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2015 (10) TMI 1900 - AT - Income TaxDeemed dividend under S.2(22)(e) - Inter-Corporate Deposits (ICDs) received by the assessee from M/s. Excel Rubber Limited - CIT(A) deleted the addition - Held that - Respectfully following the decision rendered by the coordinate bench of this Tribunal in assessee s own case for the assessment years 2006-07 and 2010-11, we uphold the impugned order of the learned CIT(A), deleting the addition made by the Assessing Officer under S.2(22)(e) by treating the amount of ICD received by the assessee form M/s. Excel Rubber Pvt. Ltd. as deemed dividend as admittedly the assessee is not a shareholder of the lender company - Decided in favour of assessee.
Issues Involved
1. Whether the Inter-Corporate Deposits (ICDs) received by the assessee from M/s. Excel Rubber Pvt. Ltd. can be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act. Issue-wise Detailed Analysis 1. Treatment of ICDs as Deemed Dividend under Section 2(22)(e): The core issue in this appeal is whether the Inter-Corporate Deposits (ICDs) amounting to Rs. 7.50 crores received by the assessee from M/s. Excel Rubber Pvt. Ltd. should be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act. The Assessing Officer (AO) added the ICD amount to the assessee's total income, treating it as deemed dividend, based on the fact that M/s. Excel Rubber Pvt. Ltd. had accumulated profits and the transaction was similar to one in the assessment year 2006-07. Arguments by the Assessee: The assessee contended that the ICDs were regular business transactions and not loans or advances that could be classified as deemed dividends. Additionally, the assessee argued that it was not a shareholder in M/s. Excel Rubber Pvt. Ltd., and hence, the provisions of Section 2(22)(e) were not applicable. CIT(A) Decision: The Commissioner of Income-tax (Appeals) [CIT(A)] deleted the addition made by the AO, relying on the Tribunal's decision in the assessee's own case for the assessment year 2006-07, which had a similar issue. The CIT(A) held that the ICDs could not be treated as deemed dividends under Section 2(22)(e). Tribunal's Analysis: The Tribunal considered the arguments from both sides and the relevant material on record. It was noted that the issue was squarely covered in favor of the assessee by the Tribunal's decision in the assessee's own case for the assessment year 2006-07. The Tribunal reiterated that the assessee was not a shareholder in M/s. Excel Rubber Pvt. Ltd., and hence, the ICDs could not be treated as deemed dividends under Section 2(22)(e). Judicial Precedents: The Tribunal referred to several judicial precedents, including the Delhi High Court's decision in CIT Vs. Ankitech P. Ltd. and the Mumbai Special Bench's decision in Bhaumic Colours (P) Ltd., which clarified that for a payment to be treated as deemed dividend under Section 2(22)(e), the recipient must be a shareholder of the payer company. Since the assessee was not a shareholder in M/s. Excel Rubber Pvt. Ltd., the ICDs could not be classified as deemed dividends. Conclusion: The Tribunal upheld the CIT(A)'s order, deleting the addition made by the AO under Section 2(22)(e) and treating the ICDs received by the assessee from M/s. Excel Rubber Pvt. Ltd. as deemed dividends. The appeal of the Revenue was dismissed. Final Judgment: The appeal of the Revenue is dismissed, and the order of the CIT(A) deleting the addition made by the AO under Section 2(22)(e) is upheld. Summary: The Tribunal concluded that the ICDs received by the assessee from M/s. Excel Rubber Pvt. Ltd. could not be treated as deemed dividends under Section 2(22)(e) of the Income Tax Act, as the assessee was not a shareholder in the payer company. The appeal of the Revenue was dismissed, and the CIT(A)'s order was upheld.
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