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TMI Blog2023 (11) TMI 629X X X X Extracts X X X X X X X X Extracts X X X X ..... ortive of the order of CIT(A), but only on the point that the CIT(A) cannot give direction to the A.O for reopening of assessment u/s. 251 of the Act. We find that this can be examined by the A.O at the time of taking a decision whether to reopen the assessment or not u/s. 251 of the Act. Hence, both the appeals, that of the assessee and of the Revenue, are dismissed. - SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANJUNATHA. G, ACCOUNTANT MEMBER For the Appellant : Shri T. Vasudevan, Advocate For the Respondent : Shri S.R. Karuppusamy, CIT ORDER Per Mahavir Singh, Vice President : These cross appeals, by the assessee and the Revenue, are arising out of the orders of Commissioner of Income Tax (Appeals)-1, Madurai [hereinafter [hereinafter CIT(A) ] in ITA No.190/2016-17 dated 03-03-2020. The Assessments were framed by Income Tax Officer, Non Corporate Ward-3, Chennai for the relevant A.Y. 2014-15 vide order dated 22.12.2016 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter the Act ). 2. At the outset, it is noticed from the orders passed by CIT(A)-1, Madurai that both the appeals, one filed by the assessee and one filed by the Revenue, are del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the amount availed as under: Sl. No. Payer company from whom loan was availed by assessee Amount of loan Rs. 1. Susee Automobiles P Ltd., Kappalur 84,51,536 2. Susee Premium Automobiles P. Ltd., Trichy 6,43,94,918 3. Susse Auto Sales Services P. Ltd., Madurai 2,00,44,569 4. Susee Finance Leasing P Ltd. 76,78,082 5. Susee Traders P. Ltd. 2.34.206 6. Susee Information Systems P Ltd. 11,87,250 7. Susee Auto Plaza P Ltd. 1,04,600 5. The A.O noted the shareholding pattern of the payer companies of the directors as under: Share holding in payer companies Shareholder Shareholding in assessee compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T.C(A) Nos.105 and 106 of 2017 dated 27.03.2017 (Mad.), held that the assessee-company neither a registered shareholder nor the beneficial shareholder and therefore, the deemed dividend cannot be taxed in the hands of the assessee-company. However, the CIT(A) directed the A.O to reopen the case in the hands of Shri J. Rajiv Subramanian and Shri S. Jeyabalan, Directors of the company. For this, the CIT(A) observed in para 5.7 to 6 as under: 5.7. It has also been argued by the appellant that the appellant company is neither a registered shareholder nor the beneficial shareholder and therefore, deemed dividend cannot be taxed in the hands of the appellant company. The issue has been analysed in the context of the case of the appellant. The appellant has relied on the decision of Madras High Court in case of Principal CIT Vs Ennore Cargo Container Terminal Pvt Ltd delivered on 27.03.2017, wherein at para No.4.2 to 6 which is reproduced below:- 4.2. Revenue seeks to assess as income the capital received by the assessee-company from lndev Logistics Ltd. on the ground that it is deemed dividend received by the assessee company for the benefit of' the registered For this p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that no interference is called for With the view taken by the Tribunal via the impugned order. In these circumstances, the Revenue's appeal, i.e. T.C(A) No.105 of 2017, pertaining to AY 2007-08, with regard to the said questions, is dismissed. 5.8. In another decision which is relevant in the context is Shahir Sami Khatib Vs ITO (2018) 98 Taxmann.com 453 (Mum)/(2018) 259 Taxman 160 (Mum). ft was found that the appellant was holding more than 10% of the equity shares of the lending company and was also having substantial interest in the borrowing company, It was held that the amount of loan given by lender company to the borrower company was rightly added as deemed dividend u/s 2(22)(e) of the Act in the hands of the appellant being the registered shareholder. 5.9. In view of the above two decisions, the point agitated by the appellant in this case that ff the deemed dividend under the facts and circumstances of the case has to be brought to tax, it can be brought to tax in the hands of the registered share holder only in respect of whom the shareholding criteria is satisfied under the second limb of section 2(22)(e) of the Act. It is observed in this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have gone through the facts of the case and found from the perusal of ledger account of assessee in the books of account of Ganesh Wheat Products (P) Ltd., the lender Company, it is seen that as on the first day of the relevant accounting year 2005- 06 (A.Y. 2006-07) opening balance is at Rs.28,07,584/-. Thereafter, on several dates during the entire financial year there were several transactions through cheques and some in cash by either parties, i.e. the assessee and the loan giving resulting in shifting balances, On many occasions the balance was in favour of the assessee and on some other occasions the balance was in favour of Ganesh Wheat Products (P) Ltd. The ledger of the assessee further reveals that no payment by loan creditor is followed by a repayment by the loan debtor and, in fact, the payments by the assessee and Ganesh Wheat Products (P) Ltd. are independent of one another. No interest was charged by either side for advancing money on mutuality inasmuch as the loan account was a current account in nature. It is thus evident that there were reciprocal demands between the parties and thus mutual in characteristic. AI the close of accounting year as on 31-03-2006, debit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advance given by a company to those classes of shareholders would come within the purview of section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. From the above facts and legal proposition decided by Hon'ble jurisdictional High Court, it is clear that section 2(22) (e) of the Act was inserted to bring within the purview of taxation those amounts which are actually a distribution of profits but are disbursed as a loan so that tax thereon can be avoided. It is pertinent to note here that when dividends are declared by a company, it is solely the shareholders who benefit from the transaction. No benefits accrue to the company by way of dividend distribution. Thus, section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not quality to be dividend. In the case of the assessee, by giving and taking financial assistance from each other, both the assessee and the company were benefited and such trans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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