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TMI Blog2019 (3) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... JESH KUMAR, ACCOUNTANT MEMBER: The present appeal has been preferred by the assessee against the order dated 23.12.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12. 2. The issue raised in ground No.1 by the assessee is against the order of Ld. CIT(A) confirming the addition of ₹ 1,29,61,420/- as made by the AO on account of deemed dividend under section 2(22)(e) of the Income Tax Act by ignoring the fact that assessee is not a shareholder of M/s. Golani Construction India Pvt. Ltd. and provisions qua deemed dividend as envisaged under section 2(22)(e) are not applicable to the assessee who is not shareholder of the company who has advanced the money. Whereas the issue raised in ground No.2 is as regards bogus purchases to the tune of ₹ 4,09,657/-. 3. The Ld. A.R. at the time of hearing submitted before the Bench that ground No.2 is not pressed. Therefore, the same is dismissed as not being pressed. 4. The facts in brief are that the assessee filed return of income on 29.09.2011 declaring income of ₹ 1,50,61,430/- which was revised on 30.03.2013 declaring income of ₹ 1,91,57,582/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of ITAT Special Bench in the case of ACIT vs. Bhaumik Colour Pvt Ltd. 118 ITD 1/(313 ITR 146(AT), held that loans received by the assessee from M/s. karodia Constructions PLtd., cannot be treated as deemed dividend u/s.2(22)(e) of the Act as recipient of money should be a registered share holder as well as beneficial share holder whereas in the case of the assessee none of the above conditions are satisfied. 5. Ld D.R, has not disputed above facts and as mentioned above, but dutifully relied on order of Assessing Officer. 6. The ITAT, Special Bench in the case of Bhaumik Colour Pvt Ltd (supra) held that provisions of section 2(22)(e) of the Act create a fiction bringing any amount paid otherwise than as dividend into net of dividend. Therefore, this clause must be given strict interpretation. It was held therein that if the person is a registered holder but not the beneficiary share holder, then provisions of section 2(22)(e) will not apply. Similarly, if a person is a beneficiary share holder but not a registered share holder, then also the first limb of provisions of section 2(22) (e) will not apply. The Hon'ble Rajasthan High Court in the case of Hotel Hill Top (20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33,132/- of 31-03-2011. The closing balance is NIL. Thus, there were two instances of loans/advances given. As the reserves and surplus on 31-03-2010 was ₹ 1,29,61,420/-, the deemed dividend would be limited to such amounts only. The addition made is thus upheld. Grounds of Appeal No. 3,4 & 5 are dismissed." 6. The Ld. A.R. vehemently submitted before the Bench that the assessee is not a shareholder of M/s. Golani Construction India Pvt. Ltd. and therefore the provision of section 2(22)(e) of the Act would not apply to the assessee. The Ld. A.R. submitted that the assessee i.e. M/s. Golani Brothers a partnership concern have four partners Mira S. Golani, Kishore S. Golani, Ravi S. Golani and Nursing Lal D. Golani up to 17.02.2011 and were having profit share loading of 7%, 50%, 7% and 36% respectively. After reconstitution only first three partners remained in the assessee firm with profit sharing ratio of 7%, 68.50% and 24.50% respectively. In the M/s. Golani Construction India Pvt. Ltd. there were three shareholders Kishore S. Golani, Ravi S. Golani and Akash K. Golani with shareholdings of 15000, 5000 and 10000 share aggregating to 30000 shares. The Ld. A.R. submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... z Dishman Bio-tech (P) Ltd. (ITA Nos.958 & 959 of 2015) (Guj HC) (3) Ravindra R Fotedar vs. ACIT (2017) 85 taxmann.com 314 (Mumbai-Trib) (4) Saamag Developers (P) Ltd. vs. ACIT (2018) 90 taxmann.com 20 (Delhi-Trib.) The Ld. A.R. also submitted distinguished the decision relied upon by the Ld. CIT(A) by submitting that the same are distinguishable on facts in the case of Gopal And Sons (HUF) Vs CIT [2017] 77 taxmann.com 71 (SC). The facts in this case are that the assessee was both registered as well as a beneficial shareholder of the company holding more than 10% of the voting power whereas in the present case the assessee is neither a registered shareholder nor a beneficial shareholder of M/s. Golani Construction India Pvt. Ltd. In the above case of Gopal and Sons (supra) the money to purchase the shares in the company was given by assessee HUF and the shares were issued in the name of karta Shri Gopal Kumar Sanei but in general returns the HUF was shown as registered as well as beneficial owner whereas in the present case the facts are different. In the case of National Travel Services (2018) 89 taxmann.com 332 SC, the two partners were members of the company/shareholders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Construction India Pvt. Ltd. of ₹ 2.10 crores to the assessee firm could be considered as deemed dividend under section 2(22)(e) of the Act to the extent the lender company has accumulated reserved and surpluses. It is clear from the above that the firm M/s. Golani Brothers is neither a registered shareholder nor a beneficial shareholder in the M/s. Golani Construction India Pvt. Ltd. Before reaching any conclusion we would like to touch upon the decision of the various judicial firms on the matter which is reproduced as under: "10.. Hon'ble Supreme Court has approved the decision of Hon'ble Delhi High Court in case of Ankitech Pvt. Ltd., (2011) 199 Taxman 341, while deciding the Civil Appeal No.3961 of 2013. Hon'ble Supreme Court observed that once it is found that such a loan or advance cannot be treated as deemed dividend at the hands of such a concern which is not shareholder, the provisions of Section 2(22)e cannot be applied. Hon'ble Supreme Court further observed as under:- "Having perused the judgment and having heard arguments, we are of the view that the judgment is a detailed judgment going into Section 2(22)(e) of the Income Tax Act which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of Gundecha Group of Companies. The transactions between the group companies were current and inter banking accounts containing both type of entries i.e. receipts and payments. There are total 61 transactions entered during the year on need basis. In case where both receipts and payments is taking place in inter banking accounts the same cannot be regarded as Loans and Advances as contemplated u/s 2(22)(e) and thus no addition could be made as Deemed Dividend. Our view is supported by the decision of Gujarat High Court in the case of Schutz Dishman Bio-tech (P) Ltd., (IT Appeal Nos. 958 & 959 of 2015 of 2015) (Guj. HC) observed as under:- "If there are transactions in the form of current accommodation entries, they cannot be regarded to be loans and advances for the purpose of deemed dividend." 15. ITAT Mumbai Bench in the case of Ravindra R Fotedar (2017) 85 taxmann.com 314 observed as under:- "Whether where Assessing Officer made addition to assessee's income "Under section 2(22)(e) in respect of loan given by one company to another company by taking a view that assessee was holding substantial interest i.e. more than ten per cent shareholding in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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