2013 (11) TMI 1739 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are:
1. Deletion of addition of deemed income u/s.2(22)(e)
2. Allowability of depreciation losses for A.Y. 2007-08 and 2009-10

Deletion of addition of deemed income u/s.2(22)(e):
The assessee, engaged in manufacturing, faced an addition of deemed income u/s. 2(22)(e) of the Income Tax Act. The CIT(A) granted relief to the assessee, but the ITAT found that the conditions of section 2(22)(e) were not met. The ITAT emphasized that for section 2(22)(e) to apply, the shareholder must have substantial interest in the concern. The ITAT referred to legal precedents and held that the deemed dividend can only be taxed in the hands of a person who is both a beneficial and registered shareholder. As the necessary ingredients were lacking, the ITAT upheld the CIT(A)'s decision to delete the addition of deemed income.

Allowability of depreciation losses:
The second issue pertained to the allowability of depreciation losses for A.Y. 2007-08 and 2009-10. The Authorized Representative pointed out that the Assessing Officer failed to mention the depreciation losses for A.Y. 2007-08. The CIT(A) agreed with this contention and directed the Assessing Officer to specify the depreciation and unabsorbed depreciation for A.Y. 2007-08 while implementing the order. The ITAT upheld this decision, leading to the dismissal of the revenue's appeals for both years regarding the depreciation losses.

In conclusion, the ITAT dismissed both appeals of the revenue, emphasizing the importance of meeting the conditions of section 2(22)(e) for the taxation of deemed income and ensuring proper documentation of depreciation losses for the respective assessment years.