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TMI Blog2013 (9) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned assessment year declaring an income of Rs. 22,90,000/-. During the course of assessment proceedings, it was noted by the Assessing Officer that assessee had taken a loan of Rs. 1,44,38,000/- from one M/s Pugazh Chemical Plant & Equipments (P) Ltd., of which, Rs. 76,68,000/- was repaid. Assessing Officer verified the share holding pattern of assessee-company as well as lender company. She found that there were common shareholders in both companies, who were having shares in excess of 10% of both the companies. One Shri M. Pugazhendhi and one Ms. S. Tamil Selvi held 36.65% each of the equity shares of M/s Pugazh Chemical Plant & Equipments (P) Ltd. The same Shri M. Pugazhendhi and Ms. S. Tamil Selvi held 42.5% and 28.9% respectively, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpressed. According to him, assessee could not show that the amount received from lender company was only a trade advance. There was no evidence to show that nature of transactions between assessee and lender company were in the normal course of business. In this view of the matter, he confirmed the addition. 5. Now before us, Adv. Shri S. Sridhar, appearing for the assessee, strongly assailing the orders of authorities below, submitted that lower authorities did not consider the Special Bench decision in the case of Bhaumik Colour Pvt. Ltd. (supra), where it was clearly held that deemed dividend could be assessed only in the hands of a person who was the shareholder of the lender company and not in the hands of a borrowing concern. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gies (I) (P) Ltd. (I.T.A. No. 4077/Mum/2002) dated 30th December, 2005 had held that where common shareholders were there, a loan taken by a concern could be brought within the ambit of Section 2(22)(e) of the Act. 7. We have perused the orders and heard the rival submissions. No doubt, ld. CIT(Appeals) was justified in coming to a finding that assessee could not show the commercial nature of the transactions entered by it with the lender company, M/s Pugazh Chemical Plant & Equipments (P) Ltd.. Except for a letter dated 19th November, 2012 filed before the CIT(Appeals), there is nothing to substantiate the contention of the assessee that the amount given by M/s Pugazh Chemical Plant & Equipments (P) Ltd. was a deposit for dealership. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Nikko Technologies (I) (P) Ltd. (supra), reliance has been placed on Circular No.495 dated 22nd September, 1987 which states as follows:- "Further deemed dividend would be taxable in the hands of the concern, where all the following conditions are satisfied........" We are of the view that circulars of CBDT to the extent that they do not tone down the rigor of the provisions of the Act in the sense to the extent they are not benevolent are not binding. 40. Apart from the above, it is also noticed that s. 2(22)(e)(iii) provides to a shareholder as follows: "Dividend does not include: (i) to (ii)............. (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittedly the assesse company was not holding any shares in the lender company at all. Therefore, in our opinion, the said decision will not help the case of the Revenue. 8. Coming to the decision of Nikko Technologies (I) (P) Ltd. (supra) of the Tribunal, again relied on by the learned D.R., the said decision stood overruled by the Special Bench decision in the case of Bhaumik Colour Pvt. Ltd. (supra). In view of this legal position, we are of the opinion that the loan received by the assessee-company from M/s Pugazh Chemical Plant & Equipments (P) Ltd. could not be considered as deemed dividend in the hands of the assesseecompany deposit it being not a trading advance. The addition therefore stands deleted. 9. In the result, appeal filed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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