Case: Commissioner of Income-Tax,Central-Iv Vs. Jignesh P. Shah

1. This Appeal under SectionThe undisputed facts are that the assessee received loan from one M/s. NS Fincon Pvt. Ltd. The Revenue seeks to tax this loan as deemed dividend. The case of the Revenue before us is that one M/s.Financial Services Pvt. Limited had advanced money to M/s. NS Fincon Pvt. Ltd. who in turn advanced money to theee a 50% share holder of M/s.Financial Services Pvt. Limited and in view thereof, loan advanced by M/s. NS Fincon Pvt. Ltd. to theis to be treated as a dividend in the hands ofIt is also an admitted position that theis not a share holder in M/s. NS Fincon Pvt. Ltd. The Assessing Officer brought to tax the amount of loan received by thefrom M/s. NS Fincon Pvt. Ltd. as deemed dividend under Section 2 (22)(e) of the Act.7. On Appeal, the CIT(A) held that the loan given by M/s. NS Fincon Pvt. Ltd to theis not the payment made by it to its share holder. Thus, Section 2 (22)(e) of the Act could have no application. The CIT(A) further held that Section 2 (22)(e) of the Act creates a fiction by bringing to tax an amount as dividend when the amount so received is otherwise then dividend. Therefore, Section 2(22) (e) of the Act has to be strictly read.8. On further appeal to the Tribunal by the Revenue, the impugned order placed reliance upon the decisions of this Court in Universal Medicare (P) Ltd. (supra) read with its decision in Bhaumik Colours (P) Ltd. (supra) and the decision of Rajasthan High Court in CIT v. Hotel Hilltop [2009] 313 ITR 116  /[2012] 205 Taxman 91 (Mag.)/18 taxmann.com 308 to uphold the order of the Commissioner of Income Tax (Appeals). Thus upholding the conclusion that deemed dividend can be assessed only in the hands of a shareholder of the lender company. In this case, theis admittedly not the shareholder of M/s. NS Fincon (P) Ltd.

Court's reasoning:
12. In the present facts, it is an admitted position thatis not a shareholder of M/s. NS Fincon Pvt. Ltd. from whom he has received loan. Therefore, no fault can be found with the decision of the Tribunal in having followed the decision of the High Court in Universal Medicare (P.) Ltd. (supra). This view has been further reiterated by another Division Bench of this Court in Impact Containers (P.) Ltd. (supra) rendered on 4th July, 2014.13. We are of the view that as the issue raised by the Revenue stands concluded by the order of this Court, no substantial question of law arises for our consideration.