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TMI Blog2015 (11) TMI 1611X X X X Extracts X X X X X X X X Extracts X X X X ..... Senthil Kumar Senior Standing Counsel for Income Tax JUDGMENT The tax case appeal has been filed challenging the order passed by the Income Tax Appellate Tribunal, 'B' Bench, Chennai, Madras Bench, dated 19.2.2014, made in I.T.A.Nos.2205/Mds/2013, by raising the following substantial question of law: Whether on the facts and in the circumstances of the case, the Tribunal was right in deleting the addition made by the Assessing Officer towards deemed dividend under Section 2(22)(e) of the Income Tax Act? 2. It has been stated that the assessee Company had filed its return of income, for the assessment year 2006-07, on 24.6.2006. The return was processed, under Section 143(1) of the Income Tax Act, 1961 (hereinafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,35,028/- ₹ 85,00,028/- (d) Farida Prime Tannering P Ltd ₹ 98,438/- ₹ 4,96,666/- ₹ 3,98,228/- (e) Stand ford P Ltd; and Rs. Nil ₹ 19,35,078/- ₹ 19,35,078/- (f) Delta Shoes P Ltd Rs. Nil ₹ 1,59,937/- ₹ 1,59,937/- Total ₹ 1,11,85,218/- 4. On a perusal of the balance sheet, it had been noted that the subsidiary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utilisation of the loans received by the assessee company, from its subsidiary companies diverting the loan, as advance, to the loss making subsidiary company, would not make any difference in the eye of law, as the amount received was assessable as deemed dividend under Section 2(22)(e) of the Act and therefore, an amount of ₹ 84,96,594/- received by the assessee company, as a loan, from the subsidiary companies, had been treated as deemed dividend in the hands of the assessee company and therefore, the said amount had been added to the total income, under the head 'other sources'. Accordingly, the assessing officer had arrived at the taxable income of the assessee as ₹ 26,85,190/-. 7. Aggrieved by the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r than the subsidiary companies. d) The Tribunal missed to note that for being a NBFC approval of the Reserve Bank of India is a must and the same was not produced before the AO. e) The Tribunal ought to have seen that once the conditions prescribed under Section 2(22)(e) are fulfilled and the assessee holding more than 10% voting power and being the only shareholder of the subsidiary company and as per Section 2(31) defines a person which include a company and receive loans and advances from its subsidiary and therefore Section 2(22)(e) was attracted. Since the funds were available with the company in the form of profits the controlling group did not distribute the accumulated profit as dividend to the shareholders so as to avoid the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and circumstances of the case, the Appellate Tribunal was right in law that it is not a fit case for treating the advance inter se subsidiaries of the assessee holding company, as the deemed dividend in the hands of the assessee company? 2. The assessee which is a holding company has 100% share in subsidiary companies. The assessee filed its return of income on 12.10.2003 for the assessment year disclosing loss of ₹ 9,05,970/-. Thereafter, the case was selected for scrutiny and notice under Section 143(2) of the Income Tax Act was issued calling for certain details. The assessee company furnished the details about the subsidiary companies and the shares held by the assessee company in the same. As per the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income Tax Act would not be applicable to the assessee's case and added the same as addition in the income of the assessee and passed an order by assessing the said income by way of reassessment under Section 143(3)(ii) of the Income Tax Act. Aggrieved against the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeal) reversed the finding of the Assessing Officer on the ground that there is no evidence to hold that the assessee company received any benefit in the transactions involving advances within the subsidiary companies. On examination it would reveal that the advances by the advance giving subsidiary companies are from out of their profits and these ad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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