ACIT, New Delhi v. M/s Maharishi Ayurveda Products Pvt. Ltd.,, New Delhi

ITA 4601/DEL/2013 | 2009-2010
Pronouncement Date: 30-04-2015 | Result: Dismissed

Appeal Details

RSA Number 460120114 RSA 2013
Assessee PAN AACCM5403A
Bench Delhi
Appeal Number ITA 4601/DEL/2013
Duration Of Justice 1 year(s) 8 month(s) 24 day(s)
Appellant ACIT, New Delhi
Respondent M/s Maharishi Ayurveda Products Pvt. Ltd.,, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2015
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 30-04-2015
Date Of Final Hearing 23-04-2015
Next Hearing Date 23-04-2015
Assessment Year 2009-2010
Appeal Filed On 05-08-2013
Judgment Text
ITA NO. 4601/ DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI S.V. MEHROTRA ACCOUNTANT MEMBER AND SHRI H.S. SIDHU JUDICIAL MEMBER I.T.A. NO. 4601 /DEL/2013 A.Y. : 2009 - 10 ACIT CIRCLE - (1) N. DELHI ROOM NO. 413 CR BUILDING I.P. ESTATE NEW DELHI VS. M/S MAHARISHI AYURVEDA PRODUCTS PVT. LTD. A - 14 MATHURA ROAD MOHAN CO. OP. INDL. ESTATE NEW DELHI 110 044 (PAN: AACCM5403A) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. K.K. JAISWAL SR. D.R. ASSESSEE BY : SH. S.K. GARG ADV. & SH. AKA R SH GARG ADV. DATE OF HEARING : 23 - 04 - 201 5 DATE OF ORDER : 3 0 - 04 - 201 5 ORDER PER H.S. SIDHU : J M TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) - I X NEW DELHI DATED 20 . 5 .201 3 P ERTAINING TO ASSESSMENT YEAR 2009 - 10 ON THE FOLLOWING GROUNDS: - THE DCIT/ACIT CIRCLE - 6(1) NEW DELHI IS HEREBY DIRECTED TO FILE AN APPEAL IN ABOVE MENTIONED CASE BEFORE THE INCOME TAX APPELLATE TRIBUNA L NEW DELHI ON THE FOLLOWING GROUNDS(S) OF APPEAL: - ITA NO. 4601/ DEL/ 2013 2 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT 1961 FOR A SUM OF RS. 1 56 81 039/ - ON THE GROUND THAT ASSESSING OFFICER COULD NOT PROVE THE THIRD LIMB OF SECTION IGNORING THE FACT MENTIONED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND THAT BENEFIT COULD BE ACCRUED DIRECT OR INDIRECT. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) DELETED THE ABOVE DISALLOWANCE WITHOUT PROVIDING THE ASSESSING OFFICER ANY OPPORTUNITY TO REBUT AS PER THE PROVISION OF RULE 46A ON THE SUBMISSION OF THE ASSESSEE THAT DETAILS WERE FILED DURING THE COURSE OF ASSESSMENT. 3. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 4. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD ALTER AMEND OR FORGO ANY GROUND(S) OF THE APPEAL RAISED ABOVE AT T HE TIME OF THE HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING EXPORTING AND DEALING IN ALL KINDS OF AYURVEDIC AND HERBAL PREPARATIONS. THE RETURN OF INCOME FOR THE AY 2009 - 10 WAS FI LED ON 30.3.2010 DECLARING AN ITA NO. 4601/ DEL/ 2013 3 INCOME OF RS. 3 76 95 433/ - . THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICE U/S. 143(2) DATED 20.8.2010 WAS ISSUED AND SERVED. THE ASSESSMENT WAS COMPLETED U/S. 143(3) VIDE ORDER DATED 29.12.2011 BY THE AO AT THE INCOME OF RS. 5 33 76 472/ - MAKING THE VARIOUS ADDITIONS. 3. AGAINST THE ASSESSMENT ORDER ASSESSE APPEAL BEFORE THE LD. CIT(A) WHO VIDE IMPUGNED ORDER DATED 20.5.2013 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE AFORESAID IMPUGNED ORDER REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. DR RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE CONTENTIONS RAISED BY THE REVENUE IN THE GROUNDS OF APPEAL. 6. ON THE CONTRARY LD. COUNSEL OF THE ASSESSEE RELIED UPON THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE IMPUGNED ORDE R OF THE LD. CIT(A) MAY BE UPHELD. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE IN THE SHAPE OF PAPER BOOK. THE ONLY ISSUE INVOLVED IN THE PRESENT APPEAL IS THE ADDITION OF RS. 1 56 81 039/ - MADE BY THE AO U/S 2(22)(E) OF THE I.T. ACT 1961. THE AO HAS MADE THE ADDITION IN DISPUTE AS MORE THAN 90% IS BENEFICIAL AND REGISTERED ITA NO. 4601/ DEL/ 2013 4 SHARE HOLDING IN THE COMPANIES TO WHOM LOAN HAS BEEN GIVEN BY THE ASSESSEE COMPAN Y IS WITH THE FAMILY MEMBERS OF SHRI ANAND PRAKASH SRIVASTAVA AND AO HAS HELD THAT THE LOAN OR ADVANCE WAS MADE ARE LIABLE TO BE TREATED AS BENEFIT ACCRUING IN THE CASE OF THE ASSESSEE WHO IS SUBSTANTIAL SHARE HOLDER OF THE ASSESSEE COMPANY AND THUS PROVIS IONS OF SECTION 2(22)(E) IS ATTRACTED IN THE CASE OF THE ASSESSEE. THE LD. CIT(A) HAS DECIDED THE ISSUE IN DISPUTE IN THE APPEAL FILED BY THE ASSESSEE IN HIS IMPUGNED ORDER. FOR THE SAKE OF CONVENIENCE THE RELEVANT PORTION OF THE LD. CIT(A) S ORDER FRO M PARA S 3 TO 13 AT PAGES 2 TO 11 IS REPRODUCED BELOW: - 3.1 THE APPELLANT COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING EXPORTING AND DEALING IN ALL KINDS OF AYURVEDIC AND HERBAL PREPARATIONS. 3.2 THE RETURN OF INCOME FOR THE AY 2009 - 10 WAS FILED ON 30.3.2010 DECLARING AN INCOME OF RS. 37695433/ - . THE SAME WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY THROUGH CASS AND STATUTORY NOTICE U/S. 143(2) DATED 2 0.8.2010 WAS ISSUED AND SERVED. THE ASSESSMENT WAS COMPLETED U/S. 143(2) VIDE ORDER DATED 29.12.2011 BY THE AO AT THE INCOME OF RS. 53376472/ - MAKING THE FOLLOWING ADDITIONS: ITA NO. 4601/ DEL/ 2013 5 3.3. AGGRIEVED WITH THE ABOVE THE APPELLANT FILED THE PRESENT APPEAL. ON BEH ALF OF THE APPELLANT SH. DEEPAK JAIN CA APPEARED AND MADE WRITTEN AND ORAL SUBMISSIONS. THE ONLY ISSUE INVOLVED IS THE ADDITION UNDER SECTION 2(22)(E) FOR THE SUMS AGGREGATING RS. 1 56 81 039/ - PAID AS LOAN/ADVANCE BY THE APPELLANT COMPANY TO AS MANY A S 4 PERSON (3 COMPANIES AND 1 CHARITABLE SOCIETY). S.NO. COMPANY S NAME OPENING BALANCE PAID DURING THE YEAR RECEIVED DURING THE YEAR CLOSING BALANCE NATURE OF PAYMENT MADE 1. GLOBAL DIAMONDS (P) LTD. 55633463 6946039 12675000 49904502 LOAN 2. MAHARISHI VEDIC CONSTRUCTION CORPN. (P) LTD. 868847 2350000 - 3218847 ADVANCE 3. GOLDEN GLADES LTD. 40626000 385000 - 41011000 ADVANCE 4. SRM FOUNDATION OF INDIA (CHARITABLE) - 6000000 - 6000000 LOAN TOTAL (RS.) 97128310 15681039 12675000 100134349 4. T HE AO HAS MADE THE SAID ADDITION AS MORE THAN 90% BENEFICIAL AND REGISTERED SHARE HOLDING IN THE COMPANIES TO WHOM LOAN HAS BEEN GIVEN BY THE ASSESSEE COMPANY IS WITH THE FAMILY MEMBERS OF SHRI ANAND PRAKASH SRIVASTAVA THEREFORE THE AO HELD THAT THE LOAN OR ADVANCE SO MADE ARE ITA NO. 4601/ DEL/ 2013 6 LIABLE TO BE TREATED AS A BENEFIT ACCRUING TO SH. ANAND PRAKASH SRIVASTAVA WHO IS SUBSTANTIAL SHARE HOLDER OF THE APPELLANT COMPANY AND THUS PROVISIONS OF SECTION 2(22)(E) A RE ATTRACTED IN THE PRESENT CASE. 5. THE PROVISION OF SECTION 2(22)(E) READS AS UNDER: - 2(22) DIVIDEND INCLUDES (A) TO (D). .. (E) ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY BY THE FINANCE ACT 1987 W.E.F. 1.4.1988 (MADE AFTER THE 31 ST DAY OF MAY 1987) BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER BE ING A PERSON WHO IS THE 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 TO ANY CONCERN IN WHICH SUCH S HAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO ITA NO. 4601/ DEL/ 2013 7 THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS; 5.1 THE THREE LIMBS OF SECTION 2(22(E) ARE AS FOLLOWS: ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE MAY 31 1987 BY WAY OF ADVANCE OR LOAN. FIRST LIMB: - (A) TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER W ITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER SECOND LIMB: - (B) OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CL AUSE REFERRED TO AS THE SAID CONCERN). THIRD LIMB: - ITA NO. 4601/ DEL/ 2013 8 (C) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS; 5.2 THE PROV ISIONS OF SECTION 2(22)(E) CREATE A FICTION BRINGING IN AMOUNT PAID OTHERWISE THAN AS DIVIDEND INTO THE NET OF DIVIDENDS. THEREFORE THIS CLAUSE MUST BE GIVEN A STRICT INTERPRETATION AS HAS BEEN HELD BY THE HON BLE SUPREME COURT IN THE CASE OF CIT V. C. P . SARATHY MUDALIAR [1972] 83 ITR 170(SC) RAMESHWARLAL SANWARMAL V. CIT [1980] 122 ITR 1 (SC) 6. IT IS SEEN THAT SHRI ANAND PRAKASH SRIVASTAVA IS THE BENEFICIAL OWNER AND REGISTERED SHARE HOLDER HOLDING 99.9% OF VOTING POWER OF THE ASSESSEE COMPANY; HE IS THE SUBSTANTIAL SHAREHOLDER OF THE ASSESSEE COMPANY. 6 .1 IT NOW HAS TO BE SEEN WHETHER LOANS AND ADVANCES HAVE BEEN GIVEN TO HIM AS PER CLAUSE (A) OR TO ANY CONCERN IN WHICH SHRI. ANAND PRAKASH SRIVASTAVA IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST AS PER CLAUSE (B) ANY PERSON ON BEHALF OF OR FOR THE INDIVID UAL BENEFIT OF SHRI. ANAND PRAKASH SRIVASTAVA (C) ITA NO. 4601/ DEL/ 2013 9 6 . 2 LOANS OR ADVANCE HAVE NOT BEEN MADE BY THE APPELLANT COMPANY TO SHRI ANAND PRAKASH SHRIVASTAVA THEREFORE CONDITION NO. (A) IS NOT ATTRACTED IN THE PRESENT CASE. 6 . 3 THE SHAREHOLDING PATTERN OF THREE COMPANIES TO WHOM LOANS AND ADVANCES HAVE BEEN GIVEN ON ACCOUNT OF WHICH ADDITION UNDER SECTION 2(22)(E) HAS BEEN MADE IS AS UNDER: A. GLOBAL DIAMONDS PVT. LTD. _________________________________________________________________ SI. NAME OF THE NO. OF EQUITY PAID - UP. % AGE OF NO. SHAREHOLDER SHARE OF RS.10 SHARE CAPITAL HOLDING EACH -------------------------------------------------------------------------------------------- (I) ANAND PRAKASH 3 93 300 39 33 000 19.66% SH RIVASTAVA (II J.P. SHRIVASTAVA 3 21 250 32 12 500 16.06% (III RAM SHRIVASTAVA 2 89 130 28 91 300 14.46% (IV) NISHI SRIVASTAVA 1 44 665 14 46 650 7.23% (V) ADITI SRIVASTAVA 1 44 565 14 45 650 7.23% (VI AMRITA SRIVASTAVA 1 44 565 14 45 650 7.23% (VII RICHA SRIVASTAVA 1 44 565 14 45 650 7.23% (VIII) AJAY SRIVASTAVA 1 44 565 14 45 650 7.23% (IX SANJAY SRIVASTAVA 1 28 500 12 85 000 6.43% ITA NO. 4601/ DEL/ 2013 10 OTHERS 1 44 895 14 48 950 7.24% TOTAL 20 00 000 2 00 00 000 100.00% B. MAHARISHI VEDIC CONSTRUCTION CORPORATION (P) LTD. SI. NAME OF THE NO. OF EQUITY PAID - UP % AGE OF NO. SHAREHOLDER SHARE OF RS.10 SHARE HOLDING EACH CAPITAL -------------------------------------------------------------------------------------- (I) MAHARISHI GLOBAL 2 95 99 358 29 59 93 580 99.994% CONSTRUCTION LTD. * (II) ANAND PRAKASH 1 000 10 000 00.003% SHRIVASTAVA (III) OTHERS 1 070 10 700 00.003% TOTAL 2 96 01 428 29 60 14 280 100.000% * NOTE : SHRI ANAND PRAKASH SHRIVASTAVA DOES NOT HOLD ANY EQUITY SHARES IN MAHARISHI GLOBAL CONSTRUCTION LTD. C. GOLDEN - GLOBAL GLADES LTD SI. NAME OF THE NO. OF EQUITY PA ID - UP % AGE OF NO. SHAREHOLDER SHARE OF RS.10 SHARE HOLDING EACH CAPITAL -------------------------------------------------------------------------------------- (I) ANAND PRAKASH 19 746 1 97 460 4.562% SHRIVAST AVA (II) HIMA SRIVASTAVA 42 900 4 29 000 9.911 % (III)RAM SRIVASTAVA 42 900 4 29 000 9.911% (IV)NISHI SRIVASTAVA 49 500 4 95 000 11.436% (V) RICHA SRIVASTAVA 42 900 4 29 000 9.911% (VI) PRAGYA SRIVASTAVA 42 900 4 29 000 9.911 % ITA NO. 4601/ DEL/ 2013 11 (VII)OTHERS 1 92 014 19 20 140 44.358% TOTAL 4 32 860 43 28 600 100.000% FURTHER AS REGARDS SRM FOUNDATION OF INDIA IT IS A CHARITABLE SOCIETY DULY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT AND ALSO WITH THE DIRECT OR OF INCOME - TAX (EXEMPTION) UNDER SECTION 12A OF THE ACT WHEREIN FAMILY MEMBERS OF SHRI. ANAND PRAKASH SRIVASTAVA ARE OFFICE BEARERS/MEMBERS OF THE SOCIETY. 6 . 4 FOR CONDITION NO. (B) 'SUBSTANTIAL INTEREST' HAS TO BE UNDERSTOOD. IT HAS BEEN DEFINED IN S ECTION 2(32) OF THE ACT TO MEAN A PERSON BENEFICIALLY OWNING AT LEAST 20% OF ITS VOTING POWER. SECTION 2(32) READS AS UNDER: '2(32) 'PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY' IN RELATION TO A COMPANY MEANS A PERSON WHO IS THE BENEFICIAL OWN ER OF SHARES NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER;' 6.5 WHEN THE AFORESAID SITUATION IS APPLIED TO THE FACTS OF THE PRE SENT CASE IT IS EVIDENT THAT SHRI. ANAND PRAKASH SRIVASTAVA (WHO HOLDS 99.9% SHARES IN THE APPELLANT COMPANY) HOLDS FOLLOWING SHAREHOLDING / VOTING POWER IN THE THREE COMPANIES AND ITA NO. 4601/ DEL/ 2013 12 ONE SOCIETY IN RELATION TO WHICH SECTION 2(22)(E) HAS BEEN INVOKED: SI. NAME OF THE COMPANY/CONCERN % OF VOTING RIGHTS/ NO. LNCOME (I) GLOBAL DIAMONDS (P) LTD 19.66% (II) MAHARISHI VEDIC CONSTRUCTION 0.003% CORPN. (P) LTD. (III) GOLDEN GLADES LTD. 4.562% (IV) SRM FOUNDATION OF INDIA NIL BEING CHARITABLE SOCIETY 6 . 6 I T IS HERE THAT THE CONTROVERSY HAS ARISEN. THE ASSESSING OFFICER IS OF THE OPINION THAT SO AS TO HOLD WHETHER A PERSON HAS A SUBSTANTIAL INTEREST IN A COMPANY OR NOT THE HOLDING OF ALL THE FAMILY MEMBERS INCLUDING OF SHRI ANAND PRAKASH SRIVASTAVA IS TO BE SEEN AND CLUBBED TOGETHER; AND AS SUCH SHAREHOLDING EXCEEDS 20% IN ALL THE COMPANIES OR CONCERNS THEREFORE PROVISIONS OF SECTION 2(22)(E) GETS ATTRACTED. THE PERCENTAGE OF SHAREHOLDING 1 VOTING POWER/ SHARE IN THE INCOME AFTER CLUBBING OF THE SHARE OF THE FAMILY MEMBERS IN THE FOUR COMPANIES / CONCERN IS AS UNDER: SI. NO. NAME OF THE COMPANY / CONCERN % OF SHARE HOLDING / VOTING RIGHTS / INCOME (I) GLOBAL DIAMONDS (P) LTD ABOVE 20% ITA NO. 4601/ DEL/ 2013 13 (II) MAHARISHI VEDIC CONSTRUCTION CORPN. (P) LTD. ONLY .003% (III) GOLDEN GLADES LTD. ABOVE 20% (IV) SRM FOUNDATION OF INDIA NIL BEING CHARITABLE SOCIETY 7. THE APPELLANT IN THIS REGARD HAS CONTENDED BEFORE ME. FURTHER AS REGARDS THE INCLUSION/CLUBBING OF SHAREHOLDING OF FAMILY MEMBERS THAT THERE IS NOTHING IN SECTION 2(22)(E) OF THE ACT OR SECTION 2(32) OF THE ACT SO AS TO SUGGEST THAT THE HOLDING OR OWNERSHIP OF VOTING RIGHTS OF THE SHARES HELD BY THE FAMILY CAN BE TAKEN INTO CONSI DERATION FOR THE PURPOSES OF DETERMINING SUBSTANTIAL SHAREHOLDING OF A PERSON/SHAREHOLDER. THE WORDS USED ARE 'SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST' AS APPEARING IN SECTION 2(22)(E) OF THE ACT AND 'A PERSON W HO IS THE BENEFICIAL OWNER OF THE SHARES NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN 20% OF THE VOTING POWER' AS APPEARING IN SECTION 2(32) OF THE ACT. THUS IT IS THE OWNERSHIP OF THE SHAREHOLDER ALONE IN THE COMPANY TO WHICH THE LOAN/ ADVANCE IS MADE BY THE COMPANY AND NOT HIS OR HER RELATIVE OR FAMILY MEMBERS WHICH IS THE DETERMINATIVE FACTOR. ACCORDINGLY INCLUSION / CLUBBING OF BENEFICIAL OWNERSHIP OF FAMILY M EMBERS WITH THAT OF SHRI. ANAND PRAKASH SRIVASTAVA IS NOT ITA NO. 4601/ DEL/ 2013 14 MANDATED BY THE PROVISIONS OF THE ACT AND THUS TANTAMOUNT TO READING A CONDITION WHICH IS NOT THERE. IT IS A TRITE LAW THAT PROVISIONS OF SECTION 2(22)(E) HAVE TO BE CONSTRUED STRICTLY WHEREAS INCL USION / CLUBBING OF SHAREHOLDING OF FAMILY MEMBERS WILL TANTAMOUNT TO CREATING FICTION OVER FICTION. FURTHER THAT INCOME TAX IS A PERSONAL TAX AND IS LEVIED ON A PERSON IN RESPECT OF HIS TOTAL INCOME I. E. THE INCOME WHICH HAS ARISEN ACCRUED OR RECEIVED OR DEEMED TO HAVE ARISEN ACCRUED OR RECEIVED BY HIM AND THE INCOME IS BEING COMPUTED AS PER PROVISION S OF THE ACT. WIFE SON DAUGHTER AND OTHER FAMILY MEMBERS OF AN ASSESSEE ARE DIFFERENT ASSESSEES INDEPENDENT AND DISTINCT PERSONS AND ENTITIES UNDER THE ACT AND UNLESS THE LW PRESCRIBES THE TRANSACTIONS MADE BY THEM TO BE CLUBBED TOGETHER WHILE COMP UTING THE INCOME OF THE ASSESSEE NO COGNIZANCE OF THE SHAREHOLDING OR OTHER TRANSACTIONS THEREOF COULD BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE INCOME OF THE ASSESSEE. THEREFORE THE PROVISIONS OF SAID SECTION 2(22)(E) ARE NOT APPLICABLE TO THE F ACTS OF THE PRESENT CASE. IT IS SUBMITTED THAT THE LOANS LOANS/ADVANCES GIVEN BY THE APPELLANT COMPANY CANNOT BE TERMED AS HAVING BEEN MADE FOR AND ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SHRI. ANAND ITA NO. 4601/ DEL/ 2013 15 PRAKASH SRIVASTAVA AS ENVISAGED BY THE PROVISIONS OF SECTION 2(22)(E) ON A PERUSAL OF ASSESSMENT ORDER THE AO HAS NOWHERE DEMONSTRATED OR ESTABLISHED ANY NEXUS BETWEEN THE LOANS GRANTED BY THE APPELLANT COMPANY VIS - - VIS FLOW OF FUNDS TO SH. ANAND PRAKASH SRIVASTAVA (SHAREHOLDER OF THE APPELLANT COMPANY ). THEREFORE THE FINDING OF THE LD. AO IN THIS REGARD IS MERELY BASED ON ASSUMPTION AND PRESUMPTION ONLY AND DESERVES TO BE QUASHED BEING BASED ON NO EVIDENCE .. WHEREAS IN THE PRESENT CASE THERE IS NO FINDING THAT LOAN / ADVANCES GIVEN BY THE APPELL ANT COMPANY TO THE THREE COMPANIES AND ONE CHARITABLE SOCIETY HAVE REACHED THE HANDS OF APS (A SHAREHOLDER CONTROLLING THE APPELLANT COMPANY) .. 8. THE SPECIAL BENCH OF THE HON BLE ITAT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME TAX VS. BHAUMIK COLO UR P. LTD [2009] 313 ITR (A.T.) 0146 (MUM) (SB) HAS TAKEN A VERY STRICT INTERPRETATION OF SECTION 2(22)(E) AND HAS STATED AS UNDER : - 'SECTION 2(22) OF THE ACT ARTIFICIALLY EXTENDS THE SCOPE OF DIVIDEND FROM BEING MORE THAN ONLY A DISTRIBUTION OF ITA NO. 4601/ DEL/ 2013 16 PROFITS TO COVER CERTAIN OTHER TYPES DISBURSEMENTS SUCH AS LOANS PAID ETC. .. THE NEW CATEGORY OF PAYMENT WHICH WAS CONSIDERED AS DIVIDEND INTRODUCED BY THE FINANCE ACT 1987 WITH EFFECT FROM APRIL 1 1988 BY THE SECOND LIMB OF SECTION 2(22)(E) IS PAYMENT' TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WH ICH HE HAS A SUBSTANTIAL INTEREST'. IT IS THIS CATEGORY OF PAYMENT WITH WHICH WE ARE CONCERNED IN THIS REFERENCE. THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFIED FOR APPLICATION OF THE ABOVE CATEGORY OF PAYMENT TO BE REGARDED AS DIVIDEND. THEY ARE: ' (A) THERE MUST BE A PAYMENT TO A CONCERN BY A COMPANY. (B) A PERSON MUST BE A SHAREHOLDER OF THE COMPANY BEING A REGISTERED HOLDER AND BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTI CIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER. THIS IS BECAUSE OF THE EXPRESSION 'SUCH SHAREHOLDER' FOUND IN THE RELEVANT PROVISION. THIS EXPRESSION ONLY REFERS TO THE SHAREHOLDER REFERRED TO IN THE EARLIER PART OF SECTION ITA NO. 4601/ DEL/ 2013 17 2(22) (E) VIZ. A REGISTERED AND A BENEFICIAL HOLDER OF SHARES HOLDING 10% VOTING POWER (C) THE VERY SAME PERSON REFERRED TO IN (B) ABOVE MUST ALSO BE A MEMBER OR A PARTNER IN THE CONCERN HOLDING SUBSTANTIAL INTEREST IN THE CONCERN VIZ. WHEN THE CONCERN IS NOT A COMPANY HE MUST AT ANY TIME DURING THE PREVIOUS YEAR BE BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT. OF THE INCOME OF SUCH CONCERN; AND WHERE THE CONCERN IS A COMPANY HE MUST BE THE OWNER OF SHARES NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER. (D) IF THE ABOVE CONDITIONS ARE SATISFIED THEN THE PAYMENT BY THE COMPANY TO THE CONCERN WILL BE DIVIDEND. T HE INTENTI ON BEHIND ENACTING THE PROVISIONS OF SECTION 2(22)(E) IS THAT CLOSELY HELD COMPANIES (I.E. COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED) WHICH ARE CONTROLLED BY A GROUP OF MEMBERS EVEN THOUGH THE COMPANY HAS ACCUMULATED PROFITS WOULD NOT D ISTRIBUTE SUCH PROFIT AS DIVIDEND BECAUSE IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECOME TAX - ABLE IN THE HANDS OF THE ITA NO. 4601/ DEL/ 2013 18 SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND COMPANIES DISTRIBUTE THEM AS LOAN OR ADVANCES TO SHAREHOLDER OR TO CONCERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT BY THE DEEMING PROVISIONS SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. THE INTENTI ON BEHIND THE PROVISIONS OF SECTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMING PROVISIONS AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST IS BASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. . TH E APEX COURT WHILE CONSIDERING WHAT CAN COME WITHIN THE ARTIFICIAL DEFINITION OF DIVIDEND UNDER SECTION 2(22) IN THE CASE OF CIT V. NALIN BEHARI LALL SINGHA [1969] 74 ITR 849 (SC) DESCRIBED THE SCOPE OF THE DEFINITION OF DIVIDEND THUS 'THE DEFINITION IS IT IS TRUE AN INCLUSIVE DEFINITION AND A RECEIPT BY A SHAREHOLDER WHICH DOES NOT FALL WITHIN THE DEFINITION MAY POSSIBLY BE REGARDED AS DIVIDEND WITHIN ITA NO. 4601/ DEL/ 2013 19 THE MEANING OF THE ACT UNLESS THE CONTEXT NEGATIVES THAT VIEW.' 8. 1 IN THIS CASE THE RATIO LAID DOWN IN BRIEF WAS THAT THE DEEMED DIVIDEND CAN BE ASSESSED ONLY IN HANDS OF A PERSON WHO IS A SHAREHOLDER OF LENDER COMPANY AND NOT IN HANDS OF A PERSON OTHER THAN A SHAREHOLDER . ALSO EXPRESSION 'SHAREHOLDER' REFERRED TO IN SECTION 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER AND THUS IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT BEN EFICIAL SHAREHOLDER THEN PROVISIONS OF SECTION 2(22)(E) DO NOT APPLY AND SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO PROVISIONS OF SECTION 2(22)(E) DO NOT APPLY. THE TRIBUNAL THUS TOOK A VERY STRICT INTERPRE TATION AND WENT COMPLETELY BY THE LETTER OF THE PROVISION. AS THIS SECTION CREATES A FICTION BRINGING IN AMOUNTS PAID OTHERWISE THAN AS DIVIDENDS INTO THE NET OF DIVIDENDS IT DOES NOT ALLOW FOR ANY FURTHER INTERPRETATION OR LEEWAY FOR CREATING ANY FURTHE R FICTION. 9. I N SMT. GUNVANTI R. MEHTA [1993] 45 ITD 382 (BOM) WHEREIN THE TRIBUNAL COMMENTED ON THE ISSUE THE SHARES HELD BY THE FAMILY CAN BE TAKEN INTO CONSIDERATION IN DETERMINING THE 'SUBSTANTIAL INTEREST IN THE COMPANY' HELD AS UNDER: - ITA NO. 4601/ DEL/ 2013 20 'I FIND TH AT THERE IS NOTHING IN SECTION 2(22)(E) OF THE ACT OR SECTION 2(32) OF THE ACT TO SUGGEST THAT THE HOLDING OR OWNERSHIP OF VOTING RIGHTS OF THE SHARES HELD BY THE FAMILY CAN BE TAKEN INTO CONSIDERATION FOR DETERMINING THE QUESTION AS TO WHETHER A PERSON IS SUBSTANTIALLY INTERESTED IN THE COMPANY OR NOT. THE WORDS ARE 'SHAREHOLDER BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY' AS APPEARING IN SECTION 2 (22)(E) OF THE ACT AND 'A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES. NOT BEING SHARES EN TITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER' AS APPEARING IN SECTION 2(32) OF THE ACT. IT IS THE OWNERSHIP OF THE SHAREHOLDER ALONE TO WHOM THE LO AN/ADVANCE IS MADE BY THE COMPANY AND NOT HIS OR HER RELATIVE OR FAMILY MEMBER WHICH IS THE DETERMINATIVE FACTOR. INCOME - TAX IS A PERSONAL TAX AND IS LEVIED ON A PERSON IN RESPECT OF HIS TOTAL INCOME I.E. THE INCOME WHICH HAS ARISEN ACCRUED OR RECEIVE D OR DEEMED TO HAVE ARISEN ACCRUED OR RECEIVED BY HIM AND THE AMOUNT IS THE COMPUTATION AS PER THE PROVISIONS OF THE ACT HUSBAND AND SON OF THE ASSESSEE ARE DIFFERENT ASSESSEE INDEPENDENT AND DISTINCT PERSONS AND ENTITLES UNDER THE ITA NO. 4601/ DEL/ 2013 21 ACT AND UNLESS THE LAW PRESCRIBES THE TRANSACTIONS TO BE LOOKED INTO TOGETHER WHILE COMPUTING THE INCOME OF THE ASSESSEE NO COGNIZANCE OF THE SHAREHOLDINGS OR OTHER TRANSACTIONS THEREOF COULD BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE INCOME OF THE ASSESSEE. NO PROVISION HAS BEEN BROUGHT TO MY NOTICE WHICH AUTHORISES THE REVENUE AUTHORITIES TO CONSIDER THE SHARE HOLDING OR OWNERSHIP OF THE HUSBAND OR SON AS THE HOLDING OR OWNERSHIP OF THE ASSESSEE OR TO INCLUDE THE SAME FOR DETERMINING THE ASSESSEE'S INTEREST IN THE COMPAN Y.' 10. FOLLOWING THIS CASE THE AFOREMENTIONED CASE HAS CORRECTLY BROUGHT OUT THAT THE OTHER RELATIVES OF SH. ANAND PRAKASH SHRIVASTAVA ARE DIFFERENT DISTINCT AND INDEPENDENT ASSESSEE UNDER THE ACT AND UNLESS THE LAW PRESCRIBES THAT THE TRANSACTIONS / HOLDINGS OF THESE PERSONS CAN BE CLUBBED WITH THAT OF THE MAJORITY SHAREHOLDER IT CANNOT BE DONE. ACCORDINGLY IT IS HELD THAT IN THE CASE AT HAND THAT THE AFORESAID CONDITION NO. (B) GIVEN IN PARA 5.2 ABOVE IS NOT ATTRACTED. 11. THE AO HAS NOT BROUGHT OUT ANY FACTS TO SHOW THAT THE THIRD LIMB (C) GIVEN IN PARA 5.2 OF SECTION IS ATTRACTED. LOANS / ADVANCES GIVEN BY THE APPELLANT COMPANY CANNOT BE TERMED ITA NO. 4601/ DEL/ 2013 22 AS HAVING BEEN MADE FOR AN ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SH. A NAND PRAKASH SRIVASTAVA AS ENVISAGED BY THE PROVISIONS OF SECTION 2(22)(E) UNLESS SOME TRANSACTIONS TO PROVE THIS ARE BROUGHT OUT. THE INDIVIDUAL BENEFIT OF SH. ANAND PRAKASH SRIVASTAVA CAN SAID TO ARISE ONLY WHEN SUCH SUMS HAVE GONE TO MEET THE LIABILI TIES OR MAKE ASSETS FOR OF SH. ANAND PRAKASH SRIVASTAVA. SUCH NEXUS BETWEEN THE LOANS GRANTED BY THE APPELLANT COMPANY TO SHRI ANAND PRAKASH SRIVASTAVA HAS NOT BEEN DEMONSTRATED OR ESTABLISHED. MERELY HIS FAMILY MEMBERS BEING SHAREHOLDERS IN THESE COMPA NIES DOES NOT HELD ESTABLISH THE NEXUS OR BENEFIT. 12. (WRONGLY MENTIONED AS 13) GROUNDS OF APPEAL NO. 2 3 & 4 ARE ALLOWED. THE ADDITION OF RS. 1 56 81 039/ - ON ACCOUNT OF DEEM DIVIDEND U/S. 2(22)(E) IS DELETED. 7.1 AFTER GOING THROUGH THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) WE ARE OF THE VIEW THAT THE AO IS OF THE VIEW THAT THAT WHETHER A PERSON HAS A SUBSTANTIAL INTEREST IN THE COMPANY OR NOT THE HOLDING OF THE FAMILY MEMBERS INCLUDING THE APS IS TO BE SEEN AND CLUBBED TOGETHER AND A S SUCH THE SHARE HOLDING RECEIPTS OF 20% IN ALL THE COMPANIES OR CONCERNS THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT GETS ATTRACTED. IN THE IMPUGNED ORDER THE LD. FIRST ITA NO. 4601/ DEL/ 2013 23 APPELLATE AUTHORITY HELD THAT THERE IS NOTHING IN SECTION 2(22)(E) OF THE ACT OR SECTION 2(32) OF THE ACT SO AS TO SUGGEST THAT THE HOLDING OR OWNERSHIP OF VOTING RIGHTS OF THE SHARES HELD BY THE FAMILY CAN BE TAKEN INTO CONSIDERATION FOR THE PURPOSES OF DETERMINING SUBSTANTIAL SHAREHOLDING OF A PERSON / SHAREHOLDER. THE WORDS USED A RE 'SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST' AS APPEARING IN SECTION 2(22)(E) OF THE ACT AND ' A PERSON WHO IS THE BENEFICIAL OWNER OF THE SHARES NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WIT H OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN 20% OF THE VOTING POWER' AS APPEARING IN SECTION 2(32) OF THE ACT. THUS IT IS THE OWNERSHIP OF THE SHAREHOLDER ALONE IN THE COMPANY TO WHICH THE LOAN / ADVANCE IS MADE BY THE COMPANY AN D NOT HIS OR HER RELATIVE OR FAMILY MEMBERS WHICH IS THE DETERMINATIVE FACTOR. ACCORDINGLY INCLUSION / CLUBBING OF BENEFICIAL OWNERSHIP OF FAMILY MEMBERS WITH THAT OF SHRI ANAND PRAKASH SRIVASTAVA IS NOT MANDATED BY THE PROVISIONS OF THE ACT AND THUS TAN TAMOUNT TO READING A CONDITION WHICH IS NOT THERE. 7.2 WE FIND THAT LD. CIT(A) HAS ALSO HELD THAT THE LOAN / ADVANCE GIVEN BY THE ASSESSEE COMPANY CANNOT BE TERMED AS HAVING BEEN MADE FOR AND ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF APS AS ENVISAGE D BY THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. ITA NO. 4601/ DEL/ 2013 24 7.3 WE FIND THAT THE LD. CIT(A) HAS RIGHTLY REFERRED THE SPECIAL BENCH OF THE ITAT IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME - TAX V. BHAUMIK COLOUR P. LTD [2009] 313 ITR (A.T.) 0146 (MUM ) (SB) HAS TAKEN A VERY STRICT INTERPRETATION OF SECTION 2(22)(E) AND HAS STATED AS UNDER : - 'SECTION 2(22) OF THE ACT ARTIFICIALLY EXTENDS THE SCOPE OF DIVIDEND FROM BEING MORE THAN ONLY A DISTRIBUTION OF PROFITS TO COVER CERTAIN OTHER TYPES DISBURSEMENT S SUCH AS LOANS PAID ETC. .. THE NEW CATEGORY OF PAYMENT WHICH WAS CONSIDERED AS DIVIDEND INTRODUCED BY THE FINANCE ACT 1987 WITH EFFECT FROM APRIL 1 1988 BY THE SECOND LIMB OF SECTION 2(22)(E) IS PAYMENT' TO ANY CONCERN IN WHICH SUCH SHAREHOLDER I S A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST'. IT IS THIS CATEGORY OF PAYMENT WITH WHICH WE ARE CONCERNED IN THIS REFERENCE. THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFIED FOR APPLICATION OF THE ABOVE CATEGORY OF PAYMENT TO BE REGARDED AS DIVIDEND. THEY ARE: ' (A) THERE MUST BE A PAYMENT TO A CONCERN BY A COMPANY. ITA NO. 4601/ DEL/ 2013 25 (C) A PERSON MUST BE A SHAREHOLDER OF THE COMPANY BEING A REGISTERED HOLDER AND 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. THIS IS BECAUSE OF THE EXPRESSION 'SUCH SHAREHOLDER' FOUND IN THE RELEVANT PROVISION. THIS EXPRESSION ONLY REFERS TO THE SHAREHOLDER REFERRED TO IN THE EARLIER PART OF SECTION 2(22)(E) VIZ. A REGISTERED AND A BENEFICIAL HOLDER OF SHARES HOLDING 10% VOTING POWER (C) THE VERY SAME PERSON REFERRED TO IN (B) ABOVE MUST ALSO BE A MEMBER OR A PARTNER IN THE CONCERN HOLDING SUBSTANTIAL INTEREST IN THE C ONCERN VIZ. WHEN THE CONCERN IS NOT A COMPANY HE MUST AT ANY TIME DURING THE PREVIOUS YEAR BE BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT. OF THE INCOME OF SUCH CONCERN; AND WHERE THE CONCERN IS A COMPANY HE MUST BE THE OWNER OF SHARES NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN TWENTY PER CENT OF THE VOTING POWER. ITA NO. 4601/ DEL/ 2013 26 (D) IF THE ABOVE CONDITIONS ARE SATISFIED THEN THE PAYMENT BY THE COMPANY TO THE CONCE RN WILL BE DIVIDEND. 7.4 WE FIND THAT THE INTENTION BEHIND ENACTING THE PROVIS I ONS OF SECTION 2(22)(E) IS THAT CLOSELY HELD COMPANIES (I.E. COMPANIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED) WHICH ARE CONTROLLED BY A GROUP OF MEMBERS EVEN THOU GH THE COMPANY HAS ACCUMULATED PROFITS WOULD NOT DISTRIBUTE SUCH PROFIT AS DIVIDEND BECAUSE IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECOME TAX - ABLE IN THE HANDS OF THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND COMPANIES DIS TRIBUTE THEM AS LOAN OR ADVANCES TO SHAREHOLDER OR TO CONCERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT BY THE DEEMING PROVISIONS SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. THE INTENTION BEHIND THE PROVISIONS OF SECTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMING PROVISIONS AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHICH ITS SHAR EHOLDER HAS SUBSTANTIAL INTEREST IS BASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. . ITA NO. 4601/ DEL/ 2013 27 7 . 5 WE NOTE THAT T HE HON BLE APEX COURT WHILE CONSIDERING WHAT CAN COME WITHIN THE ARTIFICIAL DEFINITION OF DIVIDEND UNDER SECTION 2(22) IN THE CASE OF CIT V. NALIN BEHARI LALL SINGHA [1969] 74 ITR 849 (SC) DESCRIBED THE SCOPE OF THE DEFINITION OF DIVIDEND THUS 'THE DEFINITION IS IT IS TRUE AN INCLUSIVE DEFINITION AND A RECEIPT BY A SHAREHOLDER WHICH DOES NOT FALL WITHIN THE DEFINITION MAY POSSIBLY BE REGARDED AS DIVIDEND WITHIN THE MEANING OF THE ACT UNLESS THE CONTEXT NEGATIVES THAT VIEW.' 7 . 6 WE ALSO FIND THAT THE LD. CIT(A) HAS RELIED UPON THE ITAT CASE IN SMT. GUNVANTI R. MEHTA [1993] 45 ITD 382 (BOM) WHEREIN THE TRIBUNAL CO MMENT ED ON THE ISSUE THE SHARES HELD BY THE FAMILY CAN BE TAKEN INTO CONSIDERATION IN DETERMINING THE 'SUBSTANTIAL INTEREST IN THE COMPANY' HELD AS UNDER : - 'I F IND THAT THERE IS NOTHING IN SECTION 2(22)(E) OF THE ACT OR SECTION 2(32) OF THE ACT TO SUGGEST THAT THE HOLDING OR OWNERSHIP OF VOTING RIGHTS OF THE SHARES HELD BY THE FAMILY CAN BE TAKEN INTO CONSIDERATION FOR DETERMINING THE QUESTION AS TO WHETHER A PER SON IS SUBSTANTIALLY INTERESTED IN THE COMPANY OR NOT. THE WORDS ARE 'SHAREHOLDER BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY' AS APPEARING IN SECTION 2 (22)(E) OF THE ACT AND 'A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES. NOT BEING SHA RES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS CARRYING NOT LESS THAN TWENTY PER CENT OF THE ITA NO. 4601/ DEL/ 2013 28 VOTING POWER' AS APPEARING IN SECTION 2(32) OF THE ACT. IT IS THE OWNERSHIP OF THE SHAREHOLDER ALONE TO WHOM THE LOAN / ADVANCE IS MADE BY THE COMPANY AND NOT HIS OR HER RELATIVE OR FAMILY MEMBER WHICH IS THE DETERMINATIVE FACTOR. INCOME - TAX IS A PERSONAL TAX AND IS LEVIED ON A PERSON IN RESPECT OF HIS TOTAL INCOME I.E. THE INCOME WHICH HAS ARISEN ACCRUED OR R ECEIVED OR DEEMED TO HAVE ARISEN ACCRUED OR RECEIVED BY HIM AND THE AMOUNT IS THE COMPUTATION AS PER THE PROVIS I ONS OF THE ACT HUSBAND AND SON OF THE ASSESSEE ARE DIFFERENT ASSESSEE INDEPENDENT AND DISTINCT PERSONS AND ENTITLES UNDER THE ACT AND UNLESS T HE LAW PRESCRIBES THE TRANSACTIONS TO BE LOOKED INTO TOGETHER WHILE COMPUTING THE INCOME OF THE ASSESSEE NO COGNIZANCE OF THE SHAREHOLDINGS OR OTHER TRANSACTIONS THEREOF COULD BE TAKEN INTO CONSIDERATION WHILE COMPUTING THE INCOME OF THE ASSESSEE. NO PROV ISION HAS BEEN BROUGHT TO MY NOTICE WHICH AUTHORISES THE REVENUE AUTHORITIES TO CONSIDER THE SHARE HOLDING OR OWNERSHIP OF THE HUSBAND OR SON AS THE HOLDING OR OWNERSHIP OF THE ASSESSEE OR TO INCLUDE THE SAME FOR DETERMINING THE ASSESSEE'S INTEREST IN THE COMPANY.' 8 . WITH REGARD TO GROUND NO 2 IS CONCERNED RELATING TO DELETION OF DISALLOWANCE WITHOUT PROVIDING THE AO ANY OPPORTUNITY TO REBUT AS PER THE PROVISION OF RULE 46A ON THE SUBMISSION OF THE ASSESSEE THAT DETAILS WERE FILED DURING THE COURSE OF ASSESSMENT. IN OUR VIEW THE LD. CIT(A) HAS NOT ADMITTED ANY ADDITIONAL EVIDENCE ON THE ADDITION IN DISPUTE HENCE THE CONTENTION RAISED BY THE REVENUE REGARDING WITHOUT PROVIDING THE AO AN OPPORTUNITY TO REBUT AS PER THE PROVISIONS OF RULE 46A HAS N O FORCE THEREFORE THE GROUND NO. 2 RAISED BY THE REVENUE IS HEREBY DISMISSED. ITA NO. 4601/ DEL/ 2013 29 9 . KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF CASE AS EXPLAINED ABOVE WE ARE OF THE CONSIDERED VIEW THAT LD. FIRST APPELLATE AUTHORITY HAS DELETED THE ADDITION IN DISPUTE BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE SUPREME COURT IN THE CASE OF NALIN BEHARI LALL SINGHA [1969] 74 ITR 849 (SC) (SUPRA) AN D DECISION OF THE ITAT MUMBAI SPECIAL BENCH IN THE CASE OF ASSISTANT COMMISSIONER OF INCOME - TAX V. BHAUMIK COLOUR P. LTD [2009] 313 ITR (A.T.) 0146 (MUM) (SB) (SUPRA) WHICH DOES NEED ANY I NTERFERENCE ON OUR PART HENCE WE UPHOLD THE IMPUGNED ORDER BY DISMISSING THE APPEAL FILED BY THE REVENUE. 1 0 . IN THE RESULT THE APPEAL FILED BY THE REVENUE STANDS DISMISSED . ORDER PRONOUNCED IN THE O PEN C OURT ON 3 0 / 4 /20 1 5 . S D / - S D / - [ S.V. MEHROTRA ] [ H.S. SIDHU ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 3 0 / 4 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHES ITA NO. 4601/ DEL/ 2013 30