2016 (3) TMI 313 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - Held that - Respectfully following the decision of the co-ordinate bench of this Tribunal in the assessee s own case for Asst. year 2010-11 wherein the ratio of the decision of the Hon ble Bombay High Court in the case of Universal Medicare Pvt. Ltd. (2010 (3) TMI 323 - BOMBAY HIGH COURT ) was followed, we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the addition of ₹ 26,21,073/- made in the hands of the assessee on the ground that such dividend could not be taxed in the hands of the assessee as it was not a shareholder in M/s. Tainwala Holdings Pvt. Ltd..- Decided in favour of assessee

Summary

Issues:
1. Addition of deemed dividend u/s 2(22)(e) of the Income Tax Act.
2. Appeal against the order of the CIT(A) for the assessment year 2011-12.

Issue 1: Addition of Deemed Dividend u/s 2(22)(e) of the Income Tax Act:
The appellant contested the addition of &8377; 2,621,073 as deemed dividend u/s 2(22)(e) of the Act, arguing that it was a repayment of expenses, not a loan or advance. The appellant cited a similar case from a prior year where the Tribunal ruled in their favor. The Tribunal noted that the appellant was not a shareholder in the concerned company, hence the amount could not be taxed in their hands. Following the precedent, the Tribunal directed the Assessing Officer to delete the addition of &8377; 2,621,073. The second addition of &8377; 50,000 was not pressed by the appellant's representative and was dismissed as infructuous.

Issue 2: Appeal Against CIT(A) Order for AY 2011-12:
The appellant appealed against the CIT(A)'s decision upholding the additions made by the Assessing Officer. The Tribunal carefully considered the arguments presented by both parties and the relevant legal provisions. Relying on past decisions and legal interpretations, the Tribunal found in favor of the appellant regarding the first ground of appeal, directing the deletion of the deemed dividend addition. The second ground, which was not pressed, was dismissed. The third ground being general in nature did not require adjudication. Consequently, the appellant's appeal for the assessment year 2011-12 was partly allowed by the Tribunal.

In conclusion, the Appellate Tribunal ITAT Mumbai ruled in favor of the appellant, directing the deletion of the additions made as deemed dividends under section 2(22)(e) of the Income Tax Act for the assessment year 2011-12. The Tribunal's decision was based on legal interpretations, precedents, and factual considerations presented during the proceedings.