2015 (4) TMI 551 - HC - Income Tax

Deemed dividend under Section 2(22)(e) - ITAT deleted addition on the ground that this amount represented share application money - Held that - The learned Tribunal on due consideration of the reasonings assigned by the Appellate Authority, so also the record found that the assessee has filed copy of the relevant share application money, account of share application money, copy of the Board's resolution for allotment of shares, copy of form no.2 with ROC for allotment of shares and held that the documentary evidence clearly establishes that the money so received was on account of share application money and dismissed the appeal. On due consideration of the reasonings assigned by the learned Income Tax Appellate Tribunal, we are of the view that the finding recorded by the learned Tribunal is based on appreciation of material on record. No substantial question of law arises in this appeal. - Decided against revenue.

Summary

Issues:
1. Addition of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 based on share application money.

Analysis:
The Revenue contested the deletion of an addition of Rs. 76,89,300 as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, arguing that the amount represented share application money. The assessing Officer noted that the assessee had received Rs. 82,09,300 from a company where the assessee held 9.17% equity shares, below the 10% threshold for Section 2(22)(e) to apply. The AO treated the amount as loans and advances, adding it to the assessee's income under Section 2(22)(e). The Commissioner of Income Tax (Appeals) ruled in favor of the assessee, rejecting the AO's view. The CIT(A) found that the entries in the assessee's accounts did not support the AO's contention that the amount was loans and advances, deeming it as share application money.

The Tribunal upheld the CIT(A)'s decision, emphasizing the documentary evidence provided by the assessee, including relevant share application money records, board resolutions for share allotment, and filings with the Registrar of Companies. The Tribunal concluded that the money received was indeed for share application and dismissed the appeal. The High Court, after reviewing the Tribunal's reasoning and the records, affirmed the decision. It found no grounds for interference, stating that the Tribunal's findings were based on the material on record. The High Court concluded that no substantial question of law arose, and the appeal by the Revenue lacked merit, thus dismissing it.