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TMI Blog2011 (10) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter of order passed by the Assessing Officer u/s 143(3) dated 31.12.2007. 2. Following grounds have been taken by the Revenue :- On the facts and in the circumstances of the case , the ld. CIT(A) has erred in :- 1. deleting the addition of ₹ 58,40,226/- out of interest of ₹ 60,92,226/- made by the Assessing Officer on account of loan given without interest. 2. deleting the addition of ₹ 1,74,27,588/- made by the Assessing Officer on account of deemed dividend u/s 2(22)(e)/ 3. accepting the additional evidence during the course of appellate proceedings in violation of Rule 46A of Income Tax rules, 1962. 3. Rival contentions have been heard and records perused. Facts in brief are that the assessee is in the business of publishing of Hindi news papers. During the year the company Bhaskar Graphic & Printing Arts Limited has been amalgamated with the assessee company w.e.f. 1.4.04 by M.P. High Court order dated 30.11.04. As per the scheme of amalgamation the assessee has issued seven equity shares against ten equity shares of Bhaskar Graphic & Printing Arts Pvt.Ltd. resulting in issue of 3,57,630 equity shares of ₹ 10/- during the year. Due to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counted for in the year under appeal i.e. assessment year 2005-06. Hence, the gross interest chargeable by the appellant from the said party amounting to ₹ 27,000/- is brought to tax in this year. Regarding Bhartiya Sanskriti Sansthan Limited to whom loans/advances has been given interest free by the appellant the outstanding balance as on 31.03.2005 is 50,00,000. It has been simply stated that the same has been given against land and expenses. No further details regarding the purpose of loan given or supporting evidence given to the said party was for business purpose. In view of the above facts interest attributable to it amounting to ₹ 2,25,000/- has to be taxed in the year. The interest has been calculated on the basis of the period of loan/advances given to Shri Bhartiya Sanskriti Sansthan. Reliance is placed in the case of CIT vs. Abhishekh Industries Limited, 286 ITR 1 ( P & H). In this case the Hon'ble High Court has held that if the appellant is paying interest on borrowed capital and if interest free loans have been advanced to sister concern for non business purpose than the interest relating to the extent of interest free loans is to be disallowed while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these advances and it was found that the assessee has duly charged interest of ₹ 37,79,233/- and offered the same in the books of account. Only in respect of three parties stated above, it was observed by the ld. CIT(A) that advance was given to Kopran Pharmaceuticals on 31.3.2005 against delivery of articles in the subsequent year. Copy of ledger account was furnished. It was also found that the advance of ₹ 9 lakhs was given to Cargo Co.Limited during the fag end of the relevant year and interest of ₹ 24,177/- has been charged for in the next year. In respect of advance given to Shri Bhartiya Sanskriti Sansthan, it was observed that advance of ₹ 50 lakhs was given during the year against land and expenses. The nature and purpose of loan given has not been specified before the AO. Therefore, the CIT(A) has suitably worked out interest on these advances on the basis of period for which loan was outstanding during the year and sustained the addition to the extent of ₹ 2,52,000/-. The findings recorded by the ld. CIT(A) has not been controverted by the ld. CIT DR by bringing any positive material on record. We also do not find any documents having bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom M/s Bhaskar Multinet Limited. It was observed that Mr. R. C. Agarwal had 10% shareholding in M/s. Bhaskar Multinet Limited and 20% shareholding in the appellant company. The AO concluded that in view of the above facts loan given by M/s. Bhaskar Multinet Limited to the appellant company is taxable as deemed dividend in the hands of the appellant u/s 2(22)(e). The amount of ₹ 1,74,27,588/- was thus added representing accumulated profits of M/s. Bhaskar Multinet Limited. The learned counsel of the appellant disputed the addition made by the Assessing Officer and vehemently argued that the addition is wrong both on ground of facts and law. From the plain reading of the Section 2(22)(e), the first and foremost condition which is to be seen for the applicability of this Section is payment of loans and advances by a company to a shareholder. The word payment denotes actual flow of fund and not notional entries by way of transfer or otherwise. In the instant case all the entries which have been passed by the appellant is in the nature of transfer entries except ₹ 5,00,000/- which is actually repayment of loan by cheques to the appellant and not a loan taken from M/s. Bhas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all within the ambit of Section 2(22)(e). Further, in the case of Ankitech Pvt.Ltd. vs. JCIT I.T.A.No. 388/Del/2007, it is held that deemed dividend cannot be assessed in the hands of a none shareholder as primary requirement for dividend to be received rests with a shareholder and none else. The AO in the assessment order has added ₹ 1,74,27,588/- as deemed dividend u/s 2(22)(e) in the hands of the appellant representing the reserve & surplus of M/s. Bhaskar Multinet Limited as on 31.3.2005 due to the reason that Mr. R. C. Agarwal is a major shareholder in both the companies and in turn becomes the beneficial shareholder of the company giving such loan or advance. In this context, the A. R. of the appellant has submitted that Mr. R. C. Agarwal become a major shareholder in both the companies on 31.03.2005 and not before that when the relevant entries were passed in view of the proposed demerger of group entities. In other words, only payments made on or after 1.4.2005 can be considered for applicability of Section 2(22)(e). even otherwise no payments are possible or made because shares were allotted to Mr. R. C. Agrawal on 31.3.2005. In the instant case all the Journal entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Delhi High Court held that Section 2(22)(e) will be attracted in respect of loan given to the partnership firm, notwithstanding, the fact that the partnership firm was not shareholder of the lender company. 14. On the other hand, it was argued by the ld. Authorized Representative that the assessee company was not in receipt of any loans and advances from M/s. Bhaskar Graphic and Printing Arts Limited, wherein common Director of the assessee company having substantial interest, due to scheme of amalgamation of the assessee company with M/s. Bhaskar Graphics Printing Arts Limited. The amount was payable by assessee company only due to the adjustment entry passed by the assessee, which cannot be regarded as loans or advances received by the assessee company so as to bring the same within the mischief of Section 2(22)(e) of the Income-tax Act, 1961. 15. Rival contentions have been considered and record perused. In this case, the assessee company has merged with M/s. Bhaskar Graphic and Printing Arts Limited. Due to this merger, same adjustment entries were passed due to which debit balance of M/s. Bhaskar Graphic Printing Arts Limited in assessee's books of account, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the 1922 Act and the 1961 Act regarding the payee being a shareholder remains the same and it is the condition under that such shareholder should be beneficial owner of the shares and the percentage of voting power that such shareholder should hold that has been prescribed as an additional condition under the 1961 Act. The word "Shareholder" alone existed in the definition of dividend in the 1922 Act. The expression 'Shareholder" has been interpreted under the 1922 Act to mean a registered shareholder. This expression 'Shareholder" found in the 1961 Act has to be therefore construed as applying only to registered shareholder. It is a principle of interpretation of statutes that where once certain words in an Act have received a judicial construction in one of the Superior Courts, and the legislature has repeated them in a subsequent statute, the legislature must be taken to have used them according to the meaning which a Court of competent jurisdiction has given them. Page 46 para 23 " In the 1961 Act, the word " shareholder" is followed by the following words "being a person who is the beneficial owner of shares". This exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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