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Addl. Commissioner of Income Tax Versus Shri Chandrakant V. Gosalia

2015 (8) TMI 82 - ITAT MUMBAI

Deemed dividend under section 2(22)(e) - Payment for public issue RPL - IPO - HNIR - Held that:- The explanation of the assessee that the IPO of M/s RPL was applied by the assessee for and on behalf of M/s Germstar Constructions P Ltd is hard to believe. It is well established principle of law that mere repayment of money borrowed by the share holder will not escape him from the provisions of sec. 2(22)(e) of the Act. Hence the fact that the assessee has paid back the excess share application mo .....

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ran, AM And Amit Shukla, JM,JJ. For the Appellant : Shri Premanand J For the Respondent : Shri Reepal G Tralshawala ORDER Per B R Baskaran (AM) The revenue has filed this appeal challenging the order dated 27.10.2010 passed by Ld CIT(A)-34, Mumbai granting partial relief in the matter of assessment of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961 (the Act) in assessment year 2007-08. 2. The facts relating to the issue are stated in brief. The assessee here is a Director and .....

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ing balance 56,22,575 - 17.4.2006 Amt.paid towards premises deposit 50,000 - 19.4.2006 Payment for public issue RPL-IPOHNIR 62,00,000 - 24.4.2006 Amt.paid towards premises deposit 1,00,000 - 26.4.2006 Amt.paid towards premises deposit 1,00,000 - 15.5.2006 Amt.paid towards premises deposit 25,000 - 16.5.2006 Amt.paid towards premises deposit 2,25,000 - 17.5.2006 Amt.paid towards premises deposit 1,50,000 - 19.5.2006 Amt. transferred from TMSB 60,95,840 13.6.2006 Amt.paid towards premises deposit .....

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sum of ₹ 80.10 lakhs from M/s Gemstar Construction Pvt Ltd, which consisted of ₹ 18.10 lakhs received as security deposit in respect of a premises let out by the assessee to the above said company and ₹ 62.00 lakhs received for subscribing to the Initial Public Offcer of shares issued by M/s Reliance Petroleum Limited (RPL). The assessee had repaid a sum of ₹ 60,95,840/- on 19.5.2006 out of the above said amount of ₹ 62.00 lakhs. It was stated that the assessee app .....

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er section 2(22(e) of the Act and hence the amount of ₹ 62 lakhs cannot be taxed as deemed dividend. With regard to the remaining amount of ₹ 18.10 lakh, the assessee submitted that it had received a sum as lease deposits in respect of the premises let out to the above said company and hence the provisions of section 2(22)(e) are not attracted to the same. The AO was not convinced by the explanation of the assessee and accordingly assessed both the amounts aggregating to ₹ 80.1 .....

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the resolution passed by the Board of Directors, the ld.CIT(A) confirmed the assessment of deemed dividend to the extent of ₹ 1,04,160/- and deleted the assessment of balance amount of ₹ 60,95,840/-. Aggrieved, the Revenue has filed this appeal before us. 4. We heard the parties and perused the record. We notice that the ld CIT(A) has followed the decision rendered by the Delhi bench of ITAT in the case of Sunil Sethi Vs. DCIT (2008)(26 SOT 95), wherein it was held that if any payme .....

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ition made as deemed dividend u/s 2(22)(e) was liable to be deleted. The main contention of the revenue is that the ratio of the decision rendered in the case of Sunil Sethi (supra) is not applicable to the facts prevailing in the instant case. 5. In the instant case, we have noticed that the assessee had received money from M/s Gemstar Construction P Ltd for the purpose of investing in the Initial Public Officer (IPO) of M/s RPL. It is not shown to the tax authorities that M/s Gemstar Construct .....

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cates "High Networth Individual Resident". 6. The contention of the assessee was that the he had acted as an agent of M/s Gemstar Constructions P Ltd while applying shares of Initial Public offer issued by M/s RPL. In support of the same, the assessee has placed strong reliance on the resolution passed by the Board of Directors, which consisted of assessee and his son only. It is also submitted that the refund of excess application money was duly returned back to M/s Gemstar Constructi .....

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of M/s RPL. Secondly, it was not shown that the above said company is involved in dealing in shares, i.e., it was not part of business transactions. Thirdly, the assessee was allowed to retain the shares allotted in the IPO, which militates against the explanation given by the above said company and also the resolution passed by the Board of Directors. 8. It is in the common knowledge of everyone that the allotment is done on proportionate basis in case of over subscription of public issue. When .....

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