TaxTMI 
TaxTMI 
1981 (4) TMI 114
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....a proprietary concern styled as Sameer Finance Corporation. Further, the assessee was the sole proprietor of another concern styled as Bombay Engineering Industries. 2. The business carried on by Fouress Engg. (I)(P.) Ltd. was formerly carried on by a partnership firm consisting of the assessee and her husband. That business was taken over as a running concern by the aforesaid company from 1-7-1971. The accounts of the said company were closed for the first time on 30-6-1972 relevant to the assessment year 1973-74. The balance sheet of the company as on 30-6-1972 showed development rebate reserve of Rs. 4,09,798 and unappropriated credit balance in the profit and loss account amounting to Rs. 1,14,450. This was the position as at the end....
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.... observed that "shareholder" envisaged under section 2(22)(e) means a registered shareholder and not a benami shareholder, in view of the decision in the case, of Damodaran. Further, he held that the development rebate brought forward from the earlier partnership concern could not be said to be accumulated profits of the private limited company because it was of a hereditary nature and it had to be kept intact for eight years and was not available for distribution of dividends. According to him, the development rebate of the current year could not form part of the accumulated profits. Finally, he observed that an artificial provision like section 2(22)(e) has to be strictly construed and its scope could not be widened. In this view of the m....
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....(22)(e) is quite well settled. As it is a deeming provision, it has to be strictly construed and, as held in the case of Damodaran, the shareholder referred to therein must be the registered shareholder and none else. The assessee-company came into existence for the first time during the year under consideration and did not have any accumulated profits of its own. The loan given by the company to Sameer Finance Corporation was in the ordinary course of its business and there was a gap of about three months between the date of loan received by Sameer Finance Corporation and the date on which it gave loan of a different amount to the assessee in the ordinary course of its own business. Under the circumstances, he contended that the decision o....
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....ein without adding anything to it. In our opinion, this provision has been enacted to bring into the tax-net certain amounts which would not be taxed as dividends otherwise. Hence, the conditions necessary to apply the said provisions should be strictly fulfilled. 8. In the case of Rameshwarlal Sanwarmal v. CIT [1980] 122 ITR 1 (SC), the HUF through its karta was found to be the registered shareholder of a company. Hence, the loan given by the company to the HUF was held to be deemed dividend. On the other hand, in the case of Sarathy Mudaliar the members of an HUF were the registered shareholders of a company. But there was no finding by the Tribunal that the members were holding the shares on behalf of the HUF. Hence, the loan given by....