9911796707
TMI Blog2024 (9) TMI 783X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed dividend is not taxable in the hands of the assessee and hence decline to interfere with the reasoned order of the ld. CIT(A) on this issue. Deemed Interest Income u/s 56(1) - notional saving of interest on the borrowed funds - interest free loan given to the assessee company which was sourced from the interest bearing loans taken from different entities - assessee submitted that during the assessment proceedings, AO has duly verified the source of loan taken from the promoter and the sister concerns and the loan given by these entities to the assessee company are not interest bearing - HELD THAT:-CIT(A) held that it is not in dispute that the entities mentioned above have given loan to the assessee company without any interest. There is no provision to tax the saving of interest on notional basis in the hands of borrower in case loan taken by it is without interest or below the market rate. It is a case where sister concerns have taken interest bearing loan in its books and have given loan to the assessee company without interest for acquisition of property. In such case the claim of interest expenditure by the sister entities if any, against their income may be disallowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. Addition on account of deemed dividend u/s. 2(22)(e): 4. The assessee has taken loans from the below mentioned entities as under: Name of the party from which loans taken Amount of loan Angad Sons Realcon Private Ltd. 1,27,97,348 Rachaita Infrastructure Private Ltd. 6,62,76,625 Udai Karan Singh Dalal 5,05,02,652 5. The assessee submitted that Shri Udai Karan Singh Dalal holds 99.44% share in the assessee company and 43.06% share in M/s Angad Sons Realcon Pvt. Ltd. and 50% in M/s Rachaita Infrastructures Pvt. Ltd. Therefore, Shri Udai Karan Singh Dalal is a common share holder in the loan giving companies and the assessee company holding more than 10% voting rights in each of them. Accordingly, the loans and advances extended by the lending companies to the assessee company is covered u/s 2(22)(e). However, as per the assessee, the chargeability of the deemed dividend is not on the assessee company but on the common share holder of the lending and recipient companies i.e. Shri Udai Karan Singh Dalal. The assessee submitted that the decision of Hon ble High Court of Delhi in the case CIT vs. Ankitech (P) Ltd. is squarely applicable in its case, therefore, the Assessing Officer wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well, that has not happened. Most of the arguments of the learned counsels for the Revenue would stand answered, once we look into the matter from this perspective. 26. In a case like this, the recipient would be a shareholder by way of deeming provision. It is not correct on the part of the Revenue to argue that if this position is taken, then the income is not taxed at the hands of the recipient. Such an argument based on the scheme of the Act as projected by the learned counsels for the Revenue on the basis of Sections 4, 5, 8, 14 and 56 of the Act would be of no avail. Simple answer to this argument is that such loan or advance, in the first place, is not an income. Such a loan or advance has to be returned by the recipient to the company, which has given the loan or advance. 27. Precisely, for this very reason, the Courts have held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act. 28. Insofar as reliance upon Circular No. 495 dated 22.09.1997 issued by Central Board of Direct Taxes is concerned, we are inclined to agree with the observations of the Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed dividend shall be taxed in the hands of share holder not in the hands of loan receiving entity which is not a share holder. The relevant para is reproduced as under: 36. We have gone through submission of Id. AR as well as Id. CIT DR on this issue. As the assessee is not share holder of payer group companies who paid loan / advance to the assessee and considering the legal position that dividend is to be received by shareholder only, the amount received by the assessee is not to be treated as deemed dividend in the hands of assessee. Moreover, this view is fully supported by decision of the Hon ble Delhi High Court in case of Ankitech (P) Ltd. (supra). 9. In the instant case, it is observed that the assessee company is not a share holder in the companies which have extended loan to it. Shri Udai Karan Singh Dalai is the common share holder having substantial interest in the assessee company as well as in the loan giving companies. 10. In view of the facts of the case and judgments of Jurisdictional High Court and Tribunal, we find that the deemed dividend is not taxable in the hands of the assessee and hence decline to interfere with the reasoned order of the ld. CIT(A) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
