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2021 (4) TMI 868 - GUJARAT HIGH COURTDeemed dividend addition u/s 2(22)(e) - As argued section 2(22)(e) of the Act is not applicable to the opponent assessee as it was the recipient of the loans and advances but the same is applicable to the companies, who had made payment - ITAT deleted the addition - HELD THAT:- It is an undisputed fact that Akik Tiles Limited is having 23.38% shareholding in the opponent Gladder Ceramics Limited and also having 15.34% shareholding in Marbolite Granito India Limited. Shri Girish Patel, who is the management personnel in Marbolite Granito India Limited, is having 20% shareholding in the opponent – assessee. Thus, it appears that the assessee is having substantial interest in the said company. The assessee company is engaged in the business of manufacturing and trading of tiles. It is also noticed that the assessee has also received the loans/advances of ₹ 26,70,709/ from Marbolite Granito India Ltd. The CIT (Appeals) deleted the addition under section 2(22)(e) of the Act of ₹ 97,56,376/ on account of loans and advances received from Akik Tiles Limited and Marbolite Granito India Limited. The provisions of section 2(22)(e) of the Act stipulate of treating such loans/advances as deemed dividend. The observations made in [2018 (1) TMI 1079 - GUJARAT HIGH COURT] to the effect that the assessee having not made any payment by way of advance or loan to a shareholder, but on the contrary, has received a loan from Akik Tiles Limited and Marbolite Granito India Limited and hence, the provision of section 2(22)(e) of the Act will not apply since the assessee is recipient of such amount appears to be erroneous. The order [2018 (2) TMI 2031 - GUJARAT HIGH COURT] suggests that the substantial question of law “whether in case of a company who satisfies the provisions of section 2(22)(e) of the Act, the principles of deemed dividend can be invoked though the company may not be the shareholder of the principal company”, is pending before the Larger Bench of the Supreme Court in the case of National Travel Services vs. Commissioner of Income Tax, Delhi VIII, [2018 (1) TMI 1159 - SUPREME COURT]. The Coordinate Bench has admitted the appeal with regard to the issue of deemed dividend in the hands of the assessee company under section 2(22)(e) of the Act. Under the circumstances and in view of the aforesaid undisputed facts, the application is allowed.The order [2018 (1) TMI 1079 - GUJARAT HIGH COURT] passed in Tax Appeal is hereby recalled to the extent of substantial question of law stated in Paragraph No.2(B) of the captioned Tax Appeal
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