NATIONAL TRAVEL SERVICES vs. COMMISSIONER OF INCOME TAX DELHI VIII

C.A. No.-002068-002071 - 2012Supreme Court2018 INSC 3518 January 2018Bench: HON'BLE MR. JUSTICE ROHINTON FALI NARIMAN17 pages
For Petitioner: GAGRAT AND COFor Respondent: ANIL KATIYAR
AI SummaryRemanded

What did the Supreme Court hold?

The Supreme Court found the reasoning of the lower appellate tribunal difficult to accept. It held that the amended definition of 'shareholder' in Section 2(22)(e) now includes a beneficial owner of shares, and it is not necessary for the person to be a registered shareholder.

What were the facts?

The assessee, a partnership firm, received a loan from a company in which its partners were beneficial owners of shares. The issue was whether this loan was taxable as a deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.

What were the issues?

Whether a loan to a beneficial owner of shares, who is not necessarily a registered shareholder, is taxable as a deemed dividend under Section 2(22)(e) after the 1988 amendment.

Which sections of the Income-tax Act were involved?

Section 2(22)(e)

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Cause title — parties, addresses and appearances
1 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. 2068-2071 OF 2012 NATIONAL TRAVEL SERVICES …APPELLANT (S) VERSUS COMMISSIONER OF INCOME TAX, DELHI, VIII …RESPONDENT (S) WITH C.A. NO. 837 of 2018 @ S.L.P. (C) NO. 27245 OF 2017

J U D G M E N T R.F. Nariman, J. 1)

Leave granted. 2)

The present appeals raise an interesting question as to the correct interpretation of Section 2(22)(e) of the Income Tax Act, 1961, as amended in 1988. 3)

The brief facts in order to decide the present controversy are as follows: The Assessee is a partnership firm consisting of three partners, namely, Mr. Naresh Goyal, Mr. Surinder Goyal and M/s Jet 2 Enterprises Private Limited having a profit sharing ratio of 35%, 15% and 50% respectively. The Assessee firm had taken a loan of Rs. 28,52,41,516/- from M/s Jetair Private Limited, New Delhi. In this Company, the Assessee subscribed to the equity capital of the aforesaid Company in the name of two of its partners, namely, Mr. Naresh Goyal and Mr. Surinder Goyal totaling 48.19 per cen

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