{"id":6041,"date":"2012-12-19T09:34:44","date_gmt":"2012-12-19T09:34:44","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=6041"},"modified":"2012-12-19T09:48:41","modified_gmt":"2012-12-19T09:48:41","slug":"shantikumar-d-majithia-vs-dcit-itat-mumbai-s-222a-occupancy-rights-to-shareholder-taxable-as-deemed-dividend","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/shantikumar-d-majithia-vs-dcit-itat-mumbai-s-222a-occupancy-rights-to-shareholder-taxable-as-deemed-dividend\/","title":{"rendered":"Shantikumar D Majithia vs. DCIT (ITAT Mumbai)"},"content":{"rendered":"\n\n
Click here to download the judgement (shantikumar_majithia_deemed_dividend_occupancy_rights.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nS. 2(22)(a)\/2(24)(iv): Occupancy rights to shareholder taxable as “deemed dividend<\/em>” but not as “benefit or perquisite<\/em>” <\/strong><\/p>\n

The assessee was the substantial shareholder of a closely held company which owned a building. The Articles of the company provided that each shareholder would have occupancy rights to a flat on the condition that an interest-free refundable deposit be paid. The occupancy rights were transferable. The AO held that the grant of occupancy rights by the company amounted to a \u201cdistribution of assets<\/em>\u201d and that the same was assessable as \u201cdeemed dividend<\/em>\u201d in the hands of the assessee u\/s 2(22)(a) to the extent of the accumulated profits. On appeal, the CIT(A) held that as the occupancy rights were given against payment of a refundable deposit, there was no \u201cdistribution of assets<\/em>\u201d and so no deemed dividend. Instead, he held that the occupancy rights conferred a \u201cbenefit\/perquisite<\/em>\u201d on the assessee which was assessable u\/s 2(24)(iv). On cross appeals before the Tribunal, HELD:<\/p>\n

(i) U\/s 2(22)(a), any distribution by a company of accumulated profits, whether capitalized or not, constitutes \u201cdividend<\/em>\u201d if such distribution entails the release by the company to its shareholders of all or any part of the assets. As the assessee received the occupancy rights to the flat in perpetuity and could transfer them, it effectively meant that he had full ownership over the flat. Accordingly, the value of the flats was assessable as deemed dividend u\/s 2(22)(a);<\/p>\n

(ii) However, as the said occupancy rights were given in lieu of holding shares and an interest-free refundable deposit towards proportionate land cost and development cost and were transferable, there is no \u201cbenefit or perquisite\u201d which is assessable u\/s 2(24)(iv). <\/p>\n

\nContrast with G. Sreevidya<\/a><\/strong> (ITAT Chennai) that if there is a quid pro quo<\/em>, there is no “deemed dividend<\/em>”\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

U\/s 2(22)(a), any distribution by a company of accumulated profits, whether capitalized or not, constitutes \u201cdividend<\/em>\u201d if such distribution entails the release by the company to its shareholders of all or any part of the assets. As the assessee received the occupancy rights to the flat in perpetuity and could transfer them, it effectively meant that he had full ownership over the flat. Accordingly, the value of the flats was assessable as deemed dividend u\/s 2(22)(a)<\/p>\n

Read more ›<\/a><\/div>\n

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