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TMI Blog2013 (11) TMI 808X X X X Extracts X X X X X X X X Extracts X X X X ..... d in favour of assessee. Disallowance u/s 2(22)(e) - Advance payment - Business expediency or ultimate benefit of the shareholders - Held that:- The provisions of section 2(22)(e) are attracted, when a company makes payment to its shareholders whereas in contrast in present case payments have been made by the shareholder to the company. According to us, therefore, the provisions of section 2(22)(e) of the Act will not apply - Following decision of Assistant Commissioner of Income-tax v. Bhaumik Colour P. Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] - Decided in favour of assessee. - ITA No.1607/Kol/2012 , ITA No.1626/Kol/2012 - - - Dated:- 19-4-2013 - K K Gupta and Mahavir Singh, JJ. For the Appellant : Shri S K Tulsiyan, Adv. For the Respondent : Shri L K S Dehiya, CIT(DR) ORDER:- Per: Mahavir Singh: These cross appeals by assessee and revenue are arising out of order of CIT(A)-III, Kolkata in Appeal No. 35/CC-XX/CIT(A)C-III/11-12/Kol dated 31.08.2012. Assessment was framed by JCIT (OSD) CC-XX, Kol u/s. 143(3) r.w.s. 153A of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Year 2009-10 vide his order dated 03.11.2011. 2. First w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count i.e. Bank of India. Further miscellaneous expenses were incurred on behalf of assessee by Naresh Kumar Co. Now, assessee has enclosed complete details of miscellaneous expenses incurred as well as payments in its paper book at pages 15 to 24. As the amounts are disclosed in the books of account the assessee contended that the addition should have been deleted by CIT(A). We find that the CIT(A) confirmed the addition by observing as under: The appellant also produced copy of the ledger account of Naresh Kumar Co. from its own books of account and pointed out that a sum of Rs.5,000/- was deposited on 30.07.2008 by Naresh Kumar Co. for opening a bank account for the appellant. After that an amount of Rs.1,75,000/- is recorded to have been deposited in cash in the bank account of the appellant on 16.09.2008 by Naresh Kumar Co. These entries by themselves do not support the claim of the assessee that the impugned amount of Rs.1,95,185/- represented reimbursement of certain expenses incurred by the appellant on behalf of Naresh Kumar Co. from time to time. Therefore, the explanation offered by the appellant in this regard is dismissed and the addition of Rs.1,9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleting the addition made by AO by invoking the provisions of section 2(22)(e) of the Act on the ground of deemed dividend. For this, revenue has raised following two grounds: 1. That on the facts and circumstances of the case, Ld. CIT(A) erred both in facts as well as in law in deleting the addition of Rs.35,00,000/- made u/s. 2(22)(e) by accepting appellant's submission without considering the material fact on record that the payment of advance of Rs.35,00,000/- was made to the assessee company by M/s. Naresh Kumar Company Pvt. Ltd. without any business expediency but for the ultimate benefit of the shareholders of the assessee company, who are also the sole shareholders of the lender company. 2. Ld. CIT(A) had erred in deleting the addition made u/s. 2(22)(e) by considering the literal meaning only without considering the intention of the legislature to tax all payments by way of dividend as held by the ITAT, Hyderabad in the case of Hyderabad Chemicals Products (P) Ltd. vs. ITO (2000) 72 ITD 323 (HYD.) 9. We have heard rival submissions and gone through facts and circumstances of the case. Briefly stated facts are that the assessee company received a sum of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax v. Ankitech Pvt. Ltd. (242 CTR 129), after an elaborate discussion of the issue and the case law on the subject, the Hon'ble Delhi High Court has held that an assessee who is not a shareholder of the company, from which he received a loan or an advance cannot be treated as being covered by the definition of the word dividend' as provided in Sec.2(22)(e) of the Act. In Commissioner of Income-tax v. Universal Medicare Private Limited (324 ITR 263) (Bom), where also the issue of addition of deemed dividend u/s.2(22)(e) was under consideration, the Hon'ble Bombay High Court held as under: All payments by way of dividend have to be taxed in the hands of the recipient of the dividend namely the shareholder. The effect of Section 2(22) is to prov de an inclusive definit on of the expression dividend. Clause (e) expands the nature of payments which can be classified as a dividend. Clause (e) of section 2(22) includes a payment made by the company in which the public is not substantially interested by way of an advance or loan to a shareholder or to any concern to which such shareholder is a member or partner, subject to the fulfillment of the requirements wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) should be added was considered only in the case of Hyderabad Chemical Products (P) Ltd. vs. ITO (supra). Therefore, the facts of the other of the above cases are distinguishable from those of the instant case. In Hyderabad Chemical Products (P) Ltd. vs. ITO (supra) the ITAT, Hyderabad had held that the amount of deemed dividend' was to be added in the hands of the recipient company even though the recipient company itself was not a shareholder of the lender company but both the lender and the recipient companies had common shareholders holding substantial share capital in both the companies. However, subsequent to that decision Special Bench decision in Assistant Commissioner of Income-tax v. Bhaumik Colour P. Ltd. (supra) was delivered wherein the Tribunal had laid down that deemed dividend can be assessed on1y in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. The decision in the case of Hyderabad Chemical Products (P) Ltd. vs. ITO (supra) was considered by the Hyderabad ITAT itself in its order dated 13.04.2010 in the case of MTAR Technologies (P) Ltd. v. ACIT in ITAs No.1162, 1163 1166/Hyd/20 ..... 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