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2013 (11) TMI 1676 - AT - Income TaxAddition of deemed dividend u/s 2(22)(e) - Held that:- CIT(A) has rightly decided that the case of Sunil P.Mantri clearly falls u/s 2(22)(e) of the Act. However, we are inclined to accept the alternate arguments of the Ld.AR that the additions are to be restricted only to the extent of the accumulated profits of the lender concern up to March 31st of the previous years relevant to the assessment years under consideration during which the loans/advances have been made to various concerns. Therefore, as regards the additions made in the hands of Sunil P.Mantri for assessment years 2008-09 and 2009-10, we direct the AO to restrict the additions based on the accumulated profits of M/s Sunil Mantri Realty Ltd as on 31.03.2007 and 31.03.2008 respectively, corresponding to the loans/advances made for the relevant assessment years i.e., 2008-09 and 2009-10. Deleting the additions made by the AO in respect the sums repaid by the recipient concerns to the lender company for the A.Y 2009-10, the decision of the Ld.CIT(A) restricting the additions to the extent of the accumulated profits of the lender concern, the decision of the Ld.CIT(A) that the gross rent estimated by AO @ 7% of cost of the property interest in respect of the property located at Ambey Valley, Lonawala is reasonable and the decision of the Ld.CIT(A) that the assessee is eligible for claim of deduction in respect of interest paid are upheld. Decision of the Ld.CIT(A) resulting in the deletion of the additions made in the hands of the recipient concerns on protective basis, we are of the considered view that the Ld.CIT(A) has correctly relied on the decisions of Special Bench in the case of ACIT Vs. Bhaumik Colour P. Ltd. reported in (2008 (11) TMI 273 - ITAT BOMBAY-E ) wherein it has been held that the intention behind the provision of section 2(22)(e) is to tax dividend in the hands of share-holder. The deeming provisions as it applies to the case of loans or advances by a concern to concern in which its share-holder has substantial interest, is based on the presumption that the loans or advance would ultimately be made available to the share-holder of the concern giving the loans or advances. The intention of the legislature is therefore to tax dividend only in the hands of the share-holder and not in the hands the concern
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