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2018 (10) TMI 244 - HC - Income TaxDeemed dividend addition u/s 2(22)(e) - loan transaction from one subsidiary to another subsidiary company with common parent company - deemed shareholder - Held that - It is an accepted and admitted position that M/s Cargill Global Trading India Private Limited is one step down subsidiary of M/s Cargill Inc USA. The respondent-assessee is a two step down subsidiary of M/s Cargill Ink USA. The step up subsidiary(ies) of M/s Cargill Global Trading India Private Limited and M/s Cargill India Private Limited are different and not common. It is not possible to accept the contention that the respondent-assessee should be treated as a shareholder or beneficial owner of the shares in M/s Cargill Global Trading India Private Limited. We do not think that the loan given by M/s Cargill Global Trading India Private Limited can be treated as deemed dividend paid to the respondent-assessee. - Decided in favour of assessee.
Issues:
1. Condoning delay in re-filing appeal 2. Treatment of loan as "deemed dividend" under Section 2(22)(e) of the Income Tax Act, 1961 Analysis: 1. The court first addressed the issue of condoning a delay of 30 days in re-filing the appeal. The court, after considering the reasons stated in the application, decided to condone the delay and disposed of the application. 2. Moving on to the main issue, the court examined the contention of the Revenue regarding the loan given by M/s Cargill Global Trading India Private Limited to the respondent-assessee, M/s Cargill India Private Limited, being treated as "deemed dividend" under Section 2(22)(e) of the Income Tax Act, 1961. The court noted that M/s Cargill Global Trading India Private Limited is a one step down subsidiary of M/s Cargill Inc USA, while the respondent-assessee is a two step down subsidiary of M/s Cargill Inc USA. The subsidiaries of these entities are different and not common. Therefore, the court concluded that it is not feasible to consider the respondent-assessee as a shareholder or beneficial owner of the shares in M/s Cargill Global Trading India Private Limited. 3. Based on the above analysis, the court held that the loan given by M/s Cargill Global Trading India Private Limited cannot be treated as "deemed dividend" paid to the respondent-assessee. Consequently, the court found no merits in the appeal and dismissed it accordingly.
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