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II. Direct Taxes Case Laws:
1. Gopal and Sons (HUF) Vs. CIT, Civil Appeal No. 12274 of 2016, Date of Judgement: 04.01.2017, Supreme Court of India
Issue:
Whether loan/advances received by HUF could be deemed as dividend
within the meaning of Section 2(22)(e) of the Income Tax Act,1961
Held, Yes
Brief Facts:
The assessee had filed return of income of AY 2006-07 declaring his
total income at Rs.1,62,745/. During the year, assessee had received
advance of Rs.1,20,10,988/- from M/s. G.S. Fertilizers (P) Ltd in which
the assessee hold 37.12% of the total shareholding of the Company. The
AO made an addition of Rs.1,20,10,988/- as deemed dividend u/s 2(22)(e)
of the Income Tax Act, 1961 contending that the assessee was both the
registered shareholder of the Company and the beneficial owner of
shares, holding more than 10% of voting power. The addition was affirmed
by the CIT(A) while deleted by ITAT. The High court reversed the
judgement of ITAT & sustained the decision of the AO. Being
aggrieved by that, the assessee has preferred an appeal before Supreme
Court.
Held:
The supreme court held that it is not even necessary to determine as
to whether HUF can, in law, be beneficial shareholder or registered
shareholder in a Company. Although, the share certificates were issued
in the name of the Karta, Shri Gopal Kumar Sanei, but in the annual
returns, it is the HUF which was shown as registered and beneficial
shareholder. Even if the court presumes that it is not a registered
shareholder u/s 2(22)(e) then also once the payment is received by the
HUF and shareholder (Karta) is a member of the said HUF and he has
substantial interest in the HUF, the payment made to the HUF shall
constitute deemed dividend within the meaning of section 2(22)(e) of the
Act.
Therefore, the appeal of the assessee is dismissed.
(Please click here for judgment)
2. Susham Singla Vs. CIT, I.T.A Nos. 371 to 377 of 2015, Date of Pronouncement: 23.12.2016, High Court of Punjab & Haryana
Issue:
Whether in the case where the assessee owns more than 1 property,
the notional rent from the properties other than one property which has
been considered as self-occupied will be computed as per the provisions
of Section 23(1)(a) of the Income Tax Act, 1961 and not as per the
provisions of Section 23(1)(c) of the Act?
Held_Yes
Brief Facts:
A search was conducted on the upon Jagdish Jeweller Group and the
assessee who was related to the group. It was found that the assessee
was the owner of some properties. The revenue issued the notice to the
assessee as to why deemed income by determining the annual value of the
properties may not be added to the income of the assessee. The assessee
was the owner of properties, out of which one property at Patiala was
considered to be self – occupied and the notional rent from the rest 3
properties were added to the income of the assessee after allowing
statutory deductions. CIT(A) and ITAT upheld the order of the AO.
Aggrieved by which, the assessee appealed before the Hon’ble High
Court.
Held:
It was contended by the assessee that the said properties had not
been let out and remained vacant during the years under consideration
and therefore, the annual value of the same cannot be determined u/s
23(4) of the Income Tax Act, 1961 and hence as per the provisions of
Section 23(1)(c) of the Act, the Annual Value of such properties should
be taken as NIL. It was held that the Section 23(1) has three sub
sections. Section 23(1)(b) and (c) would apply only to those properties
which were actually let out and for which rent was actually received or
receivable by the assessee. These provisions deal with the concept of
real income and not notional income. Thus, the annual value of the
properties like the ones in the case in hand which are more than one,
owned by the assessee and which admittedly remained vacant throughout
the previous year would not be assessed under Section 23(1)(c) but under
Section 23(1)(a). The annual value would, therefore, be determined
notionally as done in the case in hand by the Assessing Officer and
concurrently upheld by the Commissioner and the Tribunal.
The appeal of the assessee is dismissed.
(Please click here for judgment)
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