Loan / advances received by HUF could be treated as deemed dividend

The appellant/assessee, in the instant appeal, has raised following question of law for determination:

“Whether in view of the settled principle that HUF cannot be a registered shareholder in a company and hence could not have been both registered and beneficial shareholder, loan/advances received by HUF could be deemed as dividend within the meaning of Section 2(22)(e) of the Income Tax Act, 1961 especially in view of the term “concern” as defined in the Section itself?”

2) The aforesaid question has arisen, which pertains to Assessment Year 2006-07, under the following circumstances:

3) The assessee herein had filed the return in respect of the said Assessment Year declaring his total income at Rs. 1,62,745/-.

The Assessing Officer (for short, ‘AO’) carried out the assessment resulting into passing of assessment orders dated 31^st December, 2008 whereby the net income of the assessee was calculated at Rs. 1,30,31,280/-. Obviously, number of additions were made which contributed to the enhancement of income to the aforesaid figure, in contrast with the paltry income declared by the assessee. Here, we are concerned only with one addition which was made on account of deemed dividend within the meaning of Section 2(22)(e) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’). Suffice it to state that other additions were deleted by the Income Tax Appellate Tribunal (ITAT) and the position affirmed by the High Court, but the Revenue has not challenged those deletions.

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