2013 (8) TMI 1125 - AT - Income Tax

Summary

Issues involved: The judgment involves appeals related to assessment years 2005-2006 and 2008-2009 for M/s. Jayadarsini Housing Pvt. Ltd. regarding the applicability of Sec.2(22)(e) of the I.T. Act on payments made to certain individuals and entities.

Details of the Judgment:

1. Assessing Officer's Findings: The Assessing Officer held that payments made by Jayadarsini Housing Pvt. Ltd. to specific individuals and entities represented income within the meaning of Sec.2(22)(e) of the I.T. Act and charged tax u/s 201(1) and interest u/s 201(1A) for failure to deduct tax at source.

2. Confirmation by CIT (Appeals): The learned Commissioner of Income-Tax (Appeals) confirmed the Assessing Officer's actions regarding deemed dividend under Sec.2(22)(e) for certain individuals but found that one entity was not a shareholder and thus the provision did not apply.

3. Assessee's Appeals (ITA.No. 1360 to 1363/Hyd/2011): The Hon'ble ITAT dismissed the department's appeals, stating that trade advances do not fall under Sec.2(22)(e) and in the absence of distributable profit, the case does not come under the purview of the section.

4. Revenue's Appeals (ITA.No. 1344 to 1347/Hyd/2011): The Revenue appealed the CIT (Appeals) decision, arguing that the recipients not being shareholders did not exempt the payments from Sec.2(22)(e). However, the ITAT upheld the CIT (Appeals) decision based on precedents and the nature of the transactions.

5. Legal Precedents: The ITAT considered legal precedents such as the Mumbai Special Bench decision and the Delhi High Court ruling to support the interpretation that Sec.2(22)(e) applies only to shareholders receiving loans or advances.

6. Final Decision: The appeals filed by the department were dismissed, and those filed by the assessee were allowed based on the findings that the payments were part of business transactions and not deemed dividends under Sec.2(22)(e).

In conclusion, the ITAT judgment clarified the application of Sec.2(22)(e) of the I.T. Act to payments made by Jayadarsini Housing Pvt. Ltd., ultimately ruling in favor of the assessee based on the nature of the transactions and legal interpretations.