Case Law Details
CIT Vs. T. Abdul Wahid & Co. (Madras High Court)
Conclusion: Section 2(22) (e) would stand attracted when a payment is made by a company, in which public are not substantial interested by way of advance or loan to a share holder, being a person who is the beneficial owner of the shares. Thus, deemed dividend under Section 2(22) (e) is to be assessed in the hands of the shareholder and not in the hands of the partnership firm.
Held: AO had reopened assessment on the reason that a sum of Rs.2 Crores was shown as unsecured loan obtained from M/s A Pvt., Ltd. by assessee firm and one of the partners of assessee firm held 35% stake in the assessee partnership firm, was also a shareholder in the company holding 26.25% shares, therefore, the shareholder of the company had substantial interest in the firm and consequently, the concept of deemed dividend under Section 2(22)(e) would apply. It was held that the provision of section 2(22) (e) would stand attracted when a payment is made by a company, in which public are not substantial interested by way of advance or loan to a share holder, being a person who is the beneficial owner of the shares. On facts, it was clear that the payment had been made to assessee, a partnership firm. The partnership firm was not a share holder in the company. The records placed before AO clearly showed the nature of transaction between the firm and the company and it was neither a loan nor an advance, but a deferred liability. In such circumstances, the Court was of the view that Tribunal rightly reversed the order passed by CIT(A) affirming the order of AO.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
These appeals have been filed by the Revenue under Section 260-A of the Income Tax Act, 1961 [the ‘Act’ for brevity] challenging the common order dated 17.09.2017 in I.T.A.Nos.1796/Mds/2017 and I.T.A.Nos.1797/Mds/2017 passed by the Income Tax Appellate Tribunal Madras ‘A’ Bench, Chennai [hereinafter referred to as ‘Tribunal’] for the assessment years [for brevity ‘AY’] 2012-2013 and 2014-2015.
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