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2017 (2) TMI 174 - AT - Income TaxBenefit of deduction u/s 80IB(10) entitlement - Held that - Assessee has failed to fulfill the condition of filing of return u/s 139(1) and, therefore, the assessee was not eligible for the benefit of deduction u/s 80IB(10) in view of clear provisions of section 80AC of the Act. Thus, the action of the lower authorities on this issue is upheld. Since we have rejected the claim of the assessee on the preliminary ground, we are not going into the merits of the case at this stage. As a result, appeal of the assessee is dismissed. Deemed dividend u/s 2(22)(e) - advances received by the assessee from a concern in which one of the partners of the assessee firm was holding major share holding - Held that - Deemed dividend could be assessed only in the hands of the person, who has shareholder in the lender company and not in the hands of the borrowing concern in which such shareholder was member or partner having substantial interest. Since the assessee firm was not shareholder in the lender company, viz. M/s Siroya FM Construction Pvt Ltd, the impugned amount of loan cannot be taxed in the hands of the assessee firm as deemed dividend. See CIT vs Universal Medicare Pvt Ltd 2010 (3) TMI 323 - BOMBAY HIGH COURT - Decided in favour of assessee
Issues Involved:
1. Deduction under Section 80IB(10) and admission of additional evidence by CIT(A). 2. Disallowance of 25% of purchases. 3. Denial of deduction under Section 80IB(10) due to late filing of return. 4. Addition under Section 2(22)(e) as deemed dividend. Issue-wise Detailed Analysis: 1. Deduction under Section 80IB(10) and Admission of Additional Evidence by CIT(A): The Revenue challenged the CIT(A)'s allowance of the deduction claimed under Section 80IB(10), arguing that the CIT(A) admitted additional evidence in contravention of Rule 46A of the IT Rules, 1962, and ignored the AO's detailed reasons for denying the deduction. The Tribunal found that the CIT(A) relied on additional evidence from the Bombay Municipal Corporation without seeking the AO's comments, violating principles of natural justice. Consequently, the Tribunal remanded the issue back to the AO, instructing the assessee to submit all evidence and the AO to provide an adequate opportunity for hearing and decide the issue afresh. 2. Disallowance of 25% of Purchases: The Revenue contested the CIT(A)'s deletion of the disallowance made by the AO, amounting to ?44,28,785/-, which was 25% of the purchases. Since the outcome of this issue was directly linked to the first issue, the Tribunal also remanded this matter back to the AO for reconsideration, ensuring the assessee is given a fair hearing. 3. Denial of Deduction under Section 80IB(10) Due to Late Filing of Return: The assessee's appeal against the denial of deduction under Section 80IB(10) was based on the return being filed late under Section 139(4) instead of Section 139(1). The Tribunal upheld the AO's decision, referencing Section 80AC, which mandates filing the return within the due date specified under Section 139(1) to claim the deduction. The Tribunal cited judgments from the Special Bench of the Tribunal and various High Courts, affirming that the filing deadline under Section 139(1) is mandatory. Consequently, the Tribunal dismissed the assessee's appeal, denying the deduction due to the late filing of the return. 4. Addition under Section 2(22)(e) as Deemed Dividend: The Revenue's appeal involved the addition made by the AO as deemed dividend under Section 2(22)(e) due to advances received by the assessee from a concern where one of the partners held a major share. The CIT(A) deleted this addition, relying on the judgment of the Hon’ble Bombay High Court in CIT vs Universal Medicare Pvt Ltd and the Special Bench of the Tribunal in Bhaumik Colour Pvt Ltd, which held that deemed dividend can only be assessed in the hands of the shareholder, not the borrowing concern. The Tribunal found no reason to interfere with the CIT(A)'s order and upheld the deletion, dismissing the Revenue's appeal. Conclusion: The Tribunal remanded the issues concerning the deduction under Section 80IB(10) and the disallowance of 25% of purchases back to the AO for fresh consideration. The assessee's appeal regarding the denial of deduction due to late filing of the return was dismissed, affirming the mandatory nature of the filing deadline under Section 139(1). The Revenue's appeal on the addition as deemed dividend under Section 2(22)(e) was also dismissed, upholding the CIT(A)'s deletion based on established legal precedents.
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