In Brief
The Supreme Court upheld the addition of ₹1,20,10,988 as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 in the hands of a Hindu Undivided Family (HUF). Although a HUF cannot be a registered shareholder in a company, the Court held that if a shareholder-member of the HUF has a substantial interest (20% or more of income) in the HUF, payments made by the company to the HUF are taxable as deemed dividends. The Court distinguished earlier law and relied on Explanation 3 to Section 2(22), which contemplates payment to a 'concern' including an HUF when such conditions are satisfied.
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