2020 (3) TMI 1301 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - CIT-A deleted the addition - HELD THAT - AR Fairly agree that the issue in appeal is now covered by Hon ble jurisdictional High Court s judgment in the case of CIT Vs Mahavir Inductomelt Pvt Ltd 2017 (8) TMI 123 - GUJARAT HIGH COURT In a case in which an amount is received from a person other than the shareholder as is the admitted position in this case the provisions of Section 2(22)(e) cannot indeed be invoked. The CIT(A) was thus justified in granting the impugned relief in respect of the addition under section 2(22)(e). We therefore approve the conclusion arrived at by the learned CIT(A) in this regard and decline to interfere in the matter on that count. - Decided against revenue.

Summary

Issues:
Challenge to correctness of order under section 143(3) for assessment year 2008-09; Deletion of addition under section 2(22)(e) of the Income Tax Act.

Analysis:
1. The Assessing Officer appealed against the order dated 22nd May 2012 by the CIT(A) regarding the assessment under section 143(3) for the assessment year 2008-09, specifically challenging the deletion of an addition under section 2(22)(e) of the Act.

2. The Assessing Officer contended that the assessee company received a loan from another company, which had accumulated profits, leading to the treated amount being deemed as dividend under section 2(22)(e). However, the CIT(A) deleted this addition citing precedents like the special bench decision in the case of Bhaumik Colours Pvt Ltd and the judgment of the Delhi High Court in the case of CIT Vs Anitech Pvt Ltd, which emphasized that for deemed dividend to apply, the person from whom the money is received must be a shareholder of the assessee company.

3. The ITAT, after considering the arguments and legal provisions, referred to the judgment of the jurisdictional High Court in the case of CIT Vs Mahavir Inductomelt Pvt Ltd, which reiterated the requirement that for section 2(22)(e) to be invoked, the amount must be received from a shareholder. Since this was not the case here, the ITAT upheld the CIT(A)'s decision to grant relief and dismissed the appeal.

4. The ITAT concluded that the CIT(A) was justified in deleting the addition under section 2(22)(e) as the amount was received from a person who was not a shareholder, aligning with the legal position established by relevant judgments. Consequently, the ITAT dismissed the appeal, affirming the decision of the CIT(A) and declining to interfere in the matter.