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TMI Blog2014 (6) TMI 471X X X X Extracts X X X X X X X X Extracts X X X X ..... ntemplate the addition in the hands of the lenders rather it provides for addition as deemed dividend in the hands of the borrowers - Furthermore, as expounded by the Special Bench of the Tribunal in ACIT vs. Bhaumik Colours P Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] - section 2(22)(e) can be invoked only in the hands of the borrowers who were registered shareholders only - there is no basis of making assessment as deemed divided u/s 2(22)(e) of the Act in the hands of the assessee on protective basis - CIT(A) is correct in holding that the addition u/s 2(22)(e) in this case cannot be made in the hands of the assessee – Decided against Assessee. - I.T.A. No. 3373/Del/2013, I.T.A. No. 3704/Del/2013 - - - Dated:- 29-5-2014 - Shri R. P. To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (22)(e) of the Act in its hand on protective basis in respect of advances received by the assessee from other companies as evident from the last para at page 9 of the assessment order. 3. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any / all of the grounds of appeal before or during the course of the hearing of the appeal. 3. In this case AO noted that assessee has given some advances to its group companies. AO proposed to tax u/s. 2(22)(e) of the I.T. Act as deemed dividend. Assessee submitted that these advances were given under normal business circumstances and the same are business advances and hence, the same did not attract the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company, the company in which advances have been received and also the extent and determination of the accumulated profits of the assessee company are being attached herewith as per Annexure B. (It may be noted that the determination and the computation of the accumulated profits and accordingly of the deemed dividend has been made based on the financial statements of the assessee and also keeping in view the ratio of the judgment of the Hon ble Supreme Court in the case of P.K. Badiani vs. CIT (102 ITR 642), wherein it has been held that the accumulated profits have to be commercial profits, additions made due to concealed income can be included in accumulated profits. As such, the disallowances made have not been considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2)(e), the additions are required to be made in the hands of the borrowers / shareholders instead of the lender the AO is free to take appropriate action in this regard as per law. Hence, I am unable uphold the action of the AO making an addition of Rs. 40,84,000/- in this case. With the above observations, the addition of Rs. 40,84,000/- is directed to be deleted. 5. Against the above order the Assessee and Revenue are in cross appeals before us. 6. We have heard both the counsel and perused the records. 7. We find that AO has passed an ambiguous order. He has held that amount advanced by the assessee to various group company and concerns of M/s Sammag Group are treated as deemed dividend u/s. 2(22)(e) of the IT Act, 1961 and tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances. Under the circumstances, there is no basis of making assessment as deemed divided u/s 2(22)(e) of the Act in the hands of the assessee on protective basis. In these circumstances, we are of the considered opinion that Ld. CIT(A) is correct in holding that the addition u/s. 2(22)(e) in this case cannot be made in the hands of the assessee. 7.2 Assessee has agitated that Ld. CIT(A) erred in holding that provisions of section 2(22)(e) of the Act be applied to loans given for the business purposes. We find that since we have already held that addition u/s. 2(22)(e) in this case cannot be made in the hands of the assessee, the adjudication on this issue is only of academic interest. Accordingly, we are not engaging into the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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