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TMI Blog2024 (9) TMI 518X X X X Extracts X X X X X X X X Extracts X X X X ..... n brief are that the assessee was a company engaged in the business of manufacturing of sponge iron lump, filed it's return of income for A.Y. 2013-14 on 01.10.2013 declaring loss of Rs. 14,61,37,875/- under the normal provisions of the Income Tax Act, 1961 ("the Act"). Further the assessee filed revised return of income on 31.10.2013 declaring loss of Rs. 14,95,06,268/- under the normal provisions of the Act. The case of the assessee was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of the Act were issued to the assessee. After considering the submissions of the assessee, the Learned Assessing Officer ("Ld. AO") completed the assessment u/s. 143(3) of the Act on 31/03/2016 making addition of Rs. 16,68,33,979/- on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46,29,18,427/-from M/s Agarwal Industries Pvt Ltd in which M/s Agarwal Agri & Steel Pvt Ltd is the common share holder and is having more than 10% share holding. Apart from this M/s Agarwal Industries Pvt Ltd has accumulated profits of Rs. 16,68,33,979/-during the financial year 2012-13. Considering the facts of the case and also the provisions of section 2(22)(e), an amount of Rs. 16,68,33,979/- is treated as deemed dividend to the extent of accumulated profits of M/s Agarwal Industries Pvt Ltd in the hands of the assessee company and added to the income returned. In view of the above additions made, the assessee has concealed the particulars of income or furnished the inaccurate particulars of income, hence penalty proceedings u/s 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be taxed as deemed dividend in the hands of such non- shareholder. The decision of the Special Bench has been affirmed by the Bombay High Court in the case of Universal Medicare (P) Ltd and the Delhi High Court in the case of M/s. Ankitech Private limited. However, the Supreme Court put at rest this controversy in the case of M/s. Ankitech Private Limited and held that deemed dividend is not taxable in the hands of a loan recipient concern, if such concern is not a shareholder of the lender company. It is taxable in the hands of common shareholders having substantial interest in both the entries. The Supreme Court decision has provided clarity on the issue. In this present case, the M/s. Agarwal Industries Pvt Ltd and M/s.Agarwal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9/- on account of deemed dividend u/s. 2(22)(e) of the Act in the hands of the assessee. The Ld. AR also submitted that since the assessee is not a shareholder of the lendor, the provisions of section 2(22)(e) is not applicable to the assessee with regard to loans taken from the lendor. In support of their argument, the Ld. AR relied on the decision of Hon'ble Delhi High Court in ITA No.462 of 2009 & Others in the case of CIT Vs. Ankitech Pvt. Ltd. & others and Hon'ble Bombay High Court in the case of CIT Vs. Universal Medicare Pvt. Ltd. Dt. 22.03.2010, in which it has been held that addition on account of deemed dividend u/s. 2(22)(e) of the Act can be made in the hands of shareholder only. 5. Per contra, the Ld. DR relied on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT Vs. Universal Medicare Pvt. Ltd.(Supra). To have a better understanding of the issue, it is also relevant to go through section 2(22)(e) of the Act, the same is reproduced as under : "(22) "dividend" includes- (a) ....... (b) ....... (c) ........ (d) ...... (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten ..... X X X X Extracts X X X X X X X X Extracts X X X X
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