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TMI Blog2017 (2) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that from whom loan and advance was taken by the assessee must be shareholder in the assessee company. - Decided in favour of assessee - TAX APPEAL NO. 47 of 2017 - - - Dated:- 24-1-2017 - MR. M.R. SHAH AND MR. B.N. KARIA, JJ. FOR THE APPELLANT : MRS MAUNA M BHATT, ADVOCATE ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal, Ahmedabad A Bench, Ahmedabad in ITA No.2476/AHD/2011 for AY 2007-08, by which, the learned Tribunal has allowed the appeal preferred by the assessee and has directed to delete the addition made by the Assessing Officer a sum of ₹ 40,26,933/-as deemed dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said amount could not be treated as deemed dividend. Accordingly, the learned CIT(A) deleted the addition to the aforesaid extent and confirmed the rest of the addition made by the AO and consequently partly allowed the appeal. 2.3. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A) in deleting the only part amount towards deemed dividend i.e. ₹ 18,73,532/- and ₹ 81,374/- out of total addition of ₹ 40,26,933/-, the assessee preferred appeal before the learned Tribunal. By the impugned judgment and order, the learned Tribunal has deleted the entire addition of ₹ 40,26,933/-, made by the AO treating the amount of ₹ 40,26,933/- as deemed dividend under Section 2(22)(e) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as deemed dividend under Section 2(22)(e) of the Act on the ground that the assessee was a common shareholder in both BVCPL and BOPL and therefore, the loan given by the BVCPL to BOPL be treated as deemed dividend under Section 2(22)(e) of the Act in the hands of the assessee. However, it is required to be noted and it is an admitted position that neither BVCPL was the shareholder in the BOPL nor the BOPL was shareholder in the BVCPL. Under the circumstances, merely because the assessee was a common shareholder in BVCPL and BOPL, the loan given by the BVCPL to BOPL could not have been treated as deemed dividend under Section 2(22)(e) of the Act in the hands of the assessee. 5.0. Identical question came to be considered by the Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... make any payment on behalf of or for the individual benefit of such shareholder. In such an event, by the deeming provisions, such payment by the Company is treated as dividend. The intention behind the provisions of Section 2(22)(e) of the Act is to tax dividend in the hands of shareholders. The deeming provisions as it applies to the case of loans or advances by a Company to a concern in which its shareholder has substantial interest, is based on the presumption that the loans or advances would ultimately be made available to the shareholders of the Company giving the loan or advance. 25. Further, it is an admitted case that under the normal circumstances, such a loan or advance given to the shareholders or to a concern, would not q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income is not taxed at the hands of the recipient. Such an argument based on the scheme of the Act as projected by the learned Counsel for the revenue on the basis of Sections 4, 5, 8, 14 and 56 of the Act would be of no avail. Simple answer to this argument is that such loan or advance, in the first place, is not an income. Such a loan or advance has to be returned by the recipient to the Company, which has given the loan or advance. 27. Precisely, for this very reason, the Courts have held if the amounts advanced are for business transactions between the parties, such p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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