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TMI Blog2019 (12) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... R. cited an order in the matter of CIT vs. Impact Containers (P.) Ltd. 367 ITR 346 [2014] (Bombay) wherein it is held that the deemed dividend u/s. 2(22)(e) can only be assessed in the hands of a person other than the shareholder who is a shareholder of the lender company and not in the hands of a person other than shareholder. CIT(A) has passed reasoned order and same does not require any kind of interference at our end. Appeal filed by the Revenue is dismissed. - ITA. No: 554/AHD/2017 And C.O. NO. 71/AHD/2017 - - - Dated:- 6-12-2019 - Shri Pradip Kumar Kedia, Accountant Member And Shri Mahavir Prasad, Judicial Member For the Appellant : Shri Lalit P. Jain, Sr. D.R. For the Respondent : Ms. Nupur Shah, A.R. ORDER PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. ITA No. 554/Ahd/2017 C.O. No. 71/Ahd/2017 are appeal by the revenue and cross objection of the Assessee directed against the order of the Ld. CIT(A)-8, Ahmedabad dated 29.12.2016 pertaining to A.Y. 2008-09 and following ground has been taken: 1) Whether the ld. CIT(A) is right in law and on the facts in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 J. P. Iscon Limited - 70% - The assessing officer initiates the addition on account of deemed dividend u/s 2(22)(e) mentioning the common shareholder in both the companies in para 5.1 of the assessment order. 6. The fact is that the appellant company was not holding any shares of JPIL from the date of its incorporation and the appellant is neither registered share holder of JPIL nor beneficial owner of shares holding 10% or more of the voting power of JPIL. JPIL has given Inter corporate deposit (ICD) of ₹ 3,45,59,000/-to the appellant for the purpose of business 7. But ld. A.O. was not convinced with the plea of the assessee and made addition of ₹ 3,45,59000/-. 8. Against the order of the ld. CIT(A), assessee preferred first statutory appeal before the ld. CIT(A) who allowed the appeal of the assessee in following terms: 5. I have carefully considered the assessment order and submission filed by the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(22)(e) is that closely held companies which are controlled by group of members, even though the company has accumulated profit would not distribute such profit on dividend because if so distributed the dividend income would be taxable in the hands of the shareholders. The A.O. has held that the amount of loan given by J.P. Iscon Limited to the assessee attracts the provisions of the section 2(22) (e) of the Act and therefore an amount of ₹ 3,45,59,000 from J. P. Iscon Limited is considered as deemed dividend in the hands of assessee company and added to the total income received by assessee company. As quoted above, the appellant has submitted that inter corporate deposits (ICD) have been given by J P Iscon Limited (JPIL) to the appellant company in me ordinary course of the business and interest have been charged by JPIL on the said ICD. The appellant had also provided for the interest expense on the said ICD borrowed and have done the necessary TDS and have repaid back the said ICD along with interest during F.Y 2008-09. The AR has argued that ICD is always for an agreed period with an agreed interest. Hence, there is a clear distinction between ICD vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed that it is fact that Shri Amit Gupta is not holding any share in the appellant company. He has only 15% of share holding in the lending company i.e. JP Iscon Limited. The express provisions of section 2(22)(e) show that there are three limbs of the said section i.e. (i) the payment by a company by way of advance or loan should have been made to a shareholder who is a beneficial owner of the shares and substantial interest. (ii) or the payment should be made to any concern in which such share holder is amember or partner and in that concern, he should have a substantial interest; (iii) or the company makes payment, or on its behalf payment is made for individual benefit of any such shareholder to the extent to which the company in either casepossesses accumulated profits. 5.6.1 In the present case, the payment has been made by J P Iscon Limited, to the appellant company but the appellant company is not a registered share holder of J P Iscon Limited. From the facts, it is seen that appellant is not a shareholder in the lender company however, the assessing officer treated the same as deemed divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) can only be assessed in the hands of the person who is a shareholder of the lender company and not in the hands of a person other than the shareholder. In view of the above facts and on the basis of the above referred decisions (supra), the addition made by the Assessing Officer u/s.2(22)(e) is held to be not justified. 5.6.3 In view of above discussion, following the judicial pronouncements in above quoted cases and also the view taken by CIT Appeal in cases of Group companies i.e. M/s. Dhwani Infrastructure Pvt. Ltd. A .Y. 2008-09 (order dated 29.06.2016) , Amit Intertrade P. Ltd. A.Y.2007-08 (order dated 29.06.2016) and Rich Retail P. Ltd.A.Y.2007-08 2008-09 (orders dated 01.06.2016 and 12.07.2016), the A.O is directed to delete the addition of ₹ 3,45,59,0007- made as deemed dividend u/s 2(22)(e) of IT Act in the hands of the appellant company. Accordingly, all the grounds of appeal which are inter-linked are allowed. 9. Now Revenue has come before us by way of second appeal. 10. In this case, there are common share holder between JIPL (IDC giver) and the appellant company (ICD receiver) having Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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