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2021 (8) TMI 602 - AT - Income TaxTreatment of deemed dividend of the unsecured loan received by the assessee from group Company - HELD THAT - CIT(A) accepted the assessee's plea that the disallowance if any should be restricted to be 75 lakhs. However as regards the plea of the assessee that assessee is not a registered shareholder of the company from where it has received the loan, the learned CIT(A) referred to the fact that on this issue the matter has travelled to the Supreme Court and the Hon'ble Supreme Court has referred the matter to a Larger Bench. He noted that on similar facts ITAT has directed that the AO should await the order of Supreme Court and then decide the issue. Hence, the learned CIT(A) remitted the matter to the AO and directed him decide the issue after the receipt of Supreme Court order on the above. We note that the NATIONAL TRAVEL SERVICES VERSUS COMMISSIONER OF INCOME TAX, DELHI, VIII 2018 (1) TMI 1159 - SUPREME COURT has not reversed its order on the issue but has referred to a Larger Bench. Further we note that as per section 251 of the Act there is no power of learned CIT(A) to remand the matter. In this view of the matter the order of learned CIT(A) remanding the issue the file of assessing officer is not at all sustainable. In this regard learned counsel of the assessee has also referred to the decision of honourable Bombay High Court for the proposition that the issue is covered in favour of the assessee. Upon careful consideration we find that interest of justice demands that issue be remitted to the file of learned CIT(A), as he has no power to remand the issue to the assessing officer. The learned CIT(A) is directed to consider the issue afresh after considering all facts. Needless to add assessee should be granted adequate opportunity of being heard - Appeal by the assessee is partly allowed for statistical purposes.
Issues:
1. Treatment of deemed dividend under section 2(22)(e) of the Act 2. Disallowance under section 14A of the Income Tax Act, 1961 3. Disallowance of payment made towards site expenses on an ad hoc basis Issue 1: Treatment of Deemed Dividend under Section 2(22)(e) of the Act: The appeal concerned the treatment of a loan received by the assessee from a group company as deemed dividend under section 2(22)(e) of the Act. The assessing officer noted that the assessee had received an unsecured loan from the group company with a closing balance of ?75,00,000. The assessing officer found that the conditions specified in section 2(22)(e) were satisfied, leading to the loans being treated as deemed dividend. The learned CIT(A) accepted the assessee's plea to restrict the disallowance to ?75 lakhs. However, the CIT(A) remitted the matter to the AO pending a Supreme Court decision on whether the sum treated as dividend is taxable in the hands of the recipient or the shareholder of the payer. The ITAT directed the CIT(A) to reconsider the issue after considering all facts, granting the assessee an adequate opportunity to be heard. Issue 2: Disallowance under Section 14A of the Income Tax Act, 1961: The learned counsel of the assessee decided not to press grounds 4 and 5 related to disallowances under section 14A of the Income Tax Act and site expenses, respectively. Consequently, grounds 4 and 5 were dismissed. This decision was made at the outset of the proceedings. Issue 3: Disallowance of Payment Made Towards Site Expenses on an Ad Hoc Basis: The disallowance of a sum of ?60,310 made towards site expenses on an ad hoc basis was one of the grounds of appeal raised by the assessee. However, as mentioned earlier, this ground was not pressed by the assessee's counsel and was consequently dismissed. In conclusion, the ITAT partially allowed the appeal for statistical purposes, directing the CIT(A) to reconsider the issue of deemed dividend treatment after considering all facts and granting the assessee an adequate opportunity to be heard. The decision was made in light of the absence of the power of the CIT(A) to remand the matter to the assessing officer and pending a Larger Bench decision by the Supreme Court on the taxation of deemed dividends.
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