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Whether a Hindu Undivided Family (HUF) can be considered a "beneficial owner" of shares registered in the name of its Karta, thereby attracting provisions of Section 2(22)(e) of the Income Tax Act, 1961, in case of loans or advances from a closely held company in which the HUF has substantial intere
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Yes, the Supreme Court has ruled that if shares are registered in the Karta's name but the HUF is shown as the registered and beneficial owner in the company's annual accounts, the HUF will be considered the beneficial owner.
The ruling pertains to Section 2(22)(e) of the Income Tax Act, 1961, which deals with deemed dividends.
As per Explanation 3(a) of Section 2(22), a 'concern' includes a Hindu Undivided Family (HUF), a firm, an association of persons, a body of individuals, or a company.
Loans or advances made by a company to a HUF will be treated as deemed dividends under Section 2(22)(e) if the HUF is a beneficial owner of shares in that company and the Karta (or another member with substantial interest) has a substantial interest in the HUF.
No, the Supreme Court clarified that even if shares are issued in the Karta's name, if the HUF is documented as the registered and beneficial shareholder in company records, it will be treated as such for the purposes of Section 2(22)(e).
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