M/s Jet Age Securities Pvt. Ltd., Kolkata V. DCIT, CIR-7(1), KOLKATA, Kolkata

ITA 405/KOL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3317 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-04-2015
• Court: TRIBUNAL
• Assessee Lawyers: MANOJ KATARUKA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH D, KO LKATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI WAS EEM AHMED, AM] ITA NO.405/KOL/2015 ASSESSMENT YEAR : 2010-11 M /S. JET AGE SECURITIES PVT. LTD. -VERSUS- D.C.I.T ., CIRCLE-7(1), KOLKATA KOLKATA (PAN:AABCJ 0993 R) (APPELLANT ) (RESPONDENT) FOR THE APPELLANT : SHRI MANOJ KATARUKA, ADVOCATE FOR THE RESPONDENT : NONE DATE OF HEARING : 15.12.2015. DATE OF PRONOUNCEMENT : 15.1.2016. ORDER PER SHRI N.V.VASUDEVAN, JM THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER DATED 18.03.2015 OF CIT-KOLKATA-3, KOLKATA RELATING TO A.Y.2010-11. 2. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD RECEIVED LOAN FROM M/S JET AGE FINANCE LIMITED (JAFL) OF RS.1,88,75,000/-. THE CI T WAS OF THE VIEW THE SAID AMOUNT RECEIVED AS LOAN SHOULD BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961 (ACT). THE ASSESSEE SUBMITTED THAT IT WAS NOT A SHAREHOLDER IN JAFL AND CONSEQUENTLY THE AMOUNT COULD NOT BE HELD TO BE DEEMED DIVIDEND BY APPLYING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 3. THE CIT HOWEVER, WAS OF THE VIEW THAT THOUGH THE ASSESSEE WAS NOT A SHAREHOLDER IN JAFL, ONE HARSHAVARDHAN HIMATSINGHKA WAS A COMMON SHAREHOLDER IN BOTH THE ASSESSEE AND JAFL HOLDING 20% PAID UP SHAR E CAPITAL IN THE SHARE CAPITAL OF ASSESSEE AS WELL AS JAFL AND THEREFORE THE PROVISIO NS OF SEC.2(22)( E) OF THE ACT WOULD BE ATTRACTED. THE CIT ULTIMATELY PASSED AN OR DER HOLDING THAT THE AO BEFORE CONCLUDING THE ASSESSMENT OUGHT TO HAVE MADE ENQUIR IES ON THIS ASPECT AND THAT HE ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 2 FAILED TO MAKE ANY ENQUIRY. ACCORDINGLY, THE CIT PASSED ORDER U/S.263 OF THE ACT SETTING ASIDE THE ORDER OF THE AO AND DIRECTING THE AO TO CONDUCT NECESSARY EXAMINATION TO CONSIDER THE APPLICABILITY OF SEC.2( 22)( E) OF THE ACT. 4. AGGRIEVED BY THE ORDER OF THE CIT THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. NONE WAS PRESENT ON BEHALF OF THE DEPARTMENT. M R.VIVEK VERMA JCIT, SR.DR, PRESENT SUBMITTED THAT THE CASE IS NOT ALLOTTED TO HIM AND EXPRESSED HIS INABILITY TO INFORM THE BENCH AS TO WHY THE REVENUE IS NOT BEING REPRESENTED IN THIS APPEAL. SINCE APPEALS UNDER SEC.263 OF THE ACT ARE TO BE DISPOSED ON A PRIORITY BASIS, WE DEEM IT EXPEDIENT TO PROCEED TO HEAR THE APPEAL AFTER HEARI NG THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED CO UNSEL FOR THE ASSESSEE. THE PROVISIONS OF SEC.2(22)(E) OF THE ACT, READS AS FOL LOWS: (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31-5-19 87, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BE NEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND W HETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN P ER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER O R A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUS E REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FO R THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE CO MPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. EXPLANATION-3 TO SECTION 2(22)(E) IS AS FOLLOWS: EXPLANATION-3: FOR THE PURPOSE OF THIS CLAUSE- (A) CONCERN MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PERCENT OF THE INCOME OF SUCH CONCERN; ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 3 6.1. SECTION 2(32) DEFINES THE EXPRESSION PERSON WHO HA S A SUBSTANTIAL INTEREST IN THE COMPANY, IN RELATION TO A COMPANY, MEANS A PER SON WHO IS THE BENEFICIAL OWNER OF SHARES, NOT BEING SHARES ENTITLED TO A FIXED RAT E OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS, CARRYING NOT LES S THAN TWENTY PERCENT OF THE VOTING POWER. 6.2. AN ANALYSIS OF THE ABOVE PROVISIONS SHOWS THAT THERE ARE THREE LIMBS TO SEC.2(22)(E) WHICH ARE AS FOLLOWS:- ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN W HICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS REPRESENTING A P ART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31-5-1987 , BY WAY OF ADVANCE OR LOAN FIRST LIMB (A) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BEN EFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R 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 CLAUS E REFERRED TO AS THE SAID CONCERN) THIRD LIMB (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 P OSSESSES ACCUMULATED PROFITS. 6.3. IN THE PRESENT APPEAL WE ARE CONCERNED WITH TH E SECOND LIMB OF SEC.2(22)(E) OF THE ACT, VIZ., TO ANY CONCERN IN WHICH SUCH SHAREH OLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. 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 COMPA NY. (B) A PERSON MUST BE SHAREHOLDER OF THE COMPANY BEI NG A REGISTERED HOLDER AND BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE 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 EARLIE R PART OF SEC.2(22)(E) VIZ., A REGISTERED AND A BENEFICIAL HOLDER OF SHARES HOLDIN G 10% VOTING POWER. (C)THE VERY SAME PERSON REFERRED TO IN (B) ABOVE M UST ALSO BE A MEMBER OR A PARTNER IN THE CONCERN HOLDING SUBSTANTIAL INTEREST IN THE CONCERN VIZ., WHEN ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 4 THE CONCERN IS NOT A COMPANY, HE MUST AT ANY TIME D URING THE PREVIOUS YEAR, BE BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PE RCENT 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 DIVIDE ND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS, CARRYING NOT LESS THAN TWENTY PERCENT OF THE VOTING POWER (D) IF THE ABOVE CONDITIONS ARE SATISFIED THEN THE PAYMENT BY THE COMPANY TO THE CONCERN WILL BE DIVIDEND. 6.4. THE SPECIAL BENCH OF ITAT, MUMBAI, IN THE CASE OF BHAUMIK COLOR LABS ITA 5030/M/04, 118 ITD 1 (SB) (MUM), CONSIDERED THE QUE STION WHETHER DEEMED DIVIDEND U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961 CAN BE ASSESSED IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER OF THE LENDER? THE SPECIAL BENCH HELD THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PER SON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTH ER THAN A SHAREHOLDER. THE SPECIAL BENCH ON THE ABOVE ISSUE HAS OBSERVED AS FO LLOWS:- 30. AT THE OUTSET IT HAS TO BE MENTIONED THAT PRO VISIONS OF SEC.2(22)(E) WHICH BROUGHT IN A NEW CATEGORY OF PAYMENT WHICH WAS TO B E CONSIDERED AS DIVIDEND AS INTRODUCED BY THE FINANCE ACT 1987 W.E.F.1-4-88 VIZ., PAYMENT BY A COMPANY TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBE R OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST DO NOT SAY AS TO IN WHOSE HANDS THE DIVIDEND HAS TO BE BROUGHT TO TAX, WHETHE R IN THE HANDS OF THE CONCERN OR THE SHAREHOLDER. WE HAVE ALREADY SE EN THE DIVERGENT VIEWS ON THIS ISSUE WHICH HAVE BEEN REFERRED TO IN THE EARLI ER PART OF THIS ORDER. 31. THE ABOVE PROVISIONS WERE SUBJECT MATTER OF CO NSIDERATION BEFORE THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. HOTEL HILLTOP. 217 CTR 527(RAJ). THE FACTS OF THE CASE BEFORE THE HONBLE COURT WERE AS FOLLOWS. THE ASSESSEE WAS ONE M/S.HOTEL HILLTOP A PARTNERSHIP FI RM. THIS FIRM RECEIVED AN ADVANCE OF RS.10 LACS FROM A COMPANY M/S.HILLTOP PA LACE HOTELS (P) LTD. THE SHAREHOLDING PATTERN OF M/S.HILLLTOP PALACE HOTELS (P) LTD., WAS AS FOLLOWS: 1. SHRI ROOP KUMAR KHURANA : 23.33% 2. SMT.SAROJ KHURANA : 4.67% 3. VIKAS KHURANA : 22% 4. DESHBANDHU KHURANA: 25% 5. SHRI.RAJIV KHURANA : 25% THE CONSTITUTION OF THE FIRM HOTEL HILL TOP WAS AS FOLLOWS: 1. SHRI ROOP KUMAR KHURANA: 45% 2. SHRI.DESHBANDHU KHURANA: 55% ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 5 THE AO ASSESSED THE SUM OF RS.10 LACS AS DEEMED DIV IDEND U/S.2(22)(E) OF THE ACT IN THE HANDS OF THE FIRM BECAUSE THE TWO PARTNE RS OF M/S.HOTEL HILL TOP WERE HOLDING SHARES BY WHICH THEY HAD 10% VOTING PO WER IN M/S.HILL TOP PALACE HOTELS (P) LTD. THEY WERE ALSO ENTITLED TO 2 0% OF THE INCOME OF THE FIRM M/S.HOTEL HILL TOP. THEREFORE THE LOAN BY M/S.HILL TOP PALACE HOTELS (P) LTD. TO THE FIRM M/S.HOTEL HILL TOP WAS TREATED AS DEEME D DIVIDEND IN THE HANDS OF M/S.HOTEL HILL TOP, THE FIRM UNDER THE SECOND LIMB OF SEC.2(22)(E) OF THE ACT. THE CIT(A) HELD THAT SINCE THE FIRM WAS NOT THE SHA REHOLDER OF THE COMPANY THE ASSESSMENT AS DEEMED DIVIDEND IN THE HANDS OF THE F IRM WAS NOT CORRECT. THE ORDER OF THE CIT(A) WAS CONFIRMED BY THE TRIBUNAL. ON REVENUES APPEAL BEFORE THE HONBLE HIGH COURT, THE FOLLOWING QUESTI ON OF LAW WAS FRAMED FOR CONSIDERATION:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED TRIBUNAL WAS JUSTIFIED IN UPHOLDING THE ORDER OF LEARNED CIT(A) DELETING THE ADDITION OF RS.10 LACS AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE IT ACT? THE HONBLE COURT HELD AS FOLLOWS:- THE IMPORTANT ASPECT, BEING THE REQUIREMENT OF SE CTION 2(22)(E) IS, THAT THE PAYMENT MAY BE MADE TO ANY CONCERN, IN WH ICH SUCH SHAREHOLDER IS A MEMBER, OR THE PARTNER, AND IN WHI CH HE HAS SUBSTANTIAL INTEREST, OR ANY PAYMENT BY ANY SUCH CO MPANY, ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLD ER . THUS, THE SUBSTANCE OF THE REQUIREMENT IS THAT THE PAYMENT SH OULD BE MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER, OBVIOUSLY, THE PROVISION IS INTENDED TO ATTRACT THE LIABILITY OF TAX ON THE PERSON, ON WHOSE BEHALF, OR FOR WHOSE INDIVIDUAL BE NEFIT, THE AMOUNT IS PAD BY THE COMPANY, WHETHER TO THE SHAREHOLDER, OR TO THE CONCERNED FIRM. IN WHICH EVENT, IT WOULD FALL WITHI N THE EXPRESSION DEEMED DIVIDEND. OBVIOUSLY, INCOME FROM DIVIDEND, IS TAXABLE AS INCOME FROM THE OTHER SOURCES UNDER SECTION 56, AND IN THE VERY NATURE OF THINGS THE INCOME HAS TO BE OF THE PERSON EARNING THE INCOME. THE ASSESSEE IN THE PRESENT CASE IS NOT SHO WN TO BE ONE OF THE PERSONS, BEING SHAREHOLDER. OF COURSE, THE TWO INDI VIDUALS BEING R AND D. ARE THE COMMON PERSONS, HOLDING MORE THAN RE QUISITE AMOUNT OF SHAREHOLDING AND ARE HAVING REQUISITE INTEREST, IN THE FIRM, BUT THEN, THEREBY THE DEEMED DIVIDEND WOULD NOT BE DEEM ED DIVIDEND IN THE HANDS OF THE FIRM, RATHER IT WOULD OBVIOUSLY BE DEEMED DIVIDEND IN THE HANDS OF THE INDIVIDUALS, ON WHOSE BEHALF, OR O N WHOSE INDIVIDUAL BENEFIT, BEING SUCH SHAREHOLDER, THE AMOUNT IS PAID BY THE COMPANY TO THE CONCERN. THUS, THE SIGNIFICANT REQUIREMENT OF S ECTION 2(22)(E) IS NOT SHOWN TO EXIST. THE LIABILITY OF TAX, AS DEEMED DIVIDED, COULD BE ATTRACTED IN THE HANDS OF THE INDIVIDUALS, BEING TH E SHAREHOLDERS, AND NOT IN THE HANDS OF THE FIRM. ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 6 32. THE AFORESAID DECISION OF THE HONBLE RAJASTHA N HIGH COURT WHICH IS THE ONLY DECISION OF HIGH COURT, SHOULD BE SUFFICIENT T O ANSWER QUESTION NO.2 WHICH HAS BEEN REFERRED TO THE SPECIAL BENCH BY HOL DING THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO I S A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTH ER THAN A SHAREHOLDER. THE ARGUMENT OF THE LEARNED D.R. THAT THE HONBLE R AJASTHAN HIGH COURT DID NOT DEAL WITH THE SECOND LIMB OF SEC.2(22)(E) OF TH E ACT IS NOT CORRECT. 6.5. THE SPECIAL BENCH FURTHER HELD AS FOLLOWS:- 34. WE ARE OF THE VIEW THAT THE PROVISIONS OF SEC .2(22)(E) DOES NOT SPELL OUT AS TO WHETHER THE INCOME HAS TO BE TAXED IN THE HAN DS OF THE SHAREHOLDER OR THE CONCERN(NON-SHAREHOLDER). THE PROVISIONS ARE AMBIG UOUS. IT IS THEREFORE NECESSARY TO EXAMINE THE INTENTION BEHIND ENACTING THE PROVISIONS OF SEC.2(22)(E) OF THE ACT. 35. THE INTENTION BEHIND ENACTING PROVISIONS OF SE CTION 2(22)(E) ARE THAT CLOSELY HELD COMPANIES (I.E. COMPANIES IN WHICH PUB LIC ARE NOT SUBSTANTIALLY INTERESTED), WHICH ARE CONTROLLED BY A GROUP OF MEM BERS, EVEN THOUGH THE COMPANY HAS ACCUMULATED PROFITS WOULD NOT DISTRIBUT E SUCH PROFIT AS DIVIDEND BECAUSE IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECAME TAXABLE IN THE HANDS OF THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS LOAN OR ADVA NCES TO SHAREHOLDERS 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 SE CTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMING P ROVISIONS AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CON CERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST, IS BASED ON T HE PRESUMPTION THAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO T HE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. THE INTENTION O F THE LEGISLATURE IS THEREFORE TO TAX DIVIDEND ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE HANDS OF THE CONCERN. 36. THE BASIS OF BRINGING IN THE AMENDMENT TO SEC. 2(22)(E) OF THE ACT BY THE FINANCE ACT, 1987 W.E.F 1-4-88 IS TO ENSURE THAT PE RSONS WHO CONTROL THE AFFAIRS OF A COMPANY AS WELL AS THAT OF A FIRM CAN HAVE THE PAYMENT MADE TO A CONCERN FROM THE COMPANY AND THE PERSON WHO CAN CONTROL THE AFFAIRS OF THE CONCERN CAN DRAWN THE SAME FROM THE CONCERN INSTEAD OF THE COMPANY DIRECTLY MAKING PAYMENT TO THE SHAREHOLDER AS DIVIDEND. THE SOURCE OF POWER TO CONTROL THE AFFAIRS OF THE COMPANY AND THE CONCERN IS THE BASIS ON WHICH THESE PROVISIONS HAVE BEEN MADE. IT IS THEREFORE PROPER TO CONSTRUE THOSE PROVISIONS AS CONTEMPLATING A CHARGE TO TAX IN THE HANDS OF THE S HAREHOLDER AND NOT IN THE HANDS OF A NON-SHAREHOLDER VIZ., CONCERN. A LOAN OR ADVANCE RECEIVED BY A ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 7 CONCERN IS NOT IN THE NATURE OF INCOME. IN OTHER W ORDS THERE IS A DEEMED ACCRUAL OF INCOME EVEN U/S.5(1)(B) IN THE HANDS OF THE SHAREHOLDER ONLY AND NOT IN THE HANDS OF THE PAYEE VIZ., NON-SHAREHOLDER (CO NCERN). SEC.5(1)(A) CONTEMPLATES THAT THE RECEIPT OR DEEMED RECEIPT SHO ULD BE IN THE NATURE OF INCOME. THEREFORE THE DEEMING FICTION CAN BE APPLI ED ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT THE NON-SHAREHOLDER VIZ., THE C ONCERN. 37. THE DEFINITION OF DIVIDEND U/S.2(22)(E) OF THE ACT IS AN INCLUSIVE DEFINITION. SUCH INCLUSIVE DEFINITION ENLARGES THE MEANING OF T HE TERM DIVIDEND ACCORDING TO ITS ORDINARY AND NATURAL MEANING TO IN CLUDE EVEN A LOAN OR ADVANCE. ANY LOAN OR ADVANCE CANNOT BE DIVIDEND AC CORDING TO ITS ORDINARY AND NATURAL MEANING. THE ORDINARY AND NATURAL MEAN ING OF THE TERM DIVIDEND WOULD BE A SHARE IN PROFITS TO AN INVESTOR IN THE S HARE CAPITAL OF A LIMITED COMPANY. TO THE EXTENT THE MEANING OF THE WORD DI VIDEND IS EXTENDED TO LOANS AND ADVANCES TO A SHAREHOLDER OR TO A CONCERN IN WHICH A SHAREHOLDER IS SUBSTANTIALLY INTERESTED DEEMING THEM AS DIVIDEND I N THE HANDS OF A SHAREHOLDER THE ORDINARY AND NATURAL MEANING OF THE WORD DIVIDEND IS ALTERED. TO THIS EXTENT THE DEFINITION OF THE TERM DIVIDEND CAN BE SAID TO OPERATE. IF THE DEFINITION OF DIVIDEND IS EXTENDE D TO A LOAN OR ADVANCE TO A NON SHAREHOLDER THE ORDINARY AND NATURAL MEANING OF THE WORD DIVIDEND IS TAKEN AWAY. IN THE LIGHT OF THE INTENTION BEHIND T HE PROVISIONS OF SEC.2(22)(E) AND IN THE ABSENCE OF INDICATION IN SEC.2(22)(E) TO EXTEND THE LEGAL FICTION TO A CASE OF LOAN OR ADVANCE TO A NON-SHAREHOLDER ALSO, WE ARE OF THE VIEW THAT LOAN OR ADVANCE TO A NON-SHAREHOLDER CANNOT BE TAXED AS DEEMED DIVIDEND IN THE HANDS OF A NON-SHAREHOLDER. 6.6. THE AFORESAID VIEW HAS SINCE BEEN APPROVED IN SEVERAL DECISIONS RENDERED BY HONBLE HIGH COURT OF BOMBAY AND DELHI IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD., 324 ITR 263 (BOM) AND CIT VS. ANKITECH P VT.LTD. & OTHERS 340 ITR 14 (DEL.). SINCE THE ASSESSEE IN THE PRESENT CASE IS NOT A SHAREHOLDER IN THE LENDER COMPANY, WE ARE OF THE VIEW THAT THE ABOVE DECISION IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 6.7. IN VIEW OF THE AFORESAID DECISION, WE ARE OF T HE VIEW THAT THE ORDER OF CIT CANNOT BE SUSTAINED AS IN ANY CASE THERE CAN BE NO ADDITION AND THERE CAN BE NO PREJUDICE TO THE INTEREST OF THE REVENUE IN AS MUCH AS NO ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)( E ) CAN BE MADE IN THE F ACTS AND CIRCUMSTANCES OF THE PRESENT CASE. WE THEREFORE QUASH THE ORDER U/S.263 OF THE ACT AND ALLOW THE APPEAL BY THE ASSESSEE. ITA NO.405/KOL/2015 M/S. JET AGE SECURIT IES (P)LTD.. A.YR.2010-11 8 7.IN THE RESULT THE APPEAL BY THE ASSESSEE IS ALLOW ED. ORDER PRONOUNCED IN THE COURT ON 15.1.2016. SD/- SD/- [WASEEM AHMED] [N.V.VASUDEVAN] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 15.1.2016. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.JET AGE SECURITIES (P)LTD., 804, SUBHAM BUIL DING, 8 TH FLOOR, 1, SAROJINI NAIDU SARANI, KOLKATA-700017. 2 THE D.C.I.T., CIRCLE-7(1), KOLKATA. 3. THE CIT, KOLKATA-3, KOLKATA, 4. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES