INCOME TAX ACT, 1961

Section 2(22)(e)

Dividend deemed under section 2(22)(e) - Applicability of provision - Loans received from a company in which substantial shareholders of assessee company were holding substantial interest -

Assessee-company received loans from a company in which substantial shareholders of assessee-company were holding substantial interest in said concern. AO treated amount (Rs. 2,85,56,335) received said company as deemed dividend under section 2(22)(e). Held: A payment made by a company on behalf, or for the individual benefit, of any such shareholder is treated by clause (e) to be included in the expression 'dividend'. Consequently, the effect of clause (e) of section 2(22) is to broaden the ambit of the expression 'dividend' by including certain payments which the company has made by way of a loan or advance or payments made on behalf of or for the individual benefit of a shareholder. The definition does not alter the legal position that dividend has to be taxed in the hands of the shareholder. As such, dividend within the meaning of clause (e) of section 2(22) can only be brought to tax in the hands of the shareholder. As assessee-company was not a shareholder in lender companies, therefore, amount received from them could not be brought to tax as 'deemed dividend' within meaning of section 2(22)(e) in its hands.

Followed:CIT v. Universal Medicare Private Ltd. (2010) 324 ITR 263 (Bom) : 2010 TaxPub(DT) 1700 (Bom-HC).

REFERRED : Anil Rai v. State of Bihar 2009 TaxPub(EX) 0022 (SC), CIT v. Impact Containers Pvt. Ltd. & Ors. (2014) 367 ITR 346 (Bom) : 2014 TaxPub(DT) 3354 (Bom-HC), Asstt. CIT v. M/s. Britto Amusement Pvt. Ltd. (2014) 360 ITR 544 (Bom) : 2014 TaxPub(DT) 0186 (Bom-HC) and Shivsagar Veg. Restaurant v. Asstt. CIT (2009) 317 ITR 433 (Bom) : 2009 TaxPub(DT) 1040 (Bom-HC).

FAVOUR : In assessee's favour.

A.Y. : 2011-12

INCOME TAX ACT, 1961

Section 254 Rule 34(5)

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