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PETITIONER: RAMESHWAR LAL SANWARMAL

       Vs.

RESPONDENT: COMMISSIONER OF INCOME-TAX, ASSAM

DATE OF JUDGMENT05/12/1979

BENCH: BHAGWATI, P.N. BENCH: BHAGWATI, P.N. PATHAK, R.S.

CITATION:  1980 AIR  372            1980 SCR  (2) 369  1980 SCC  (2) 371

ACT:      Indian Income  Tax Act 1922-Section 2(Income) (e)-Scope of-Shares in  a company  registered in  the name of Karta of HUF-Company advanced  loans to  business  concerns  of  HUF- loans-if "deemed dividend".

HEADNOTE:      The assessee,  a Hindu  Undivided Family, owned certain shares in a private limited company in which the public were not  substantially   interested.  Though   the  shares  were beneficially owned by the Hindu Undivided Family, they stood registered in  the name  of  its  Karta.  From  out  of  its accumulated  profits   the  company   gave  loans,   in  the assessment year  1956-57. to  three business  concerns which were owned  by The  assessee. Section 2(6! (e) of the Indian Income Tax  Act, 1922  provided that where a private company in which public were not substantially interested gave loans to its shareholders from out of its accumulated profits such loan would  be treated  as "deemed dividend" in the hands of the shareholders.      The Income  Tax officer  treated the  loans as  "deemed dividend" in  the hands  of the  assessee on The ground that though the  shares stood  in the  name  of  the  Karta,  the assessee being  the  beneficial  owner,  the  conditions  of section 2(6A)-(e)  were satisfied.  This view  of the Income Tax  officer   was  upheld   by  the   Appellate   Assistant Commissioner.      The Appellate  Tribunal rejected the contentions of the assessee that  the loans  could  not  be  taxed  as  "deemed dividend" in  its hands  because it  was not  the registered owner of  the shares;  and (2)  assuming that  they could be treated as "deemed dividend" they could be taxed only in the hands of  the karta.  The Tribunal referred six questions to the High Court.      Answering two  out of  the si questions, the High Court held that  (1) the  loans could  not be  treated aS  "deemed dividend"  in   the  assessee’s   hands  because   the  term shareholder used  in the  section meant  only a person whose name is  recorded in  the company’s register of shareholders and (2)  even assuming that the loans were "deemed dividend" they could  be taxed  only in  the hands  of the  registered shareholder (the  Karta). The  assessment made by the Income

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Tax officer was accordingly  set aside.      In appeal  to this  Court, instead  of questioning  the correctness of  the answers  returned by  the High Court the Revenue attacked  only that  part of  the High Court’s order which held  that "deemed   dividend"  could be taxed only in the hands  of  the  registered  shareholder.  Therefore  the question before  this Court  was whether  "deemed  dividend" could be  taxed in  the hands  of the  beneficial  owner  of shares or  could be  brought to tax only in the hands of the registered  shareholder.  This  Court  answered  that  where shares are  acquired with  the funds  of one  person but are registered in the name of another it is the beneficial owner who should  be taxed  on the dividend on the shares and that this 370 principle applies  equally to  "deemed dividend"  under  the section. Even  so, this Court discharged the answer given by the High  Court in favour of the assessee and substituted an answer in favour of the Revenue.      Placing reliance  on the  decision  of  this  Court  in C.I.T.. v.  Sarathy Mudaliar  (83 I.T.R.  170) where  it was held that a loan advanced by a company to a beneficial owner did not  fall within  the mischief  of section  2(6A)(e) the assessee contended  that loans  in this  case could  not  be taxed as "deemed dividend" in its hands.      The Revenue  on the other hand contended that (I) since in the earlier case of Rameswarlal Sanwarmal (82 I.T.R. 628) this Court  had answered  the reference  in  favour  of  the Revenue and  that decision  was final  the later decision in Sarathy Mudaliar’s  case  would  not  be  available  to  the assessee;  (2)   although  the   present  question  was  not specifically  considered   by  this  Court  on  the  earlier occasion it  must be  held to  have been  impliedly  decided against the  assessee and  (3) that  the decision in Sarathy Mudaliar’s case  was incorrect  and should  be referred to a larger bench. ^      HELD: The arguments of the Revenue are fallacious. When the Revenue came in appeal to this Court in the earlier case of Rameswarlal  Sanwarmal it challenged only the second part of the  High Court’s  decision ignoring  the first part. The result was  that the first part of the High Court’s decision that loans advanced to The business concerns of a beneficial owner of  shares could  not be regarded as ’deemed dividend" in his  hands and  that the  loans in the  sent case did not fall within  the meaning of section 2(6A)(e) remained intact and unaffected  by the  decision of  this Court.  This Court could not  have answered  the  first  question  against  the assessee without  over-ruling the  first part  of  the  High Court’s decision.  However, through inadvertence, this Court set  aside  the  High  Court’s  answer  without  considering whether this  part of tile decision was right or wrong. When no contention  was raised on behalf of the Revenue that even if the  assessee was  not  a  registered  shareholder  loans advanced to its business concerns would be "deemed dividend" in its  hands and  there was  no occasion  for this Court to consider the question, from the mere fact that an answer was given in  favour of the Revenue, it cannot be said that this contention was impliedly decided in its favour. [376 C-H]      2. The  proper Way  of looking  at the decision of this Court in Rameswarlal Sanwarmal would be to regard the answer given in  favour of  the Revenue  to be confined only to the aspect considered  and decided  by this  Court, namely, that "deemed dividend"  did not  stand on  any different  tooting from actual  dividend and  just as actual dividend is liable

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to be  taxed in  the hands  of the beneficial 6 owner of the shares. so  too "deemed  dividend" must be held liable to be taxed ill  the hands of the beneficial owner. This Court did not consider  whether a  loan to a beneficial owner could be regarded as "deemed dividend". Therefore, this aspect of the question still  remained to  be answered  and it was open to the assessee  to contend  that the  loans  advanced  to  its business concerns could not be regarded as "deemed dividend" within the meaning of the section since the assessee was not a! registered shareholder. [377 A-D]      3 (1) The decision of this Court  in Sarathy Mudaliar’s case laid  down the  law correctly  and there  is no need to refer the case to a larger bench. The 371 question whether  a loan  advanced to   beneficial  owner of shares would  be liable  to be regarded as "deemed dividend" was  neither   raised  nor   considered  by  this  Court  in Rameswarlal Sanwarmal’s  case but  came up for consideration for the first time in Sarathy Mudaliar’s case only. There is thus no conflict between the two decisions, [77 E-l]      (b) It is only where a loan is advanced by a company to a registered  shareholder   the other  conditions set out in the section  are satisfied that the amount of the loan would be liable to be regarded as "deemed dividend". The amount of loan would not fall within The mischief of the section if it is granted to a beneficial owner of the shares. [378 E-F]      In the  instant case the loans were advanced not to the registered shareholder  but to  the business concerns of the beneficial owner.  Hence they  could not  be regarded  loans advanced to  a shareholder of the company within the meaning of the section. [378 H

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 133 or 1979.      Appeal by  Special Leave  from the  Judgment and  order dated 13-6-1972  of the  Assam  High  Court  in  Income  Tax Reference No. 2/64.      H. M. Verma and N. R. Choudhary for the Appellant.      S.C. Manchanda,  S.P. Nayar  and Miss A. Subhashini for the Respondent.      The Judgment of the Court was delivered by      BHAGWATI, J.-This  appeal by  special  leave  raises  a question of  law relating  to the  interpretation of section 2(6A) (e)  of the  Indian Income-Tax Act, 1922. The question is in  fact  concluded  by  a  decision  of  this  Court  in Commissioner of  Income-tax v. C.P. Sarathy Mudaliar but, it has been  argued on behalf of the Revenue that this decision is in  conflict with an earlier decision given by this Court in Commissioner  of Income-tax v. Rameshwarlal Sanwarmal and hence the  question should be referred to a larger Bench. We shall presently  consider these  two decisions,  but we  may point out  straight-away that,  in our  opinion, there is no conflict between  these two  decisions and  the question  is completely cover  d  by  the  decision  in  Commissioner  of Income-tax- v.  C. P.  Sarathy Mudaliar  (supra)). The facts giving rise  to the  appeal are  not in  dispute and  we may briefly state  the same  in  order  to  appreciate  how  the question arises for determination.      The assessee  is the  Hindu Undivided  Family  of  M/s. Rameshwarlal  Sanwarmal  consisting  of  S.  M.  Saharia  as manager and karta and 372

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his wife  and a minor son. The assessment year with which we are  concerned  in  the  appeal  is  1956-57,  the  relevant accounting year  being the  year  ending  Ramanavami  Sambat 2012, that  is, 18th  April, 1956.  During  this  assessment year, the  assessee was  the  beneficial  owner  of  certain shares in  a private limited company called Shyam Sunder Tea Co. (P)  Limited. These  shares though beneficially owned by the assessee  stood in  the name  of  S.M.  Saharia  in  the register of  shareholders of  the Company. The assessee also owned 3  business concerns,  namely, Nilmony Shop, Saharia & Co. and Saharia Industrial Corporation. The Company advanced loans to  these 3  business  concerns  during  the  relevant assessment year  and since  it was a company in which public were not  substantially interested,  a question arose in the assessment of  the assessee to income-tax, whether the loans advanced to  these 3  business concerns could be regarded as "deemed dividend"  of the assessee under section 2(6A)(e) of the Act? ’he Income-tax officer took the view that the loans advanced to the 3 business concerns were attributable to the accumulated profits  of the  company to  the extent  of  Rs. 4,48,045 and  since the  assessee which owned the 3 business concerns was  the beneficial owner of the shares standing in the name  of S.  M. Saharia, the conditions of section 2(6A) (e) were  satisfied and the loans were liable to be regarded as "deemed  dividend" taxable  in the  hands of the assessee under section  2(6A) (e).  The assessee  preferred an appeal against the  order of assessment but the Appellate Assistant Commissioner agreed  with the  view taken  by the Income-tax officer and held that since S. M. Saharia held shares in the company as  representing the  assessee and  the  loans  were advanced  to  the  three  business  concerns  belonging  the assessee out  of the accumulated profits of the company, the Income-tax officer  was justified  in treating  the loans as "deemed dividend"  under section  2(6A) (e); and taxing them in the  hands of  the assessee.  The matter  was carried  in further appeal  to the  Tribunal and  several arguments were advanced  on   behalf  of   the   assessee   resisting   the applicability of  section 2(6A)  (e), but of them, there are two which  are material for our purpose and they are: first, that since  the assessee  was not  a  registered  holder  of shares in  the company,  the loans  advanced  to  the  three business concerns  of the  assessee could not be regarded aS loans advanced  to a  share-holder  so  as  to  attract  the applicability of  section 2(6A)  (e); and  secondly, even if the loans  could  be  treated  as  "deemed  dividend"  under section 2(6A) (e), they could be taxed only ill the hands of S. M.  Saharia, the  registered shareholder and not : in the hands of  the, assessee. Both these arguments were negatived by the  Tribunal and  so also  were  the  other  subordinate arguments and  the appeal  was rejected  and the  assessment confirmed. This led 373 to a  reference application  by  the  assessee  and  on  the application, five  A. questions  of law were referred by the Tribunal to  the  High  Court.  There  were,  in  fact,  six questions but  for the  purpose of the present appeal, it is not necessary  to refer  to the  first  question,  since  it related to the assessment year 1955-56 and it raised a point of limitation  which was ultimately decided in favour of the assessee and  there is  no dispute  about it. The other five questions related to the taxability of the loans advanced to the three  business concerns  of  the  assessee  as  "deemed dividend" under section 2((A)(e) and each of these questions brought in  issue different  aspect of taxability. It is the first of  these questions  which is  material and we may re-

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produce it as follows:           "Whether on  the facts and in the circumstances of      the case,  and on a true interpretation of the terms of      section 2(6A)  (e) of  the Income-tax  Act,  1922,  the      Tribunal was  right ill holding that the amounts of Rs.      2,21,702 (gross) and Rs. 3,43,505 (net) were taxable as      dividends in  the hands of the applicant H.U.F. for the      assessment year  1955-56 and 1956-57 respectively, when      the shares  were registered  in the  name of  Sri S. M.      Saharia, the karta of the family ?"      This question  referred to  both the  assessment  years 1955-56 and 1956-57, but we are not concerned in this appeal with the controversy relating to the assessment year 1955-56 and hence  we shall confine ourselves only to the assessment year 1956-57.      Now  two   distinct  aspects  were  comprised  in  this question and both were argued before the High Court. One was whether the loans advanced to the three business concerns of the assessee  could be  regarded as "deemed dividend" within the meaning  of section  2(6A) (e) and the other was whether these loans,  even if regarded as "deemed dividend" could be taxed in  the hands  of the assessee. The High Court decided both these aspects of the question in favour of the assessee and held  that the  word "share-holder" in section 2(6A) (e) meant     registered  share-holder  or  in  other  words,  a shareholder whose  name is  recorded in  the Register of the company as the holder of the shares and since the advance in the present  case was  made to  the assessee which was not a registered share-holder, it could not be regarded as "deemed dividend" within  the meaning  of section 2(6A) (e) and that even if  it be  assumed that  the advance  was liable  to be regarded as  "deemed dividend"  under section  2(6A) (e), it could be  taxed as  dividend income  only of  the registered share-holder and  not Only  of the assessee. This view taken by the  High Court  rendered it  unnecessary to  decide  the other four questions and the High Court 374 accordingly declined  to consider  them. The  result of this decisions was  that  the  assessment  made  by  the  Revenue Authorities was set aside in so far as it included the loans advanced by  the company  to the  three business concerns of the assessee as deemed dividend and taxed it in the hands of the assessee.      The Revenue,  being aggrieved  by the  decision of  the High Court,  preferred an  appeal  after  obtaining  special leave  of  this  Court.  Now  it  seems  that  through  some inadvertence which  is difficult  to understand, the Revenue attacked only that part of the order of the High Court which held that  the "deemed  dividend" could  be assessed  to tax only in  the hands  of S.M.  Saharia, the  registered share- holder and  no in the hands of the assessee which was merely the beneficial owner cf the shares. Neither in the statement of case  filed on  its behalf  nor  in  the  course  of  the arguments the  Revenue assailed  the correctness of the view taken by  the High  Court that  since the assessee was not a registered shale  holder, loans  advanced  to  the  assessee could not  be regarded  as "deemed  dividend" under  section 2(6) (e). The result was that the only question that came to be considered by this Court was whether the "deemed dividend under section  2(6A)(e) could  be taxed  in the hands of the beneficial owner of the shares or it could be brought to tax only in  the assessment  of the  registered share-holder and the view  taken was  that where the shares acquired with the funds of  one person are held ill the name of another, it is the former who is assessable to tax on the dividend on those

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shares and this principle would apply equally on the ’deemed dividend’  under   section  2(6A)(e).  This  Court  did  not consider whether  the loans  granted to  the three  business concerns o  the assessee could at all be regarded as ’deemed dividend’ within  the meaning  of section  2(6A)(e) when the assessee was  not a registered share-holder and the decision of the  High Court to the effect that the assessee not being a registered  share-holder, the loan advanced to it advanced not be  regarded as ’deemed dividend’ under section 2(6A)(e) remained undisturbed. Now obviously, so long as the decision of the  High Court  on this  point was  not over-ruled,  the question whether  the amount  of the  loans was  taxable  as "deemed dividend"  in the hands of the assessee could not be answered in  favour of the Revenue. But sometimes even Homer nods and through same unfortunate inadvertence for which the counsel appearing  on behalf  of the  assessee in  that case must accept  full responsibility,  this Court discharged the answer given by the High Court in favour of the assessee and in its  place  substituted  an  answer,  in  favour  o  the, Revenue.  This   decision  of   the  Court  is  reported  in Commissioner  of   Income-tax  v.  Rameshwar  Lal  Sanwarlal (supra). 375      Since the  first question  relating to  the  assessment year 1956-57  was answered  by this  Court in  favour of the Revenue,  the   Reference  went   to  the   High  Court  for consideration of  the remaining  questions that had not been answered by  the High  Court. It appears that at the hearing of the  Reference the  first two  out of  the remaining four questions were  not pressed  on behalf  of the assessees and only the  last two  questions were  argued before  the  High Court. Both  these questions  were considered  by  the  High Court and  they were  answered in  favour of the Revenue and against the  assessee. The  assessee thereupon preferred the present appeal  after  obtaining  special  leave  from  this Court.      There is  only one contention advanced on behalf of the assessee in  support or the appeal, namely, that the amounts of the  loans advanced to the three business concerns of the assessee could  not be regarded was ’deemed dividend’ within The meaning of section 2(6A)(e) since the assessee was not a registered share-holder  of the company. This contention was sought to  be supported  by the  decision of  this Court  in Commissioner of Income-tax v. C.P. Sarathy Mudaliar (supra). Now there can be no doubt that the decision of this Court in C.I.T. v.  C.P. Sarathy  Mudaliar (supra)  lays down that it isl only  where a  loan  is  advanced  by  a  company  to  a registered share-holder out of its accumulate(i profits that it would be liable to be regarded as ’deemed dividend’ under sec. 2(6A)(e)  and a loan to a beneficial owner of the share docs not  come within  the mischief  of that  section and if this decision represents the correct law on the subject, the amounts of  loans advanced  to the three business concerns o the assessee  would not possibly be brought within the net o taxation as  ’deemed dividend’.  But the  argument urged  on behalf of  the Revenue  was that  it was  not  open  to  the assessee to  raise this  contention based on the decision in Commissioner  of   Income-tax  v.  C.  P.  Sarathy  Mudaliar (supra), since  it was  covered by  the first question which had already  been answered  in favour of the Revenue by this Court. The  Revenue conceded  That this  contention was  not specifically raised before the Court when the first question came to  be considered  but it  must be  held to  have  been impliedly decided  against the  assessee,  since  the  first question could  not be answered ill favour of the Revenue on

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any other  hypothesis. This  argument of  the  Revenue  does appear to  be very  plausible It  first blush,  but if it is scrutinised  closely   it  will   be  apparent  that  it  is fallacious  and  cannot  be  accepted.  The  most  important circumstance which it ignores is that when the Reference was first heard  by the  High  Court,  the  first  question  was decided in  favour of  the assessee  on two  counts, one was that since the assessee was not a registered share-holder of the company, the loans advanced to the three business 376 concerns of  the assessee  could not  be regarded as ’deemed dividend’ within  the meaning  of section  2(6A) (e) and the other was  that even  if they  could be  treated as  ’deemed dividend’ under  section 2(5A) (e), they could be taxed only in the  hands of  S. M. Saharya, the registered share-holder and not  in the  hands of  the assessee  who  was  merely  a beneficial owner  of the  shares. When the Revenue preferred an appeal  against the  judgment  of  the  High  Court,  the Revenue should  have assailed the decision of the High Court in both  its limbs,  but through  some inadvertence which is difficult to  understand,  the  Revenue  challenged  by  the second limb  of the  decision ignoring completely the first. The result  was that the decision of the High Court that the amounts of  loans advanced to the three business concerns of the assessee  did not  fall within the definition of ’deemed dividend’ in section 2(6A)(e) remained intact and unaffected by the decision of this Court in the appeal. Now, it is true that this  Court could  not have answered the first question against the  assessee without  over-ruling this  part of the decision or  the High  Court, but  through some  unfortunate error, this  Court set  aside the  answer given  by the High Court in  favour of the assessee without considering whether this part  of the  decision of  the High  Court was  right o wrong. When  no contention  was  raised  on  behalf  of  the Revenue before  this Court  that the  decision of  the  High Court on  this point  was wrong  and that  even  though  the assessee was  not a  registered shareholder,  the amounts of loans  advanced  to  the  three  business  concerns  of  the assessee  were  still  liable  to  be  regarded  as  "deemed dividend" under  section 2(6A)  (e) and  no such  contention formed the  subject-matter of  discussion before  this Court and this  Court had, therefore, no occasion to consider this question, it  is difficult  to see how it can be said merely from the answer given by this Court in favour of the Revenue that this  contention was impliedly decided in favour of the Revenue. It  would be  straining logic to an absurd limit to say that  though this contention was not raised, not argued, not discussed  and not  decided, yet it must be held to have been impliedly decided because through an error committed by this Court,  an answer was given in favour of the Revenue in ignorance of  the true  position. lt would also not be right to hold  that merely because this Court erroneously answered the first  question against the assessee without considering whether the  view taken  by the High Court on this point was incorrect, the  assessee must  be precluded  from raisin the contention that  the assessee  not being a registered share- holder, the  amounts of loans advanced to the three business concerns of  the assessee did not fall within the definition of "deemed  dividend" under section 2(6A)(e). Why should the assessee, which  had the  decision of the High Court of this point in its favour and 377 which decision was not assailed by the Revenue in the appeal and which  remained undisturbed by this Court, be prejudiced on account  of an  obvious error committed by the court. The

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proper way of looking at the decision of this Court would be to regard  the answer  given in  favour of the Revenue to be confined only  to the  aspect considered and decided by this Court. The  only aspect considered by this Court was whether the "deemed dividend" under section 2(6A) (e) could be taxed in the  hands of  the beneficial  owner of  the shares or it could be  assessed to  only in  the hands  of the registered shareholder, and  this Court held that "deemed dividend" did not stand  on any different footing from actual dividend and just as  actual dividend was liable to be taxed in the hands of the  beneficial owner  of the  shares,  so  also  "deemed dividend" must  be held liable to be taxed in the assessment of the  beneficial owner.  This Court  did not  decided  the question whether  a loan  advanced to  a beneficial owner of the shares  can be  regarded as "deemed dividend" within the meaning of  section 2(6A)  (e) an  the answer  given by this Court in  favour of  the Revenue cannot be said to extend to this aspect  of the question. We would, therefore, hold that the first  question still  remains to  be answered so far as this aspect  of the  question is concerned and it is open to the, assessee  to contend that the amounts of loans advanced to the  three business concerns of the assessee could not be regarded as  "deemed  dividend"  under  section-,  2(6A)(e), since the assessee was not a registered shareholder.      It is  also obvious  from what  we have said above that there is  no conflict between the decisions of this Court in C.I.T. v.  Rameswarlal Sanwarmal  and C.I.T. v. C.P. Sarathy Mudaliar  (supra).   The  question   whether,  on  a  proper construction of  section 2(6A)  (e), a  loan  advance  to  a beneficial owner  of  the  shares  would  be  liable  to  be regarded Ll;  "deemed dividend"  was not  raised  or  argued before this  Court in  C.I.T.. v.  Rameswarlal Sanwarmal and this Court  was not called upon to decide it and hence there is no  discussion about it in the judgment of this Court nor is there  any decision  on it.  It is only in the subsequent decision in  C.I.T.. v.  C. P. Sarathy Mudaliar (supra) that this question  came up  for the first time before this Court for consideration  and this  Court held that when sec. 2(6A) (e) speaks  of a  "shareholder" it  refers to the registered shareholder and not to the beneficial owner and hence a loan granted to  a beneficial  owner of  the shares  who is not a registered shareholder cannot be regarded as a loan advanced to a  "shareholder" of  he company  so as  to be  within the mischief of  section 2(6A(e).  There is  thus no conflict at all between  the  decisions  in.  C.I.T.  v.  C.  P  Sarathy Mudaliar (supra  and C.I.T.  v.  Rameswarlal  Sanwarlal.  In fact, Mr. Justice Hegde was, a common Member of the Bench in both 378 the cases  and the  subsequent decision  in C.l.T.  v. C. P. Sarathy Mudaliar  was given  within less  than a month after the decision  in C.l.T.  v. Rameshwarlal  Sanwarmal.  lt  is impossible to  believe that  Mr. Justice Hegde was oblivious of the  decision in C.I.T.. v. Rameswarlal Sanwarmal when he delivered the judgment in C.l.T. v. C. P. Sarathy Mudaliar.      The Revenue  lastly  contended  that  the  decision  in C.I.T. v.  C.P. Sarathy  Mudaliar is  incorrect and  we must refer the  present case to a larger Bench. Now it is obvious that before  we can  be persuaded to accede to this request, we must  be satisfied  that the decision in Com missioner of Income Tax  v. C.  P. Sarathy  Mudaliar is wrong. But having given our  most anxious  consideration,  we  find  ourselves unable to  disagree with  the view  taken in  that decision. What section  2(6A) (e)  is designed to strike at is advance or loan  to a "shareholder" and the t word "shareholder" can

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mean only  a! registered shareholder. It is difficult to see how a  beneficial owner of shares whose name does not appear in the register of shareholders of the company can be said o be a  "shareholder". He  may be beneficially entitled to the shares but  he is  certainly not a "shareholder". It is only the  person  whose  name  is  entered  in  the  register  of shareholders of  the company as the holder of the shares who can be said to be a shareholder qua the company, and not the person beneficially entitled to the shares. It is the former who is  a "shareholder"  within the matrix and scheme of the company law  and not  the latter.  We are, therefore, of the view that it is only where a loan is advanced by the company to a registered shareholder and the other conditions set out in section  2(6A) (e)  are satisfied  that the amount of the loan would  be liable  to be  regarded as  ’deemed dividend’ within the  meaning of  section 2(6A) (e). The amount of the loan would  not fall  within the mischief of this section if it is granted to a beneficial owner of the shares who is not the registered shareholder. The decision in C.I.T.. v. C. P. Sarathy Mudaliar  does, in our opinion, lay down the correct interpretation of section 2(6A) (e).      Now in  the present  case it was common ground that the loans were  advanced to  the three  business concerns of the assessee which  was a  Hindu Undivided Family and this Hindu Undivided Family was not the registered holder of any shares in the  company but  it was  the beneficial owner of certain shares which  stood in  the name  OF the  Manager and Karta, Shri S.  M. Saharya.  The loans  were thus  advanced to  the beneficial owner  of the  shares and  not to  the registered shareholder and  hence they  could not  be regarded as loans advanced to  a  "shareholder"  of  the  company  within  the meaning  of   section  2(6A)  (e).  Section  2(6A)  (e)  was accordingly not attracted and the amounts of the loans could not be taxed as deemed dividends 379 in the  hands of  the assessee.  We accordingly  answer  the first question  A in  favour of  the assessee so far as this aspect is  concerned. In  view of  this answer  to the first question, it  is not  necessary to  consider the  other  two questions decided  by the  High Court on remand. The learned counsel appearing  on behalf  of the  assesses, in fact, did not press them.      There will he lo order as to costs of the appeal. B.B.A.. 380