In Brief
A partnership firm in India had borrowed money from a company and subscribed to shares in that company in the names of two of its individual partners (who together held 48.19% shareholding), acting as beneficial owners on behalf of the firm. The question was whether the firm itself could be treated as a 'shareholder' under the deemed dividend provision of the Income Tax Act. The Supreme Court held that the 1988 amendment to Section 2(22)(e) fundamentally redefined 'shareholder' to mean a beneficial owner (not merely a registered member) holding 10% or more voting power. The Court found the impugned Division Bench judgment's reasoning internally contradictory and referred the matter to a larger three-judge Bench for reconsideration, particularly to reconsider the earlier Ankitech decision.
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