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2015 (7) TMI 407 - ITAT DELHI

2015 (7) TMI 407 - ITAT DELHI - TMI - Deemed dividend - whether payment made to M/s Aims Max Gardenia Developers and M/s G.S. Developers could not be treated as deemed dividend on the ground that they are not shareholders of the assessee company? - compliance of section 194 - Held that:- We are in agreement with the conclusion of the CIT(A) that the assessee company has given loans/advances to above named three companies/entities mentioned in the table as reproduced hereinabove and the provision .....

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this provision does not comply with the facts as narrated hereinabove. Therefore, impugned loans and advances given to aforesaid three companies cannot be considered as dividend or deemed dividend and if there is no deemed dividend u/s 2(22)(e) of the Act, then the question of compliance of section 194 of the Act on dividend/deemed dividend does not arise. Therefore, we are inclined to hold that the order of the AO in charging TDS u/s 201(1)/201(1A) of the Act is not justified and sustainable a .....

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for AY 2010-11. 2. The revenue has raised following grounds in this appeal:- On the facts and in the circumstances of the case as well as in law, the Ld.CIT(Appeals) has erred in holding that payment made to M/s Aims Max Gardenia Developers and M/s G.S. Developers could not be treated as deemed dividend on the ground that they are not shareholders of the assessee company by ignoring the fact that payment to above entities is covered by the definition of dividend given in provisions of section 2 .....

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is of information received from DO letter of DG(Inv.) dated 1.7.2011 in the case of search and seizure of M/s Gardenia Group. In order to verify the compliance of TDS provisions under Chapter XVII of the Income Tax Act, 1961, a notice dated 22.02.2012 for verification u/s 201(1)/201(1A) of the Act was issued to the assessee calling for information related to the provisions of TDS compliance. The main contention of the AO was that the assessee company which is providing loans and advances having .....

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lling to ₹ 78,30,223. 4. Being aggrieved by the above order of the AO, the assessee preferred an appeal before the CIT(A) which was partly allowed on this issue. Now, the revenue is before this Tribunal in this second appeal with the grounds as reproduced hereinabove. 5. We have heard arguments of both the sides and carefully perused the relevant material placed on record before us inter alia order of the AO dated 23.2.2012, impugned order of the CIT(A) and paper book filed by the assessee .....

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of share holders in the table in page 3,4 & 5 of this order. The main partners in Gardenia India Ltd. are Sh.Manoj Kumar Ray and Sh.Sanjeev Sharma having percentage of share holding of 49.70% each in this appellant company. The appellant Company Gardenia India Ltd. is also a partner of Aims Max Gardenia Developers of 27% and partner of G.S.Develpers of 50% and share holder of All India Developers Consoritum Pvt. Ltd. of 33.33% respectively. The appellant company is giving loan/advances to t .....

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ds of individual shareholders like Sh.Manoj Kumar Ray and Sh.Sanjeev Sharma, as the money is not passed on to them directly. The AO(TDS) may go through the case of Mumbai ITAT (SB) in the case of Bhowmik Colors (P)Ltd. Vs ACIT, 313 ITR 146 (DOJ=19-11-2008), where detailed analysis on who will be charged with deemed dividend is clearly analysed by the ITAT, Special Bench, Mumbai. Though these two persons are shareholder of M/s Gardenia India Ltd. There is no payment made to these two share holder .....

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re made as per Table-1(supra). The section 2(22)( e) says that the payment of dividend should be made to a shareholder(10%) or to a concern in which such shareholder has substantial internet (20%) and in the present case, the above facts are not proved from Tables Supra. Therefore, such loans and advances cannot be considered as dividends. If there is no deemed dividend u/s 2(22)(e) of the I.T.Act then the question of section 194 for deduction of TDS on dividend/deemed dividend does not attract .....

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,375 1,13,55,365 3,75,19,373 All India Developers Consortium Pvt Ltd 25,88,000 - 25,88,000 8. Ld. DR pointed out para (d) at page 4 of the assessment order and submitted that the assessee company advanced loans and advances to the companies wherein the assessee company itself having shareholding of 80%, 50% and 20% viz. in All India Developers, G.S. Developers and Aims Max Gardenia Developers respectively, therefore, interest which was not charged therein was deemed dividend as per provisions of .....

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e. assessee company and therefore under aforesaid peculiar facts and circumstances, the provisions of section 2(22)(e) and section 194 of the Act are not attracted at all and the whole order has been passed by the AO on incorrect appreciation of provisions of the Act and, thus, the same deserves to be quashed. 10. On careful consideration of above rival submissions, we note that the ld. DR has fairly accepted that the three alleged companies as pointed out by the AO do not hold any share in the .....

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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 to maintain a Register of shareholders u/s 150 of the Companies Act 1956 and the company is not obliged to maintain any other register wherein .....

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t TDS u/s 194 of the Act when loan/advance has been given to a non-shareholder entity. This is our humble understanding that the liability expressly provides for TDS requirement only when the payment is made or loan/advance is given to the shareholder which is enlisted in the list of shareholders register maintained by the company u/s 150 of the Act. We may also point out when the loans/advances have not been given to a shareholder, then the provisions of section 2(22)(e) and 194 of the Act do n .....

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