“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

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

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

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

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

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

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

Pravina Navin Dedhia, Mumbai vs. CIT (A) NFAC, Mumbai

In the result the appeal of the assessee is allowed

ITA 1701/MUM/2021[2012-13]Status: DisposedITAT Mumbai30 May 2023AY 2012-13

For Appellant: Shri Maulik ChoksiFor Respondent: Shri Anil Gupta

Section 147Section 68Section 69C

Stock Exchange, (b) the payments and receipts are routed through the bank, (c) there is no evidence to indicate it is a closely held company and (d) the trading on the Stock Exchange was manipulated in any manner.” 8.12. Based on the above referred cases decided by the higher judiciary

Pratap Singh Yadav, Haryana vs. DCIT, Central Circle-7 Delhi, Delhi

In the result, appeal is allowed as indicated above

ITA 1898/DEL/2022[2016-17]Status: DisposedITAT Delhi30 May 2023AY 2016-17

Bench: Shri G.S. Pannu & Shri Saktijit Deyassessment Year: 2016-17 Prtatap Singh Yadav, Versus Dcit, Central Circle 7, 510, Sector 31-32A, Delhi. Gurgaon. Pan: Aahpy8387M (Appellant) (Respondent)

For Appellant: Sh. Ved Jain, Advocate &For Respondent: Sh. Virendra Singh, Sr. DR

Section 139(1)Section 153C

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

ACIT, CC-14, Delhi vs. Rama Pashu Aahar Pvt. Ltd., Delhi

In the result, assessee’s appeal is allowed as indicated above and

ITA 1862/DEL/2021[2017-18]Status: DisposedITAT Delhi30 May 2023AY 2017-18

Bench: Shri G.S. Pannu & Shri Saktijit Deyassessment Year: 2017-18 Rama Pashu Aahar (P) Ltd., Versus Acit, Central Circle 14, C/O Rra Taxindia, D-28, South New Delhi. Extension, Part-1, New Delhi Pan: Aaccr1144B (Appellant) (Respondent) Assessment Year: 2017-18 Acit, Central Circle 14, Versus Rama Pashu Aahar (P) Ltd., New Delhi. C/O Rra Taxindia, D-28, South Extension, Part-1, New Delhi. (Appellant) (Respondent)

For Appellant: Dr. Rakesh Gupta, Advocate &For Respondent: Sh. Pramod Kumar, Sr. DR

Section 143(3)

Rama Pashu Aahar (P) Ltd., Bulandshahr vs. ACIT, CC-14, New Delhi

In the result, assessee’s appeal is allowed as indicated above and

ITA 1456/DEL/2021[2017-18]Status: DisposedITAT Delhi30 May 2023AY 2017-18

For Appellant: Dr. Rakesh Gupta, Advocate &For Respondent: Sh. Pramod Kumar, Sr. DR

Section 143(3)

ITO Ward -3(1), New Delhi vs. Appealing Infrastructure Pvt Ltd, New Delhi

In the result, the appeal of the Revenue is dismissed

ITA 1958/DEL/2019[2015-16]Status: DisposedITAT Delhi23 May 2023AY 2015-16

Bench: Dr. B. R. R. Kumarsh. Yogesh Kumar Usita No. 1958/Del/2019 : Asstt. Year : 2015-16 Income Tax Officer, Vs M/S Appealing Infrastructure Pvt. Ltd. 921A, 9Th Floor, Devika Tower, Ward-3(1), New Delhi-110002 Nehru Place, New Delhi-110019 (Appellant) (Respondent) Pan No. Aaica8767B

For Appellant: Sh. V. K. Agarwal, AR &For Respondent: Sh. P. Praveen Sidharth, CIT DR

Section 42Section 56(2)(viib)Section 57(2)(viib)

rulings of various benches. Section 56(2)(viib) has been inserted vide Finance Act, 2012 w.e.f. 01.04.2013 to provide that, where a closely held company receives in any previous year from any person being a resident, any consideration for issue of share that exceeds the face value of such shares

Teleperformance Global Services Pvt Ltd (M/S Serco Bpo Pvt. Ltd )., Mumbai vs. DCIT 5(3)(1), Mumbai

Accordingly 15. In result the appeal of both AY 2017-18 and AY 2018-19 is allowed

ITA 2815/MUM/2022[2018-19]Status: DisposedITAT Mumbai24 Apr 2023AY 2018-19

Bench: Amit Shukla () & Ms. Padmavathy S. ()

Section 115JSection 143(1)Section 143(3)Section 144C

Finance Act, 1955 with effect from April I, 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

Teleperformance Global Services Pvt Ltd (M/S Serco Bpo Pvt. Ltd )., Mumbai vs. DCIT 5(3)(1), Mumbai

Accordingly 15. In result the appeal of both AY 2017-18 and AY 2018-19 is allowed

ITA 2814/MUM/2022[2017-18]Status: DisposedITAT Mumbai24 Apr 2023AY 2017-18

Bench: Amit Shukla () & Ms. Padmavathy S. ()

Section 115JSection 143(1)Section 143(3)Section 144C

ACIT, Ratlam vs. M/S Shirani Automotives Pvt. Ltd, Ratlam Mp

ITA 555/IND/2018[2014-15]Status: DisposedITAT Indore31 Mar 2023AY 2014-15

Bench: Shri Vijay Pal Rao & Shri B.M. Biyaniassessment Year: 2014-15 Acit, M/S. Shirani Automotive Ratlam P. Ltd. बनाम/ 29, Shirani Pura, Vs. Ratlam (Appellant / Revenue) (Respondent / Assessee) Pan: Aancs 1007 M Revenue By Shri P.K. Mishra, Cit-Dr Assessee By None Date Of Hearing 02.03.2023 Date Of Pronouncement 31.03.2023

Section 143(3)Section 2(22)(e)Section 36

Trib.- Indore): (2012) 49 SOT 27: Assessee firm’s partner was holding 69% shares in a closely held company-Loan advanced by closely held company to assessee-firm-AO treated the loan as deemed dividend in hands of assessee-firm-HELD- Dividend is taxable in hands of shareholder being registered ... Manish Karwa v. Asst. CIT (2014) 24 ITJ 454 (Trib-Indore)/ (2014) 65 SOT 105 (URO): Assessee had 9.68% shares in the closely held company - AO added the shares held by HUF of assessee and minor child to contend the holding of the assessee was more than 10% - AO treated

The Dy. Commr. of Income Tax, Cir.-1(1), Rajkot-Gujarat vs. M/S Aryan Arcade Pvt. Ltd., Rajkot-Gujarat

In the result, appeal of the Revenue is dismissed

ITA 163/RJT/2016[2012-13]Status: DisposedITAT Rajkot22 Mar 2023AY 2012-13

Bench: Smt.Annapurna Gupta & Shri T.R. Senthil Kumarasstt.Year :2012-13 Dcit, Cir.1(1) M/S.Aryan Arcade P.Ltd. Rajkot. Vs C/O. Milestone Property Mg Basement Grant Central Mall Rajkot.

For Appellant: Shri Shramdeep Sinha, ld.CIT(DR)

Section 23Section 24Section 250(6)

which the ld.CIT(A) held to be allowable to the assessee. 3. The facts of the case being that the assessee is a closely held company engaged in the business of letting out shops and Malls on lease. The assessee had returned income earned under the head Income from Other

DCIT, Circle-14(2), New Delhi vs. Kissandhan Agri Financial Services Pvt. Ltd., Delhi

In the result, the appeal of the Revenue is dismissed

ITA 8734/DEL/2019[2016-17]Status: DisposedITAT Delhi15 Mar 2023AY 2016-17

Bench: Shri Kul Bharat & Shri Pradip Kumar Kedia

For Appellant: Shri Atul Ninawat, CAFor Respondent: Shri Javed Akhtar, CIT-DR

Section 143(3)Section 56(2)(viib)

seeks to deem premium received from subscribers being Indian entities in excess of Fair Market Value as the chargeable income in the hands closely held company issuing such share at premium in excess of its Fair Market Value. 8.3 To set the context, the assessee company in the instant case

ACIT, Ratlam vs. M/S Sagar Automobiles Pvt. Ltd, Ratlam

In the result, the appeal filed by the Revenue in ITA No

ITA 569/IND/2018[2014-15]Status: DisposedITAT Indore27 Feb 2023AY 2014-15

Bench: Shri T.R. Senthil Kumar (Judicial Member), Shri B.M. Biyani (Accountant Member)

Section 143(3)Section 2(22)(e)Section 36(1)(iii)

assessee further submitted that though the director are shareholders holding more than 20% shares in the above stated two closely held companies, but the said two closely held companies had no cross holding of shares in other companies. But the two companies had regular business transaction with each other being ... Trib.- Indore): (2012) 49 SOT 27 Assessee firm’s partner was holding 69% shares in a closely held company-Loan advanced by closely held company to assessee-firm- AO treated the loan as deemed dividend in hands of assessee-firm- HELD-Dividend is taxable in hands of shareholder being registered

ACIT, Ratlam vs. M/S Shirani Motors Pvt. Ltd., Ratlam (Mp)

In the result, the appeal filed by the Revenue in ITA No

ITA 554/IND/2018[2015-16]Status: DisposedITAT Indore27 Feb 2023AY 2015-16

Bench: Shri T.R. Senthil Kumar (Judicial Member), Shri B.M. Biyani (Accountant Member)

Section 143(3)Section 2(22)(e)Section 36(1)(iii)

ACIT, Ratlam vs. M/S Shirani Motors Pvt. Ltd., Ratlam (Mp)

In the result, the appeal filed by the Revenue in ITA No

ITA 553/IND/2018[2014-15]Status: DisposedITAT Indore27 Feb 2023AY 2014-15

Bench: Shri T.R. Senthil Kumar (Judicial Member), Shri B.M. Biyani (Accountant Member)

Section 143(3)Section 2(22)(e)Section 36(1)(iii)

Sng Metals Private Limited, Faridabad vs. ITO Ward-2(4), Faridabad

Appeal are allowed for statistical purposes

ITA 7450/DEL/2019[2015-16]Status: DisposedITAT Delhi08 Feb 2023AY 2015-16

Bench: Shri Kul Bharat[Assessment Year: 2015-16

Section 143(3)Section 56Section 56(2)Section 56(2)(viib)

viib) of the Act without appreciating the fact that all the shares are issued to the family members and since it is a closely held company with only family members and sister concerns as shareholders, the price at which the shares are issued is not relevant. 2 2. That

ACIT, Circle-19(2), New Delhi vs. Pci Ltd., New Delhi

In the result the Cross objections of the assessee in CO No

ITA 5154/DEL/2018[2014-15]Status: DisposedITAT Delhi01 Feb 2023AY 2014-15

Bench: Shri N.K. Billaiya & Ms. Astha Chandra

For Appellant: Shri Satish Agarwal, CAFor Respondent: Shri Vivek Vardhan, Sr. DR

Section 133(6)Section 2(22)(e)

case are that during the course of scrutiny assessment proceedings, the Assessing Officer noticed that Riello Power India Pvt Ltd, a closely held company, was show caused why the advance given to the assessee should not be treated as deemed dividend. 5. In its reply, the assessee stated that

Bineeta Singh, Gurgaon vs. ACIT Circle-5(1), New Delhi

In the result, appeal of the assessee is allowed

ITA 3373/DEL/2019[2013-14]Status: DisposedITAT Delhi19 Jan 2023AY 2013-14

Bench: Shri Chandra Mohan Garg & Shri Narendra Kumar Billaiyaassessment Year: 2013-14 Ms. Bineeta Singh, The Acit Circle 5(1), Flat No. 126, Aspen Greens, New Delhi Nirwana Country, Gurgaon, Vs. Haryana 122003 Pan Aqeps3259D (Appellant) (Respondent) For Assessee : Shri Ajay Wadwa, Advocate Ms. Bharti Sharma, Ca Revenue For : Shri P. Praveen Sidharth Sr. Dr

For Appellant: Shri Ajay Wadwa, Advocate

Section 147Section 2(22)Section 250

that before the authorities below it was contended that as per section 2(22)(e) of the Act, any loan or advance by closely held company to a shareholder having substantial interest in the company is deemed to be a dividend income subject to the Ms. Bineeta Singh certain condition

M/S Bhuwania Associates Pvt. Ltd., Kolkata vs. D.C.I.T., Circle-3(1), Kolkata

In the result, the appeal of the assessee is partly allowed

ITA 2608/KOL/2019[2012-13]Status: DisposedITAT Kolkata20 Dec 2022AY 2012-13

Bench: Shri Rajesh Kumar & Shri Sonjoy Sarma]

Section 68

face value of Rs. 10/- each at a share premium of Rs. 190/- per share. According to AO, the assessee is a closely held company and has issued equity shares at a high premium which appears to be sham transactions. The AO observed that the assessee did not have

DCIT Central Circle-8(4), Mumbai vs. M/S.Gandhar Yarn Private Limited, Mumbai

In the result, the appeal by the Revenue is dismissed

ITA 907/MUM/2018[2009-10]Status: DisposedITAT Mumbai07 Nov 2022AY 2009-10

Bench: Shri M. Balaganesh & Shri Sandeep Singh Karhail

For Appellant: Shri Rakesh JoshiFor Respondent: Shri P.P. Mane

Section 131Section 133(6)Section 143(1)Section 147Section 250Section 68

find that the said provision has been inserted by Finance Act, 2012 w.e.f 10.04.2013, where it provides that where a closely held company issues its shares at a price which is more than its fair market value, then amount received in excess of fair market value will be charged

Heena Suresh Jain, Mumbai vs. ITO 19 (1)(5), Mumbai

In the result, appeals filed by the assessees are allowed

ITA 6617/MUM/2019[2014-15]Status: DisposedITAT Mumbai21 Sept 2022AY 2014-15

Bench: Shri S. Rifaur Rahman, Hon'Ble & Ms. Kavitha Rajagopal, Hon’Blesuresh M. Jain Huf V. Ito-19(3)(4), 52A Nanu Bhai Desai Road 2Nd Floor, Matru Mandir Tardeo Road, Mumbai-400007 Mulji Thakersi Building 2Nd Floor, Mumbai-400004 Pan: Aalhs7460R (Appellant) (Respondent) Heena Suresh Jain V.

For Appellant: Shri. Rajkumar SinghFor Respondent: Shri. Vaibhav Jain

Section 139(1)Section 143(2)

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.” The Court also held the following vide Page 3 Para

Suresh M Jain HUF, Mumbai vs. ITO 19 (3)(4), Mumbai

In the result, appeals filed by the assessees are allowed

ITA 6614/MUM/2019[2014-15]Status: DisposedITAT Mumbai21 Sept 2022AY 2014-15

For Appellant: Shri. Rajkumar SinghFor Respondent: Shri. Vaibhav Jain

Section 139(1)Section 143(2)