Case Law Details
The issue herein is whether any loan amount advanced by M/s Octave Apparels Private Limited to the respondent-assessee would fall under Section 2(22) (e) of the Act as deemed dividend.
The Tribunal noticed that the assessee was holding 1.07% shares of sister concern whereas the partners of the assessee firm Shri Balbir Kumar and Shri Harsh Kumar were holding 6.64% and 6% shareholding respectively. It was, thus, concluded that the assessee firm was holding less than 10% shareholding of the voting power and any amount advanced by closely held company to the assessee firm was not to be treated as deemed dividend under the provisions of section 2(22) (e) of the Act.
Interpreting Section 2(22) (e) of the Act, the Bombay High Court in CIT v. Universal Medicare (P) Limited, (2010) 324 ITR 263 noted as under:-
“Clause (e) of Section 2(22) is not artistically worded. For facility of exposition, the contents can be broken down for analysis: (i) Clause (e) applies to any payment by a company not being a company in which the public is substantially interested of any sum, whether as representing a part of the assets is of the company or otherwise made after the 31 May 1987; (ii) Clause (e) covers a payment made by way of a loan or advance to (a) a shareholder, being a beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power; or (b) any concern in which such shareholder is a member or a partner and in which he has a substantial interest; (iii) Clause (e) also includes in its purview any payment made by a company on behalf of or for the individual benefit, of any such shareholder; (iv) Clause (e) will apply to the Extent to which the company, in either case, possesses accumulated profits. The remaining part of the provision is not material for the purposes of this Appeal.
By providing an inclusive definition of the expression ‘dividend ‘, clause 2(22) brings within its purview items which may not ordinarily constitute the payment of dividend. Parliament has expanded the ambit of the expression ‘dividend ‘ by providing an inclusive definition.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
can u provide the complete knowledge of excise from beginning,I am completely raw hand in Excise.
Thanks