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Asstt. Commissioner of Income Tax Versus Gardenia India Ltd.

TDS u/s 194 - Deemed dividend u/s 2(22)(e) - loan/advance given to a non-shareholder entity - liability to deduct tds - Held that:- As per scheme of statutory provisions of the Act, the payment or advances to non shareholders does not require TDS u/s 194 of the Act and the appellant company cannot be held to be a defaulter u/s 201 of the Act so as to attract interest u/s 201(1A) of the Act.

It is also pertinent to note that under provisions of Companies Act, every company is expected .....

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- provisions of section 2(22)(e) and 194 of the Act do not require the payer assessee company to deduct TDS u/s 194 of the Act. - Decided in favour of assesse. - I.T.A.No.5766/Del/2012 - Dated:- 23-3-2015 - Shri S.V. Mehrotra And Shri Chandra Mohan Garg JJ. For the Appellant : Shri T. Vasanthan, Sr. DR For the Respondent : S/Shri V.K. Jain, CA Nem Singh, Adv. ORDER Per Chandra Mohan Garg, JUDICIAL MEMBER The above appeal has been preferred by the revenue against the order of the CIT(A)-XXX, New .....

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ion of dividend given in provisions of section 2(22)( e) of the IT Act, 1961. 2. On the facts and in the circumstances of the case as well as in law, the Ld.CIT(A) has erred in not considering the fact that reasonable opportunity was given to asssessee during the assessment proceeding before charging interest u/s 201 (1A) for late payment. 3. Briefly stated the facts giving rise to this appeal are that the assessee company is engaged in the business of real estate development and construction. T .....

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ny which is providing loans and advances having shareholding of 20%, 50% and 27% in All India Consortium Pvt. Ltd., G.S. Developers, Aims Max Gardenia Developers respectively, then the assessee s case is squarely covered under the provisions of deemed dividend as per section 2(22)(e) of the Act and the assessee company should have deducted TDS u/s 194 of the Act which also covers deemed dividend. With these observations, the AO computed the liability of the assessee company under provisions of T .....

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the CIT(A) and paper book filed by the assessee spread over 131 pages. 6. At the very outset, we note that after detailed deliberations about contentions of the AO and explanation and submissions of the assessee and ratio of the legal proposition and citations relied by both parties on ground no. 2 and 3 of the assessee before the CIT(A), the first appellate authority has decided the issue in favour of the assessee with following observations and conclusions:- 4.1 The AR has given his explanati .....

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e appellant company is giving loan/advances to the above 3 company/firms as per Table-I. The AR's argument was that when there is loan and advances between company and company/firm(s), the supporting case laws/decisions of Rajasthan High Court in the case of CIT v. Hotel Hill Top 313 ITR 116, High Court of Delhi in the case of CIT v. Gopal Clothing Company P.Ltd. in ITA No.333/2006 dated 22-03-2012 and CIT vs. Ankitech Private Limited (2011)242 CTR 129(Delhi) stands in favour of the appellan .....

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ere is no payment made to these two share holders directly or indirectly is deriving the benefit as share holders/partner in the other Company M/s Gardenia India(P) Ltd company/ firms (AOP) to whom loans and advances are made, the deemed dividend cannot be applied in the hands of Sh.Manoj Kumar Ray and Sh.Sanjeev Sharma, as they are not getting any direct/indirect benefit. The AO(TDS) is of the view that M/s Gardenia India (P) Ltd is playing loans /advance to itself as it is a partner/share hold .....

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DS on dividend/deemed dividend does not attract at all. Therefore, the action of the AO in charging TDS u/s 201(1)/201(1A) is not proper and these grounds are allowed in favour of the appellant. 7. Admittedly and undisputedly, the assessee company had made following payments as loans/advances to the following parties:- Name of the Party Opening Balance Payment made during the year Received back during the year Closing Balance as on 31.03.2010 Aims Max Gardenia Developers - 6,20,00,000 2,00,00,00 .....

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therein was deemed dividend as per provisions of section 2(22)(e) of the Act and the assessee company should have deducted TDS u/s 194 of the Act which impliedly covers deemed dividend also. 9. Replying to the above, ld. Counsel of the assessee reiterated its reply and submissions before the CIT(A) and submitted that the AO has failed to appreciate that the provisions of deemed dividend u/s 2(22)(e) of the Act are attracted if loan is given to a shareholder and all the three alleged parties are .....

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nted out by the AO do not hold any share in the assessee company. At the same time, as per detail of shareholders/members of the assessee company available at page 4 of the impugned order, we note that there are eight shareholders in the assessee company out of which Mr. Manoj Kumar Ray and Sanjeev Sharma hold 49.79% of shareholding in the assessee company. We are unable to see the names of the three alleged companies and the list of shareholders of the assessee company to whom the impugned loan .....

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obliged to maintain any other register wherein details of such concern may be maintained to which provisions of section 2(22)(e) of the Act apply. Under the factual matrix of the present case, we observe that when the loans/advances have been given to a non shareholder, then it is impossible for a payer company to ascertain whether it will attract the provisions of section 2(22)(e) of the Act or not. 12. Hence, in the facts and circumstances of the present case and as per provisions of the Act, .....

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ions of section 2(22)(e) and 194 of the Act do not require the payer assessee company to deduct TDS u/s 194 of the Act. Therefore, section 194 of the Act is synchronised with the requirement of section 150 and 206 of the Companies Act and the AO is not allowed to go beyond these provisions for invoking provisions of section 201(1)/201(1A) of the Act. 13. Accordingly, impugned amount, as calculated by the AO, cannot be held as sustainable. Thus, we are in agreement with the conclusion of the CIT( .....

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