w w w . L a w y e r S e r v i c e s . i n

Dr. T.J. Jaikish, P.V.S. Hospitals (P) Ltd., Calicut v/s The Commissioner of Income Tax, Kozhikode

Company & Directors' Information:- S V S HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TG2007PTC052534

Company & Directors' Information:- D D HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN2009PTC073765

Company & Directors' Information:- A AND E HOSPITALS PRIVATE LIMITED [Active] CIN = U85110KL2003PTC016562

Company & Directors' Information:- R R HOSPITALS PRIVATE LIMITED [Active] CIN = U85100HR2011PTC042705

Company & Directors' Information:- K P S HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TZ1994PTC004918

Company & Directors' Information:- B R S HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN1988PTC016237

Company & Directors' Information:- V H M HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN2009PTC073497

Company & Directors' Information:- D B R HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TG2003PTC041648

Company & Directors' Information:- S M R HOSPITALS PVT LTD [Strike Off] CIN = U85110DL2005PTC143152

Company & Directors' Information:- M S R HOSPITALS PRIVATE LIMITED [Active] CIN = U85110AP1994PTC017731

Company & Directors' Information:- M M HOSPITALS PRIVATE LIMITED [Under Process of Striking Off] CIN = U85110UP1993PTC015371

Company & Directors' Information:- K C HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110PB2012PTC035880

Company & Directors' Information:- B M HOSPITALS PRIVATE LIMITED [Active] CIN = U85110TN2005PTC058062

Company & Directors' Information:- S A HOSPITALS LIMITED [Strike Off] CIN = U85110MH2002PLC136697

Company & Directors' Information:- M. B. HOSPITALS PRIVATE LIMITED [Active] CIN = U85100HR2010PTC041489

Company & Directors' Information:- M G M I HOSPITALS (INDIA) PRIVATE LIMITED [Active] CIN = U85195KA2010PTC052058

Company & Directors' Information:- M AND D HOSPITALS PRIVATE LIMITED [Active] CIN = U85110DL2002PTC117618

Company & Directors' Information:- M. R. HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110UP1995PTC018165

Company & Directors' Information:- S P HOSPITALS PVT LTD [Strike Off] CIN = U85110HP1992PTC012651

Company & Directors' Information:- V K R HOSPITALS PRIVATE LIMITED [Strike Off] CIN = U85110TG2011PTC075009

Company & Directors' Information:- V P HOSPITALS PRIVATE LIMITED [Active] CIN = U85110DL2011PTC220548

Company & Directors' Information:- G S HOSPITALS PRIVATE LIMITED [Active] CIN = U85100AP2014PTC094902

    ITA. No. 191 of 2013

    Decided On, 08 March 2018

    At, High Court of Kerala


    For the Petitioner: P. Raghunath, Premjit Nagendran, Advocates. For the Respondent: P.K.R. Menon, Senior Counsel, Jose Joseph, SC.

Judgment Text

K. Vinod Chandran, J.

1. The appellant is before us; with a question of law as re-framed by this Court vide order dated 29.10.2014, as against the order of the Tribunal, which is as herein below:-

'Whether the authorities below did not commit an error of law while holding that the above 'dividends' are different from the 'dividends' referred to in Section 115(O) and that the provisions of Section 115(O) are not applicable to such 'deemed dividends'?'

2. The brief facts to be noticed are that the appellant was a major shareholder of one PVS Hospitals Private Limited. The appellant was also a major participant in a Trust, which was setting up a Nursing institution, called 'PVS Nursing College'. For the purpose of setting up the College, the Trust availed finance from PVS Hospitals Private Limited, to the extent of Rs.39,14,983/- in the financial year 2004-2005. The same is deemed to be dividend under Section 2(22)(e) of the Income Tax Act, 1961 [for brevity, 'IT Act']. The said amounts were taxed in the hands of the assessee, who definitely had a beneficial interest in the Trust which established the College and which used the advance paid to the assessee. There is also no dispute that the assessee is a major shareholder in the Private Limited Company which made the advance. All the ingredients available in Section 2(22)(e) of the Act are attracted. The question raised is as to whether the assessee would be liable to tax for the said advance amounts at his hands.

3. The learned Counsel appearing for the assessee would take us through the provision under Section 2(22)(e) of the Income Tax Act, 1961 [for brevity, the Act] as also the provision under Section 10(34); the latter exempting dividends referred to in Section 150(O). There is no dispute that the money advanced by the Hospital to the assessee for the trust would fall under the definition of deemed dividend as available in Section 2(22)(e). The contention is that the dividend income having been exempted under Section 10(34); even if the amounts advanced are deemed to be dividend, the provision of exemption has to be given full play. The compelling argument is that at the hands of the receiver the dividend cannot be taxed. The dividend can be taxed as profits of the Company, which has already been done since the advanced amounts are from the accumulated profits. An additional tax under Section 115(O) can be levied on the payee Company and no tax can be levied on the receiver.

4. The learned Standing Counsel appearing for the Revenue takes us through Section 115(O) to contend that only those amounts, which are levied with additional income tax under Section 115(O) would be excluded under Section 10(34). The explanation available in Chapter XXII(d) also is pointed out, which is extracted hereunder:-

'Explanation-For the purposes of this Chapter, the expression 'dividends' shall have the same meaning as is given to 'dividend' in clause (22) of Section 2 but shall not include sub-clause (e) thereof.'

5. Exemption available from total income, as per Section 10(34), is on 'any income by way of dividends referred to in Section 115(O)'. Section 115(O) specifically speaks of an additional income tax being levied on the amounts disbursed as dividend by a Company. What is exempted from being included in the total income is that amount disbursed by a Company as dividend, which has been taxed under Section 115(O). The explanation puts it beyond any pale of doubt and excludes sub-Clause (e) of Section 2(22) from the expression of dividend for the purposes of Chapter XII-D [containing Section 115(O) to 115(Q)]. Prior to sub-section (34) of Section 10 dividend was taxable as income in the hands of the recipient. Only in the context of nonadditional tax being levied on the Company, declaring and paying dividend, that exemption was granted t

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o the recipient-shareholder. Deemed dividends are not exempted since there is no payment of additional tax under Section 115(O). The revenue is right in contending that the exclusion under Section 10(34) would be applicable only for the amounts, which has suffered tax under Section 115(O). The question of law hence has to be answered in favour of the Revenue and against the assessee. The appeal is rejected. No costs.