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“closely held company”

Losses & Set-offSection 79Section 79300 judgments

The decision most relied on for closely held company is CIT v. Ankitech (P) Ltd. (340 ITR 14), cited in 202 judgments on BharatTax.

Leading authorities on closely held company

CIT v. Ankitech (P) Ltd.
340 ITR 14 · 2012 · High Court
202
citing judgments

Deemed dividend under section 2(22)(e) cannot be taxed in the hands of a non-shareholder. The Supreme Court confirmed this view, affirming the Delhi High Court's decision in Ankitech.

CIT v. Universal Medicare Pvt. Ltd.
324 ITR 263 · 2010 · High Court
111
citing judgments

Deemed dividend under section 2(22)(e) is assessable only in the hands of the beneficial shareholder who receives the benefit of the loan or advance, and not in the hands of the company receiving the loan.

CIT v. Mukundray K. Shah
290 ITR 433 · 2007 · Supreme Court
99
citing judgments

For Section 2(22)(e) to apply, a payment by a company must be in the nature of a loan or advance, and the company must have accumulated profits. Such payments to a concern in which a shareholder, holding more than 10% voting power, has a substantial interest are deemed dividends if the shareholder ultimately benefits, even if routed through different modes or concerns.

Miss P. Sarada v. CIT
229 ITR 444 · 1998 · Supreme Court
64
citing judgments

A loan or advance from a closely held company to a shareholder is a deemed dividend under Section 2(22)(e) upon receipt, unaffected by subsequent repayment or adjustment.

(Refer: CIT v. C.P.Sarathy Mudaliar
83 ITR 170 · 1972 · Supreme Court
63
citing judgments

For the purpose of deemed dividend under section 2(22)(e) of the Income-tax Act, the term 'shareholder' refers exclusively to a registered shareholder of the company, and not a beneficial owner or non-shareholder.

CIT v. Madhur Housing and Development Company
401 ITR 152 · 2018 · Supreme Court
49
citing judgments

A loan or advance from a closely held company to a 'concern' where a common shareholder has a substantial interest is not a deemed dividend under Section 2(22)(e) for the 'concern' if it is not a shareholder of the lending company. Deemed dividend under Section 2(22)(e) is taxable only in the hands of the registered or beneficial shareholder.

CIT v. Mukundray K. Shah, Citation No.
160 Taxmann 276 · 2007 · Supreme Court
39
citing judgments

Section 2(22)(e) of the Income Tax Act, 1961, aims to prevent tax evasion by treating certain payments made by closely held companies to shareholders or their concerns as dividends.

PCIT v. BST Infratech Ltd.
161 Taxmann.com 668 · 2024 · High Court
32
citing judgments

When shares are issued at a premium, the genuineness of the transaction is paramount, not necessarily the source of the investor's funds. The court emphasizes verifying the transaction's authenticity, even if investor identity is established.

Judgments citing closely held company

Innio Jenbacher Gmbh & Co Og, Austria vs. ACIT, Circle-1(3)(1) Int. Taxation, New Delhi

In the result, all the appeals filed by the assessee are allowed as

ITA 763/DEL/2023[2016-17]Status: DisposedITAT Delhi06 Nov 2023AY 2016-17

Bench: Shri Shamim Yahya & Shri Kul Bharat

For Appellant: Shri Ravi Sharma, AdvocateFor Respondent: Shri Vijay B. Vasanta, CIT DR
Section 144CSection 144C(5)Section 147

Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend assessment year prior

Innio Jenbacher Gmbh & Co Og, Austria vs. ACIT, Circle-1(3)(1), Int. Taxation, New Delhi

In the result, all the appeals filed by the assessee are allowed as

ITA 762/DEL/2023[2015-16]Status: DisposedITAT Delhi06 Nov 2023AY 2015-16

Bench: Shri Shamim Yahya & Shri Kul Bharat

For Appellant: Shri Ravi Sharma, AdvocateFor Respondent: Shri Vijay B. Vasanta, CIT DR
Section 144CSection 144C(5)Section 147

Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend assessment year prior

Rhone Associates P.Ltd (Successor to Proactive Telecommunication P.Ltd, Ujwal Network P.Ltd and Sanchi Infratech P.Ltd), Gurgaon vs. ACIT, Central Circle-29, New Delhi

In the result, this appeal filed by the assessee is allowed as indicated

ITA 168/DEL/2023[2012-13]Status: DisposedITAT Delhi01 Nov 2023AY 2012-13

Bench: Shri Shamim Yahya & Shri Yogesh Kumar Usrhone Associates Pvt. Ltd., Vs. Acit, (Successor To Proactive Telecommunication Pvt.Ltd., Central Circle-29, Ujwal Network Pvt. Ltd. & Sanchi Infratech Pvt.Ltd.) O-44, New Mahavir Nagar, Gurgaon – 122 001 (Haryana).

For Appellant: Shri Aman Garg, CAFor Respondent: Shri P.N. Baranwal, CIT DR
Section 119Section 131Section 133

Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under

Supreme Buildestates Pvt Ltd, Madanganj- Kishangarh vs. DCIT Circle 2 Ajmer, Jaipur Road Ajmer

In the result, appeal of the assessee is allowed

ITA 495/JPR/2023[2020-21]Status: DisposedITAT Jaipur30 Oct 2023AY 2020-21

Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)

For Appellant: Shri C.M. Agarwal (C.A.)For Respondent: Sh. Anup Singh (Addl. CIT) a
Section 115JSection 142(1)Section 143(2)Section 143(3)Section 144BSection 2Section 234BSection 37Section 80Section 80G

under Section 234B & 234C of the Act.” 3. The fact as culled out from the records is that the assessee company is a closely held company, having interest income from funds available to the company, which is being assessed under the 3 Supreme Buildestates Pvt. Ltd. vs. DCIT head ‘income ... Income-tax Act, 1961 dated 23.09.2022 6.1 As per the facts culled out from the record and reproduced earlier, the appellant is a closely held company. For AY 2020-21, the appellant filed the return of income on 09.10.2020 declaring total income at Rs. 22,43,54,110/- and income

DCIT, Circle-1(1)(2), Surat vs. J B Syntex Pvt. Ltd, Surat

In the result, appeal filed by the Revenue is dismissed

ITA 140/SRT/2020[2011-12]Status: DisposedITAT Surat18 Oct 2023AY 2011-12

Bench: Shri Pawan Singh, Jm & Dr. A. L. Saini, Am आयकर अपील सं./Ita No.140/Srt/2020 Assessment Year: (2011-12) (Physical Hearing) The Dcit, Vs. J. B. Syntex Pvt. Ltd., Circle – 1(1)(2), B-25, Guj. Eco. Textile Park, Surat N. H. No.8, Palsana, Surat – 394315. "थायीलेखासं./जीआइआरसं./Pan/Gir No.: Aabcj9389D (Appellant) (Respondent) Shri Vinod Kumar, Sr. Dr Appellant By Shri Rasesh Shah, Ca Respondent By Date Of Hearing 17/08/2023 Date Of Pronouncement 18/10/2023

Section 142(1)Section 143(1)Section 143(2)Section 143(3)Section 68

that with effect from assessment year 2013-14, section 68 of the Income Tax Act has been amended to provide that if a closely held company fails to explain the source of share capital, share premium or share application money received by it to the satisfaction of the assessing officer

ITO, Ward, Phalodi vs. M/S Rama Allure LLP, Jodhpur

In the result, appeal of the revenue is dismissed

ITA 135/JODH/2023[2020-21]Status: DisposedITAT Jodhpur09 Oct 2023AY 2020-21

Bench: The Date, The Appeal Is Finally Heard.”

Section 142(1)Section 143(2)Section 143(3)

provisos to Section 68, with effect from 1- 4-2013 (assessment year 2013-14). First proviso to enlarge the onus of a closely held company and provides that if a closely held company receives any share application money or share capital or share premium or the like, it should also ... different from that which is followed in case of a company seeking share capital from the public at large. In the case of closely held companies, investments are made by known persons. Therefore, a higher onus is required to be placed on such companies besides the general onus to establish

Thales Six Gts France Sas, Delhi vs. DCIT, 3(1)(1), Delhi

In the result, this appeal is allowed as indicated above

ITA 2380/DEL/2022[2017-18]Status: DisposedITAT Delhi09 Oct 2023AY 2017-18

Bench: Shri Shamim Yahya & Shri Anubhav Sharma[Assessment Year: 2017-18]

Section 119Section 143(3)

Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under

Sh.Gaurav Aggarwal, Gurdas Pur vs. Dy.Commissioner of Income Tax, Amritsar

In the result, the appeal of assessee in ITA No

ITA 35/ASR/2019[2014-15]Status: DisposedITAT Amritsar13 Sept 2023AY 2014-15

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10(38)Section 153ASection 250

Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. I.T.A. Nos.32 to 35/Asr/2019 17 A.Ys

Smt. Deepti Aggarwal, Gurdas Pur vs. Dy Commissioner of Income Tax, Amritsar

In the result, the appeal of assessee in ITA No

ITA 34/ASR/2019[2014-15]Status: DisposedITAT Amritsar13 Sept 2023AY 2014-15

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10(38)Section 153ASection 250

Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. I.T.A. Nos.32 to 35/Asr/2019 17 A.Ys

Sh. Raman Kumar Aggarwal, Gurdas Pur vs. Dy. Commissioner of Income Tax, Amritsar

In the result, the appeal of assessee in ITA No

ITA 33/ASR/2019[2015-16]Status: DisposedITAT Amritsar13 Sept 2023AY 2015-16

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10(38)Section 153ASection 250

Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. I.T.A. Nos.32 to 35/Asr/2019 17 A.Ys

M/S Raman Kumar Aggarwal, Gurdaspur vs. Dy. Commissioner .of. Income. Tax, Amritsar

In the result, the appeal of assessee in ITA No

ITA 32/ASR/2019[2014-15]Status: DisposedITAT Amritsar13 Sept 2023AY 2014-15

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjee

Section 10(38)Section 153ASection 250

Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. I.T.A. Nos.32 to 35/Asr/2019 17 A.Ys

The Income Tax Officer, Ward-3(1), Jamnagar vs. M/S. Paras Buildcon P. Ltd., Jamnagar

ITA 315/RJT/2017[2012-13]Status: DisposedITAT Rajkot13 Sept 2023AY 2012-13

Bench: Shri Waseem Ahmed & Shri T.R Senthil Kumar

For Appellant: Shri Mehul Ranpura, A.RFor Respondent: Shri B.D. Gupta, Sr. D.R
Section 40A(3)Section 68

been able to take such doubt and suspicion to further stage by any corroborative finding. The jurisdictional High Court in the case of closely held company, Hindustan Inks & Resins Ltd, 60 DTR 18 has held that once the identity of the subscriber is proved, no addition can be made

Shri Mayur Bansal, Gwalior vs. The DCIT, Central, Bhopal

In the result, appeals of the revenue in IT(SS)ANo

ITA 81/IND/2021[2018-19]Status: DisposedITAT Indore28 Aug 2023AY 2018-19

Bench: Shri Vijay Pal Rao & Shri B.M. Biyani

Section 119Section 153ASection 156

Page 18 of 23 Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend

Shri Ishak, Indore vs. The ITO 5(4), Indore

In the result, the appeal filed by the assesse is allowed

ITA 13/IND/2023[2011-12]Status: DisposedITAT Indore24 Aug 2023AY 2011-12

Bench: Shri Vijay Pal Rao & Shri B.M. Biyanishri Ishak Ito 5(4) Kasturbagram S.O. Mundla Indore Vs. Nayata, Indore (Appellant / Assessee) (Respondent/ Revenue) Pan: Akxpi 6044 D Assessee By Shri Milind Wadhwani, Ar Revenue By Shri Ashish Porwal, Sr. Dr Date Of Hearing 21.08.2023 Date Of Pronouncement 24.08.2023

Section 144Section 147Section 154

Finance Act, 1955 with effect from April 1, 1955. These two sections provided that any payment made by a closely held company to its shareholders by way of advance or loan to the extent to which the company possesses accumulated profits shall be treated as dividend taxable under

M/S. Doit Creations (India) Pvt. Ltd, Mumbai vs. Pr. Comm of Income Tax, Central Circle-3, Mumbai

In the result, the appeal of the assessee is partly allowed and additional ground of appeal filed by the assessee is dismissed

ITA 1354/MUM/2022[2015-16]Status: DisposedITAT Mumbai23 Aug 2023AY 2015-16

Bench: Shri Amit Shukla & Shri Amarjit Singhdoit Creations (India) Vs. Principal Commissioner Private Limited Of Income Tax, Central 307 & 308, 3Rd Floor,, Circle 3, Room No. 1901, Midas, Sahar Plaza, 19Th Floor, Air India Andheri (East) Building, Nariman Point, Mumbai – 400 069 Mumbai – 400 021 स्थायी लेखा सं./जीआइआर सं./Pan/Gir No: Aabcd8695A Appellant .. Respondent [ Appellant By : Dharan Gandhi Respondent By : Neena Jeph Date Of Hearing 27.07.2023 Date Of Pronouncement 23.07.2023 आदेश / O R D E R Per Amarjit Singh (Am): This Appeal Filed By The Assesse Is Directed Against The Order Passed By The Ld. Pcit(Central), Mumbai -3, Dated 31.03.2022 For A.Y. 2015-16. The Assessee Has Raised The Following Grounds Before Us: “1. On The Facts & Circumstances Of The Case & In Law, The Hon'Ble Pr.Cit Central - 3 (Herein After Referred As 'Pcit) Erred In Invoking Provisions Of Section 263 Of The Income Tax Act, 1961 (Hereinafter Referred As 'The Act') By Issuing The Notice Inspite Of The Fact That Assessment U/S. 143(3) & U/S 143(3) R.Ws 147 Of The Act Has Been Completed After Due Examination & Application Of Mind While Framing The Assessment Order U/S 143(3) & U/S 143(3) Rws 147 Of The Act. Further Order U/S 263 Is Also Passed Merely Setting Aside The Assessment To The File Of The Learned Assessing Officer To Conduct Proper Inquiry Which Is Unjustified. It Is Therefore Submitted That The Order Passed U/S 263 Should Be Cancelled.

For Appellant: Dharan GandhiFor Respondent: Neena Jeph
Section 143(3)Section 147Section 148Section 263Section 56(2)(viib)

shares will be charged to tax in the hand of the company as income from other sources. This section applies to a closely held company (e a company in which the public are NOT substantially interested) receiving any consideration for issue of shares from any resident. These shares received shall

Venkata Rama Satyanarayana Varma Vegesna, Visakhapatnam vs. DCIT/ACIT, Circle-3(1), Visakhapatnam

In the result, appeal filed by the assessee is allowed

ITA 165/VIZ/2022[2011-12]Status: DisposedITAT Visakhapatnam14 Jul 2023AY 2011-12

Bench: Shri Duvvuru Rl Reddy, Hon’Ble & Shri S Balakrishnan, Hon’Bleआयकर अपील सं./I.T.A.No.165/Viz/2022 (ननधधारण वर्ा / Assessment Year : 2011-12) Venkata Rama Satyanarayana Varma Vs. National E-Assesment Centre, Vegesna Delhi 10-50-2, Lazarus Bangalow (Dcit/Acit Waltair Main Road Circle-3(1) Visakhapatnam Visakhapatnam) [Pan : Aagts9608E] (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलधथी की ओर से/ Appellant By : Shrin C.M.Ravi Prasad, Ar प्रत्यधथी की ओर से / Respondent By : Shri On Hari Prasada Rao, Dr सुनवधई की तधरीख / Date Of Hearing : 24.04.2023 घोर्णध की तधरीख/Date Of Pronouncement 14.07.2023 : आदेश /O R D E R Per Shri Duvvuru Rl Reddy: This Appeal Is Filed By The Assessee Against The Order Of Commissioner Of Income Tax (Appeals), National Faceless Appeal Centre (Nfac), Delhi In Din & Order No. Itba/Nfac/S/250/2022- 23/1043814974(1) Dated 12.07.2022, Arising Out Of The Assessment Order Passed By The Assessing Officer (Ao) U/S 271(1)(C) Of The Income Tax Act, 1961 (In Short “Act”) Dated 14.02.2022 For The Assessment Year (A.Y.) 2011-12. 2

For Appellant: Shrin C.M.Ravi Prasad, ARFor Respondent: Shri ON Hari Prasada Rao, DR
Section 143(3)Section 2(22)(e)Section 271(1)(c)

assessee for the reason that deeming fiction provided u/s 2(22)(e) for making addition towards loans and advances from a closely held company in the hands of the directors cannot be considered 'as furnishing of inaccurate particulars of income, despite the assessee has disclosed borrowings from the company

Measage G. G Oils & Fats Private Limited, Bathinda vs. Deputy Commissioner of Income Tax Circle- 1, Bathinda

In the result, the appeals of the assessee bearing ITA No

ITA 513/ASR/2019[2016-17]Status: DisposedITAT Amritsar11 Jul 2023AY 2016-17

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjeei.T.A. No.189/Asr/2018 Assessment Years: 2014-15

Section 143(3)Section 2(22)(e)Section 250

clause (e) of section 2(22) brings into its ambit as “dividend” any payment by way of advance or loan by a closely held company to a shareholder, being a person who is the beneficial owner of shares and having more than 10% of the voting power, to the extent ... liability to tax gets attached to any amount taken as a loan or advance by a shareholder from a closely held company at the moment the loan is borrowed, and it is immaterial whether the loan is repaid before the end of the accounting year or not. This proposition

Mesers G.G Contineental Trades Pvt.Ltd, Bathinda vs. Deputy Commissioner of Income Tax, Circle-I, Bathinda

In the result, the appeals of the assessee bearing ITA No

ITA 189/ASR/2018[2014-15]Status: DisposedITAT Amritsar11 Jul 2023AY 2014-15

Bench: Dr. M. L. Meena & Sh. Anikesh Banerjeei.T.A. No.189/Asr/2018 Assessment Years: 2014-15

Section 143(3)Section 2(22)(e)Section 250

clause (e) of section 2(22) brings into its ambit as “dividend” any payment by way of advance or loan by a closely held company to a shareholder, being a person who is the beneficial owner of shares and having more than 10% of the voting power, to the extent ... liability to tax gets attached to any amount taken as a loan or advance by a shareholder from a closely held company at the moment the loan is borrowed, and it is immaterial whether the loan is repaid before the end of the accounting year or not. This proposition

Global Business Conexxtions Pvt.Ltd., Madhya Pradesh vs. ACIT/DCIT-5(3), Mumbai

ITA 720/MUM/2023[2013-14]Status: DisposedITAT Mumbai28 Jun 2023AY 2013-14
For Appellant: Shri Jitendra SinghFor Respondent: Dr. Kishor Dhule
Section 143(3)Section 147Section 2(22)(e)

reiterate that as per this provision, the following conditions are to be satisfied : ―(1) The payer company must be a closely held company. (2) It applies to any sum paid by way of loan or advance during the year to the following persons : 7 (a) A shareholder holding at least ... advance is not in course of ordinary business activities." 24. The intention behind enacting 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

C.M. Buildcon Pvt. Ltd., Delhi vs. Pr.CIT- 2, Delhi

ITA 6202/DEL/2019[2009-10]Status: DisposedITAT Delhi14 Jun 2023AY 2009-10

Bench: Shri Anil Chaturvedi & Shri Anubhav Sharmaassessment Year: 2009-10

Section 142(1)Section 147Section 148Section 250Section 263

Delhi (hereinafter referred as the Ld. AO). 6202/Del/2019 M/s. C.M.Buildcon P. Ltd. 2. Brief fact of the case are that assessee is a closely held company engaged in the business of real estate and deriving its business income from the same and filed its return on 16.09.2009. Thereafter