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2014 (7) TMI 309 - AT - Income TaxOrder u/s 201(1)/201(1A) of the Act – Deemed dividend u/s 2(22)(e) of the Act – Held that:- CIT(A) has held that this is not a case which is hit by the provisions of Section 2(22)(e) read with Section 194 of the Act - four years was a reasonable period for passing an order u/s 201(1)/201(1A), particularly when no limitation was prescribed for initiation of such proceedings under the Income-tax Act, 1961 - the proceedings u/s 201(1)/201(1A) were initiated after a lapse of nine years - CIT(A) has also erred in holding that payment to M/s Pure Drinks (New Delhi) Ltd. could not be treated as deemed dividend on the ground that M/s Pure Drinks (New Delhi) Ltd. is not the shareholder of the assessee (company) ignoring the fact that payment to this entity is very much covered by the definition of ‘dividend’ u/s 2(22)(e) of the Act - Revenue has failed to controvert the findings of CIT(A) on the issue – thus, there was no infirmity in the order of CIT(A). Assessee has also been able to prove that the provisions of section 2(22)(e) of the Act are not applicable in as much as both the conditions of a shareholder holding 10% shares in the payer company and more than 20% beneficial stakes in the payee entity do not exist - since the payments have been made to Statutory authorities for meeting the liabilities of the payee company Pure Drinks (New Delhi) Ltd. - the transactions have not resulted in any benefit to any of the shareholders of the company - in the case of deemed dividend the provisions of section 194 are applicable - no proceedings had been initiated in the normal assessment proceedings for the relevant AY i.e. A.Y. 2000-01, 2001-02 and 2002-03 in the case of the company - it is not a case which could be said to be hit by the provisions of Section 2(22)(e) of the Income Tax Act, much less for operation of Section 194 of the Act – Decided against Revenue.
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