The assessee-company, evidently, received a capital advance in a sum of Rs.1,09,50,000/- from an entity by the name of Indev Logistics Pvt. Ltd. The assessee-company as well as the said entity, i.e.Indev Logistics Pvt. Ltd., admittedly have common shareholders. The shares in the assessee-company to the extent of 50% are held by Mr.Xavier Britto, while the balance shares are held by Smt.Vimalarani Britto. In so far as Indev Logistics Pvt. Ltd. is concerned, shares are held likewise by the said individuals, though in a different ratio. Mr.Xavier Britto holds 60% of the shares in Indev Logistics Pvt. Ltd., while Smt.Vimalarani Britto holds the balance 40% shares in the said entity.
The Revenue seeks to assess as income the capital advance received by the assessee-company from Indev Logistics Pvt. Ltd. on the ground that it is deemed dividend received by the assessee-company for the benefit of the registered shareholder. For this purpose, the provisions of Section 2 (22)(e) of the Income-tax Act, 1961 (in short ‘the Act’) is sought to be relied upon. The Tribunal has rejected the said contention of the Revenue, principally, on the ground that deemed dividend can only be assessed in the hands of the registered shareholder for whose benefit the money was advanced.
As indicated above, there is no dispute that the assessee did receive capital advance from Indev Logistics Pvt. Ltd. There is also no dispute that there are common shareholders both in the assessee-company and Indev Logistics Pvt. Ltd. Therefore, quite correctly, as noted by the Tribunal, though, the advance received by the assessee company may have been for the benefit of the aforementioned registered shareholders, it could only be assessed in the hands of those registered shareholders and not in the hands of the assseeee-company.
In our view, on a plain reading of the provisions of Section 2 (22)(e) of the Act, no other conclusion can be reached. As a matter of fact, a Division Bench of this Court, in the case of Commissioner of Income Tax vs. Print-wave Services P. Ltd., (2015) 373 ITR 665 (Mad.), has reached a somewhat similar conclusion.
Mr. Senthil Kumar, however, contends to the contrary and relies upon the judgement of the Supreme Court in Gopal and Sons (HUF) vs. Commissioner of Income-tax, Kolkata-XI, (2017) 77
5.1. In our view, the question of law considered by the Supreme Court in the case of Gopal and Sons (supra) was different from the issue which arises in the present matter. The question of law which the Supreme Court was called upon to consider was whether loans and advances received by a HUF could be deemed as a dividend within the meaning of Section 2 (22)(e) of the Act. The assessee in that case was the HUF and the payment in question was made to the HUF. The shares were held by the Karta of the HUF. It is in this context that the Supreme Court came to the conclusion that HUF was the beneficial shareholder.
5.2. In the instant case, however, both the registered and beneficial shareholders are two individuals and not the assessee-company. Therefore, in our view, the judgement of the Supreme Court does not rule on the issue which has come up for consideration in the instant matter.