2010 (12) TMI 1179 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of excess claim of premium paid on plot.
2. Deletion of addition made by invoking the provisions of Deemed Dividend u/s 2(22)(e).
3. Challenge to the reopening of the assessment.

Summary:

1. Deletion of Addition on Account of Excess Claim of Premium Paid on Plot:
The first issue in the Revenue's appeal concerns the deletion of an addition of Rs. 16,79,850/- made by the Assessing Officer (AO) on account of excess claim of premium paid on a plot. The AO treated the premium paid on a leasehold plot as capital expenditure, allowing only 1/10th of the expenditure and disallowing the balance. The CIT(A) allowed the claim of the assessee, treating the expenditure as revenue in nature, following the ITAT decision in the case of Kapurchand Bansal. The Tribunal upheld the CIT(A)'s decision, confirming that the assessee rightly claimed the deduction of Rs. 18,66,460/- as revenue expenditure.

2. Deletion of Addition Made by Invoking the Provisions of Deemed Dividend u/s 2(22)(e):
The second issue involves the deletion of an addition of Rs. 1,94,54,869/- made by the AO as deemed dividend u/s 2(22)(e). The AO observed that the assessee received loans and advances from M/s. Mahavir Rolling Mills Ltd. (MMRML), a company in which public are not substantially interested, and one of the directors held more than 20% shares in both companies. The CIT(A) deleted the addition, citing that the assessee was not a shareholder of MMRML, and hence, the provisions of section 2(22)(e) were not applicable. The Tribunal upheld the CIT(A)'s decision, referencing the Special Bench decision in ACIT v. Bhaumik Colour (P.) Ltd. and the Rajasthan High Court decision in CIT v. Hotel Hilltop, which clarified that deemed dividend can only be assessed in the hands of a shareholder of the lender company.

3. Challenge to the Reopening of the Assessment:
The assessee's Cross Objection (CO) challenged the reopening of the assessment u/s 143(3) r.w.s. 147, claiming it was illegal and bad in law. However, the assessee's counsel did not press this issue, leading to its dismissal as not pressed.

Conclusion:
The Tribunal dismissed the Revenue's appeal on both issues, confirming the CIT(A)'s orders. The assessee's CO was also dismissed as not pressed.