TMI Blog2015 (2) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... ect in assessing the advances as deemed dividend in the hands of the assessee which is not a shareholder of APL. - Decided in favour of assessse. - ITA. No. 635, 636 & 637/Hyd/2013 - - - Dated:- 6-12-2013 - Chandra Poojari, AM And Asha Vijayaraghavan, JM,JJ. For the Petitioner : Smt. K Haritha For the Respondent : Shri S Rama Rao ORDER Per Smt. Asha Vijayaraghavan, J. M. These appeals have been filed by the assessee against the Order of the CIT(A)-IV, Hyderabad dated 27.02.2013 for the assessment years 2006-2007, 2007-2008 and 2008-2009. Since common issues are involved in all the three appeals, we proceed to pass a common order. 2. Brief facts of the case are that the assessee is a closely held company, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted the following explanation for each of the advances : The loans due to Sri N. Venkateswara Rao (being the b/f balances) were repaid on 7.5.2005 (Rs. 20,00,000 + 10,00,000 + 20,00,000). This is not a loan or advance by ATPL to SPG and hence is outside the purview of deemed dividend. The amounts of ₹ 40,00,000 and ₹ 10,00,000 credited to SPG on 31.5.2005 is on account of payments of share application monies by Sri U. Kantha Rao and smt. U. Rajani respectively. This is not a loan or advance by ATPL to SPG and hence. is outside the purview of deemed dividend. Like-wise transactions of ₹ 20,00,000 on 3.8.2005 and ₹ 51,75,816/- payment of share application money by Sri U. Kantha Rao - is also of the same natu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT vs. Creative Dyeing and Printing P Ltd.(318 ITR 476) (Del) (v) CIT vs. Ambassador Travels P Ltd. 318 ITR 376 (Del) (vi) CIT vs. Raj Kumar 318 ITR 462 Delhi (vii) Pradip Kumar Malhotra vs. CIT [2011] 338 ITR 538 (Cal) dated : 2.8.2011. (viii) ACIT vs. Harshad V. Doshi [2011] 49 DTR 181 / 136 TTJ 351(Chennai) (Trib). 6. The A.R. of the assessee further argued that u/s 2(22)(e), deemed dividend can be taxed only in the hands of the share holder and that the section did not apply to the assessee since it was not a share holder of APL. For the proposition that deemed dividend cannot be brought to tax in the case of a non- shareholder, the AR relied on the following decisions: i. Navyug Promoters P Ltd. 16 taxmann.com 292 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was not a shareholder of APL, the Assessing Officer submitted that the advances were ultimately used for the individual benefit of the beneficial shareholders, Sri U. Kantha Rao and Smt. U. Rajani and therefore, attracted the provisions of section 2(22)(e).The Assessing Officer also referred to the fact that APL had in its letter to the DCIT, Circle 1(1), Hyderabad in the post-survey proceedings accepted that the advances be treated as deemed dividend in the hands of the assessee. 9. The learned CIT(A) considered the facts on record and the submissions of the Assessing Officer and the AR. The CIT(A) held that the fact that the assessee had not made any submissions during the assessment proceedings does not by itself establish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to submit an explanation during the assessment proceedings and irrespective of an admission of its liability by a third party. 9.3. The CIT(A) further relied on the decision of the Special Bench of the Tribunal in the case of Bhaumik Color P. Ltd., 313 ITR (AT) 146 (Mum.) (S.B.) and the decision of the jurisdictional ITAT in the case of MTAT Technologies Pvt Ltd. Vs. ACIT (ITA No. 555/Hyd/2008, dtd. 31.8.2009 and allowed the assessee s appeal. 10. Aggrieved, the department is in appeal before us and has raised the following grounds : 1.The Order of the CIT(A) is erroneous both in law and on facts of the case. 2. The learned CIT(A) ought to have noticed that advance given to a concern in which a shareholder is a member/b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividends. Therefore this clause must be given a strict interpretation. To attract the first limb of the provisions of section 2(22) (e), the payment must be to a person who is a registered holder of shares. In the 1961 Act, the word shareholder in section 2(22)(e) is followed by the following words being a person who is the beneficial owner of shares . This expression only qualifies the word shareholder and does not in any way alter the position that the shareholder has to be a registered shareholder nor substitute the requirement to a requirement of merely holding a beneficial interest in the shares without being a registered holder of shares. The very same person must also be a member or a partner in the concern holding substanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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