Case Law Details
Sahir Sami Khatib Vs. ITO (Bombay High Court)
It is not in dispute before us that the appellant in Income Tax Appeal No.722 of 2015 is a 15% shareholder in M/s MLPL and a 45% shareholder in M/s OFPL. Similarly, it is also not in dispute that the appellant in Income Tax Appeal No. 724 of 2015 is a 15% shareholder in M/s MLPL and a 99% shareholder in M/s SHCPL. In both these appeals, it was found that M/s MLPL had given a loan and advances to M/s OFPL and M/s SHCPL respectively. The appellant in both the appeals, is not only holding more than 10% in M/s MLPL but also having a substantial interest in M/s OFPL as well as M/s SHCPL. The appellant in Income Tax Appeal No. 722 of 2015 admittedly holds 45% of the shareholding in M/s OFPL and the appellant in Income Tax Appeal No.724 of 2015 admittedly holds 99% of the
shareholding in M/s SHCPL. It, therefore, can hardly be disputed that both the appellants have a substantial interest in the borrowing companies. These facts are not disputed. It is, in these facts, that the ITAT, after examining the definition of the word ‘dividend’ in Section 2(22)(e) of the I. T. Act, 1961 as well as the ratio of this Court in the case of Universal Medicare Pvt. Ltd. (supra) came to a finding that since the assessees were shareholders holding more than 10% of the equity shares of the lending company (M/s. MLPL) and also having a substantial interest in the borrowing companies (45% in OFPL and 99% in SHCPL), the conditions as prescribed under Section 2(22)(e) of the I. T. Act, 1961 were satisfied to include the appellants within the ambit of deemed dividend to be taxed in the hands of the appellant – assessee. We do not find that this issue decided by the Tribunal gives rise to any substantial question of law. All that the ITAT has done is, come to a conclusion that the assessee who is the shareholder in both the lending company as well as borrowing company and having substantial interest therein, the deemed dividend would have to be taxed in the appellant – assessee’s hand. In coming to this conclusion the ITAT has correctly relied upon a decision of this Court in the case of Universal Medicare Pvt. Ltd. (supra). Since this issue is already decided against the appellant – assessees by a decision of this Court, we do not think that this finding of the ITAT gives rise to any substantial question of law.
The last decision relied upon by Ms Jagtiani was a decision of the Delhi ITAT wherein it appears that the Delhi ITAT has allowed the proportionate allocation of deemed dividend on the basis of the shareholding of the borrowing company. We find this Judgment to be wholly inapplicable to the facts of the present case as in the facts of this decision, both the shareholders were holding more than 10% in the lending company and more than 46% in borrowing company. In fact, there were only two shareholders of the lending company as well as of the borrowing company. It was in these peculiar facts that the Delhi ITAT came to a conclusion that the deemed dividend ought to be proportionately divided. In the facts before us, and as mentioned earlier, the appellant – assessee is the only shareholder who is the shareholder of the lending company as well as that of the borrowing company. This being the case, the ratio of the Delhi ITAT is squarely not applicable to the facts and circumstances of the present case.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
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