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TMI Blog2018 (10) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... wo or more shareholders are shareholders of the same lending company and the same borrowing company. In such a factual position it could possibly be argued that the addition ought to be made on a proportionate basis. However, we are not examining this issue in the present case as the facts before us are completely different. - INCOME TAX APPEAL (IT) NO. 722 OF 2015 WITH INCOME TAX APPEAL (IT) NO. 724 OF 2015 - - - Dated:- 3-10-2018 - S.C. DHARMADHIKARI B.P. COLABAWALLA, JJ. Ms. Shobha Jagtiani a/w Mr. Ravi Rattesar I/b D.M. Harish and Co. for the appellant in both the appeals. Mr. Akhileshwar Sharma for the Respondent in both the appeals. JUDGMENT [ Per B. P. Colabawalla J.]: 1. By these two appeals filed under Section 260A of the Income Tax Act, 1961 (for short the I. T. Act, 1961 ), the appellant assessee challenges two separate orders of the Income Tax Appellate Tribunal, E-Bench, Mumbai (for short the ITAT ), by which the ITAT allowed the appeals filed by the revenue and restored the order of the Assessing Officer (for short the A.O. ). Both these appeals relate to the Assessment Year (for short A.Y. ) 2007-08. Income Tax Appeal No. 722 of 2015 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 146) wherein it was held that no addition can be made under Section 2(22)(e)of the I.T.Act, 1961 other than to the beneficial share holder of the company. It was submitted before the ITAT that, admittedly the appellant assessee was holding more than 10% shareholding in M/s MLPL (the lender company) and also having a substantial interest in M/s OFPL (the borrowing company). It was submitted before the ITAT that the appellant assessee was holding 45% of the shareholding in M/s OFPL. This being the case, it was submitted that the provisions of Section 2(22)(e) of the I. T. Act, 1961 were clearly attracted and the loan given by M/s MLPL to M/s OFPL was assessable as a deemed dividend in the hands of the appellant assessee. The appellant assessee, on the other hand, submitted before the ITAT that the order passed by the Tribunal in the case of M/s OFPL was already challenged before this Court, and therefore, the revenue could not assess the same income in the hand of two assessees. It was further submitted that even the addition under Section 2(22)(e) of the I.T. Act, 1961 could not be made in full in the hands of the appellant assessee when there are other shareholders o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition needed to be confirmed in the hands of the Appellant as the shareholder was not the recipient of any loan or advance. (III) Without prejudice, whether on facts and circumstances of the case and in law, the Hon'ble ITAT erred in rejecting the contention that the addition u/s 2(22)(e), should be restricted only to the extent of the shareholder's proportionate shareholding in the Company, which was 15 % in the hands of Lender Company and 45 % shareholding in the hands of the Borrower Company. (IV) Whether on facts and circumstances of the case and in law, the Hon'ble ITAT failed to consider that the application of Section 2(22)(e) would lead to a patent absurdity, if the shareholder who is not the recipient but has a limited interest in the concern (which has received the loan/ advance), is taxed in respect of the entire amount of deemed dividend. (V) Whether on facts and circumstances of the case and in law, the Hon'ble ITAT erred in holding that in the absence of specific provisions for making proportionate addition u/s 2(22)(e), the entire amount will be taxed in the hands of the shareholder who only holds a percentage of the shareho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on behalf of the Respondent revenue, supported the order of the ITAT as well as the order of the A.O. He submitted that the reasoning given by the ITAT cannot be faulted and which certainly would not give any rise to the substantial question of law that would require any consideration by this Court. He submitted that the ITAT, whilst coming to its conclusions, had followed the law as laid down by this Court in the case of Universal Medicare Pvt. Ltd. (supra) and hence, no interference was called for in the impugned order. Consequently, he submitted that these appeals be dismissed with costs. 10. We have heard the learned counsel for parties at length and have perused the papers and proceedings in the present appeal including the orders passed by the A.O., CIT(A) as well as that of the ITAT. We find considerable force in the argument of Mr Sharma that these appeals do not give rise to any substantial question of law. 11. It is not in dispute before us that the appellant in Income Tax Appeal No.722 of 2015 is a 15% shareholder in M/s MLPL and a 45% shareholder in M/s OFPL. Similarly, it is also not in dispute that the appellant in Income Tax Appeal No. 724 of 2015 is a 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that Section 2(22)(e) of the I. T. Act, 1961 does not postulate any such situation. This is especially the case before us as there is only one shareholder that has a shareholding in the lending company as well as in the borrowing company. This being the case and purely factual in nature, we do not think that the ITAT was in any event incorrect in rejecting this argument of the assessee. We may hasten to add that different considerations may arise if two or more shareholders are shareholders of the same lending company and the same borrowing company. In such a factual position it could possibly be argued that the addition ought to be made on a proportionate basis. However, we are not examining this issue in the present case as the facts before us are completely different. 13. In view of what we have held, we find that the reliance placed by Ms. Jagtiani on the Judgments referred to above have absolutely no application to the facts and circumstances of the present case. In the decision of Impact Containers Pvt. Ltd. (supra) (and to which both of us were a party), this Court followed its earlier decision in Universal Medicare Pvt. Ltd. (supra) [(2010) 324 ITR 263 (Bom.)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te an appropriate Bench of three learned Judges in order to have a re-look at the entire question. We fail to see how this Judgment, by any stretch of the imagination, can be of any assistance to the appellant assessee. The issue before the Supreme Court in that case, as mentioned earlier, was totally different from the facts before us. The question before the Supreme Court was whether the assessee partnership firm could be saddled with an addition of deemed dividend under Section 2(22)(e) of the I.T. Act, 1961 when the assessee was admittedly not a shareholder of the borrowing company, whereas only its partners were the registered shareholders thereof. That is not the issue that is before us at all, and therefore, this Judgment is of no assistance to the appellant assessee. 15. The last decision relied upon by Ms. Jagtiani was a decision of the Delhi ITAT wherein it appears that the Delhi ITAT has allowed the proportionate allocation of deemed dividend on the basis of the shareholding of the borrowing company. We find this Judgment to be wholly inapplicable to the facts of the present case as in the facts of this decision, both the shareholders were holding more than 10% ..... X X X X Extracts X X X X X X X X Extracts X X X X
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