In Brief
A partnership firm subscribed for shares in a private company in the names of two of its partners, making them registered shareholders. The firm received loans from the company and the tax authority treated these as deemed dividends under Section 2(22)(e) of the Income Tax Act. The Supreme Court examined whether the definition of 'shareholder' requires registration on the company's register or includes beneficial owners. The bench held that the 1988 amendment fundamentally redefined 'shareholder' to mean a beneficial owner holding at least 10% voting power, not necessarily a registered member. The prior case law limiting it to registered shareholders was impliedly superseded. However, the court referred the matter to a larger three-judge bench for final determination on the complete interpretation and the specific applicability to the firm's circumstances.
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