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2018 (12) TMI 687 - AT - Income TaxDeemed dividend made u/s 2(22)(e) - taxation in the hands of the appellant company who is not the shareholder of lender company - Held that:- The issue is squarely covered in favour of the assessee so far as the contention of the learned authorised representative is that the deemed dividend cannot be taxed in the hands of the appellant company as it is not a shareholder of the lender company. Same is the finding of the learned Commissioner of income Tax A. So far as this issue is involved we do not find any infirmity in the order of the ld CIT (A), hence we uphold it to the extent that deemed dividend is chargeable to tax in the hands of the share holder only. Accordingly, we do not find any merit in the appeal of the revenue for assessment year 2006 – 07 and 2007-08. Commissioner of income tax appeal has given a correct finding on the issue that the amount of loan given by the lender to the appellant company is chargeable to tax in the hands of the shareholders. The proper opportunity was also given by the Commissioner of income tax appeals to the shareholder. The shareholder did not comment that this amount is not chargeable to tax in his hands, but has only stated that the above amount given by the lender to the appellant is only a business advance and therefore provisions of deemed dividend does not apply to the facts of the case. On careful analysis of the order of the learned Commissioner of income tax appeals, he has merely directed the learned assessing officer to add the said amount as deemed dividend under section 2 (22) (e) in the hands of the shareholder. No infirmity is found in the order of the learned Commissioner of income tax appeals in holding so after giving proper opportunity of hearing to the shareholder also Accordingly, for A Y 2006 – 07 we dismiss ground number 1 and all its sub grounds holding that the advances received by the appellant from the lender is liable to tax as deemed dividend in the hands of the shareholder as it is not a business advance. We also dismiss ground number 2 of the appeal, where the learned Commissioner of income tax appeals has correctly held that the aforesaid amount is chargeable to tax in the hands of the shareholder after giving proper opportunity to the shareholder and the learned Commissioner appeals when deleting the addition in the hands of the assessee was duty-bound to say, in whose hands the deemed dividend is chargeable to tax - Decided against assessee
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