| The Tax Publishers2019 TaxPub(DT) 7792 (Mum-Trib) INCOME TAX ACT, 1961
Section 2(22)(e)
Shareholding of the estate of Late Subhash Sagar, being held by assessee in a different capacity, i.e., as an executor of the estate of deceased, could not have been clubbed for working out his individual shareholding in borrower and lender companies and since assessee in his individual capacity was not holding more than 20% of its shareholding and simultaneously more than 10% interest in the lending company, i.e., M/s. Sagar Entertainment Ltd. addition made by AO under section 2(22)(e) could not be sustained along with his individual shares to arrive at shareholding in lending company and thereby assessee as substantial interest holder.
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Dividend - Deemed dividend under section 2(22)(e) - Advancement of loan by one company to another having assessee as a common shareholder - AO also having considered shares held by assessee his capacity of the Executor of Estate of along with his individual shares to arrive at shareholding in lending company and thereby treating assessee as substantial interest holder
AO noticed that M/s Gayatri Films and Music (P) Ltd. had received substantial advances from M/s. Sagar Entertainment Ltd. He took the view that since assessee being substantial shareholders of M/s. Sagar Entertainment (P) Ltd., i.e., the lending company was also holding substantial shares in M/s Gayatri Films & Music Pvt Ltd., i.e., the borrower, therefore, entire amount had to be taxed as 'deemed dividend' under section 2(22)(e). AO for the purpose of working out shareholding of assessee in respective companies also clubbed his individual shareholding with that which was held by him as an executor of the estate of Late Subhash Sagar. Held: Shareholding of the estate of Late Subhash Sagar, being held by assessee in a different capacity, i.e., as an executor of the estate of deceased, could not have been clubbed for working out his individual shareholding in borrower and lender companies and since assessee in his individual capacity was not holding more than 20% of its shareholding and simultaneously more than 10% interest in the lending company, i.e., M/s. Sagar Entertainment Ltd. addition made by AO under section 2(22)(e) could not be sustained.
Relied:ITO v. Chirayu Estate & Developer (P) ltd. [ITA No. 263/Mum/2010, dt. 24-8-2011] and Sarrangam Ashol v. ITO ITA No. 544/Chnny/2019].
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2012-13
INCOME TAX ACT, 1961
Section 45(3) Section 50C
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