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TMI Blog2021 (12) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.10.2007 declaring total income at Rs.NIL, which was processed under section 143(1) of the Act. However, the case of the assessee was reopened upon recording of reasons with approval of the ld.CIT, Range-1, Ahmedabad by issuance of notice under section 148 of the Act dated 26.3.2014 followed by notice under section 143(2) dated 25.6.2014. Such reopening of the assessment was done on the basis of information received from the DCIT, TDS Circle, Ahmedabad that one J.P. Iscon Ltd. has provided inter-corporate deposit ("ICD" for short) of Rs. 3,53,01,765/- to the assessee-company; there were common share holders in both the companies viz. Shri Pravin Kotak, and Shri Amit Gupta. The ld.AO has noticed their shareholding ratio in both the companies in the assessment order as follows: Name Dhawani Infrastructure Pvt. Ltd. JP Iscon Ltd. Shri Pravin Kotak 90% 27.49% Shri Amit Gupta 10% 22.38% 3. In response to the notice under section 142(1) dated 19.12.2014 on the issue as to why the amount of Rs. Rs. 3,53,01,765/-, as provided by JP Iscon Ltd. should not be treated as deemed dividend under section 2(22)(e) of the Act the assessee replied as under: "With reference to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a concern (may be HUF/firm/Company/AOP/BOl) is treated as a deemed dividend u/s 2 (22) (e) if the fallowings condtions are satisfied:- (1) Loan or Advance is given by a company in which the public are not substantially interested; (2) Loan or Advance is given after Ma.y,31,1987; (3) The company should possess accumulated profits (Excluding Capitalized Profit) at the time it makes payment of Loan or Advance; and (4) Loan or Advance is given to a concern(i.e. a Hindu Undivided family or a firm or an association of persons or a body of individuals or a company) in which a shareholder (which is a registered shareholder as well as beneficially holding at least 10 Percent Equity Share Capital) of the company (giving loan or advance) has substantial interest. A Person shall be deemed to have a substantial interest in a concern, if he is at any time during the previous year, beneficially entitled to at least 20% of income of such concern (if such concern is a company, then he should beneficially hold at least 20 percent equity share capital of the company). (b) A Perusal of the above provision read with explanation 3 reveals that the following types of payments by a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Enclosed Copy of Judgement as Exb. 1 2. Assistant Commissioner of Income Tax, Circle - 33, Mumbai V/S Bhaumik Colour(P) Ltd. ITATMumbni 2009 (2009) 118 ITD 1/(2000) 27 SOT 270/ (2009) 120 TTJ 865 Enclosed Copy of Judgement us Exb.2 3 Commissioner of Income Tax V/S Navyug Promoters(P) Ltd Delhi High Court 2011 (2011) 16 Tflxmcmn.com 292/(2011) 203 taxman 618 Enclosed Copy of Judgement as Exb. 3 4 Commissioner of Income Tax V/S MCC Marketing(P) Ltd Delhi High Court 2011 (2011) 16 Taxmann.com 411/(2012) 204 taxmann 56/(2012 343 ITR 350) Enclosed Copy of Judgement as Exb. 4 5 Commissioner of Income Tax V/S Impact Containers (P.) Ltd. High Court of Bombay 2014 (2014) 48 taxmann.com 294 (Bombay)/2014 225 Taxman 322(Bombay)/(2014) 367 ITR 346 (Bombay)(2014) 270 CTR 337 (Bombay)j Enclosed Copy of Judgement as Exb.5 6 Asstt. Commissioner of Income Tax V/S Britto Amusement (P.) Ltd. High Court of Bombay 2014 (2014 ) 49 taxmann.com 256(Bombay)/2014 226 Taxman 45 (Bombay) (MAG.)/[2014J 360 ITR 554 Enclosed Copy of Judgement as Exb. 6 7 Commisioner of Income Tax Central IV V/S Jignesh P. shah High Court of Bombay 2015 [2015] 54 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee by relying upon the decision passed by the Hon'ble Delhi High Court in the matter of CIT Vs. Anitech P.Ltd., reported in 340 ITR 14 (Del). Finally, it was submitted by the ld.AR that the issue is squarely covered by the judgment and order dated 11.2.2021 passed in the assessee's own case in ITA No.2232/Ahd/2016 and CO No.157/Ahd/2016 wherein addition of ICD to the tune of Rs. 3,30,50,859/- under section 2(22)(e) of the Act has been deleted. 6. On the other hand, the ld.DR relied upon order passed by the Ld. AO. It was contended by him before us that while making addition, the ld.AO applied his mind which is clearly evident from paragraph-5.7 of the order passed by the ld.AO. Payer-company was closely held company; it has accumulated profit on the date of such payment and the payment was made to the appellant-company out of such accumulated profits. Instead of distributing accumulated profits as dividend, the company has distributed the same as loan or advance to the assessee-company, and therefore, provision of section 2(22)(e) of the Act has been rightly invoked by the ld.AO while making addition as the main contention of the Revenue before us. 7. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y High Court in the case of CIT vs. Universal Medicare Private Limited (2010) 324 ITR 263 (Bom.) The Gujarat High Court in the case of CIT v/s Daisy Packers (P) Ltd decided the issue in favour of the assessee, relying on the decision of the Division Bench of the High Court in CIT v. Ankitech (P.) Ltd. (2012) 340 ITR 14 (Del) wherein it was held that if the assessee-company does not hold a share in other company from which it had received deposit then it cannot be treated to be a deemed dividend under Section 2(22)(e) of the Act From the reading of the provisions of section 2(22)(e)t it is seen that the provision is intended to tax the dividend in the hands of a shareholder and the deeming provision as it applies to the case of loan or advance by a company to a concern in which is shareholder and has substantial interest, is based on the presumption that the loan or advance would ultimately be made available to the shareholder of the company giving loan or advance. Various court decisions e.g. Asstt. " CIT v/s. Bhumik Colour (P.) Ltd.[2009] 118 ITD 1 (Mum.) (SB) & jurisdictional High Court decision in the case of CIT v/s Daisy Packers (P.) Ltd [2013] 40 taxmann.com 480 (Gujarat), su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision of section 2(22)(e) of the Act. At the assessment stage, the assessee has categorically explained after referring various judicial pronouncements that the amount received from J.P. Escon Ltd. cannot be taxed as deemed dividend in its hand as it was not the registered share holder of J.P. Escon Ltd. The Assessing Officer after considering the substantial common share holding of Shri Pravin Kotak and Shri Amit Gupta, treated the amount of Rs. 3,30,50,859/- upto the accumulated profit received by the assessee company from J.P. Escon Ltd. as deemed dividend u/s. 2(22)(e) of the act. The ld. CIT(A) has deleted the addition holding that assessee company was not a registered share holder of J.P. Escon Ltd. after placing reliance on the various judicial pronouncements as elaborated in his findings as cited above in this order. After perusal of the material on record, it is noticed that assessee company was not a registered share holder in J.P. Escon Ltd. who has given inter corporate deposit to the assessee company. The similar issue on identical facts has been adjudicated by the Hon'ble Jurisdictional High Court of Gujarat in the case of Pr. CIT vs. Mahavir Inducto Pvt. Ltd. d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is received from a person other than the shareholder, as is the admitted position in this case, the provisions of Section 2(22)(e) cannot indeed be invoked. The CIT(A) was thus justified in granting the impugned relief in respect of the addition under section 2(22)(e). We, therefore, approve the conclusion arrived at by the learned CIT(A) in this regard, and decline to interfere in the matter on that count." We have also through the decision of Hon'ble Gujarat High Court in the case of Pr. CIT vs. Mahavir Inducto Pvt. Ltd. supra wherein the identical issue on same facts was decided in favour of the assessee after following the decision of Bombay High Court in the case of CIT vs. Impact Containers Pvt. Ltd. and others vide IT Appeal No. 114 of 2012 and the decision of Delhi High Court in the case of CIT vs. Ankitech Pvt. Ltd. Ltd. reported in 340 ITR 14 Delhi. The relevant part of the decision is reproduced as under:- "50. Identical question came to be considered by the Division Bench of this Court in Tax Appeal No. 253 of 2015. After considering the decisi on of the Bombay High Court in the case of CIT vs. Impact Containers Private Limited & ors rendered in ITA No. 114 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bench of the ITAT, the impugned addition is deleted. Accordingly, this ground of the assesse is allowed." After taking into consideration, the aforesaid facts and judicial findings as referred above, it is undisputed fact that assessee company was not a registered share holder in J.P. Escon Ltd. from whom it has obtained loan during the year under consideration. Therefore, the addition made by the Assessing Officer as deemed dividend u/s. 2(22)(e) of the Act is not justified. In the light of the above facts and findings, we do not find any infirmity in the decision of ld. CIT(A), therefore, this appeal of the revenue is dismissed." 9. We have also perused the judgments passed by different judicial forums as relied upon by the Ld. AR. The ratio laid down therein is that, in a case, in which an amount is received from a person, other than the shareholder, provision of section 2(22)(e) of the Act cannot indeed be invoked. In the instant case, the appellant company was not a registered shareholder of the lender-company viz. JP Iscon Ltd. from which the assessee-company has obtained ICD during the year under consideration, and therefore, the addition made by the Ld. AO by invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X
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