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2015 (4) TMI 1047 - ITAT AHMEDABAD

2015 (4) TMI 1047 - ITAT AHMEDABAD - TMI - Addition u/s.2(22)(e) for deemed dividend - CIT(A) deleted the addition - advance received from M/s.Giriraj Developers Pvt. Ltd. as unsecured loan - Held that:- CIT(A) having considered the submission on behalf of assessee observed that as per CBDT's Circular No.495 dated 22.09.1987 i.e. Explanatory Notes on provisions of Finance Act, 1987, payment of any kind received by assessee is to be taxed as deemed dividend u/s. 2(22)(e) in the hands of concern r .....

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the same. - Decided in favour of assessee

Addition u/s 41(1) on account of cessation of liabilities - CIT(A) deltd the addition - Held that:- CIT(A) held that merely because of lapse of period of three years, it cannot be said that liabilities had ceased or were remitted. Assessee is liable to pay certain amounts and liability. Once assessee recognize this as its liability, it does not cease to be its liability. Provisions of limitations are not applicable to the person liable for mak .....

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for A.Y. 2007-08. So, they are being disposed of by way of this common order for the sake of convenience. 2. In ITA No. 2403/Ahd/2011 for A.Y. 2007-08, Revenue has filed the appeal on the following grounds: 1(a) On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in deleting the addition of ₹ 26,54,225/- made u/s.2(22)(e) of the Act on account of advance received from M/s.Giriraj Developers Pvt. Ltd. as unsecured loan without appreciating the deeming pro .....

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the loan posses accumulated profits to the tune of ₹ 1,71,60,878/-. 2. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in deleting the addition of ₹ 7,59,469/- made u/s.41(l) of the Act the amount in respect of creditors remained unpaid for more than 3 years as the assessee had failed to establish the genuineness of the creditors by furnishing evidence like address and proof of payment. 2.1 In ITA No. 2110/Ahd/2011 for A.Y. 2007-08, assessee h .....

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lays down that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of the borrowing concern in which such shareholder is member or partner having substantial interest. The order of ld. CIT (A) being contrary to the provisions of the section and erroneous deserves to be quashed. 3. Initiation of levy of interest u/s 234A/ 234B/ 234C & 234D of the Act is not justified. 4. Initiation of penalty u/s 271 (1) (c) of the Act .....

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M/s Giriraj Developers Pvt. Ltd as per its balance sheet as on 31.3.2007 had accumulated profits of ₹ 1,71,60,878/-. Payment of loan of ₹ 26,54,225/- was therefore taxed in the hands of assessee by Assessing Officer by invoking provisions of Section 2(22)(e). Assessing Officer did not accept assessee's submission that since assessee company was not a shareholder of M/s Giriraj Developers Pvt. Ltd, provisions of Section 2(22)(e) could not be invoked. 3.1 Matter was carried before .....

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's Circular No.495 dated 22.09.1987 i.e. Explanatory Notes on provisions of Finance Act, 1987, payment of any kind received by assessee is to be taxed as deemed dividend u/s. 2(22)(e) in the hands of concern received in the payment and not the shareholder. ITAT Special Bench in case of Bhaumik Colour P. Ltd. (2009) 120 TTJ (Mumbai) (Special Bench) 865 held that such deemed dividend is to be assessed only in the hands of shareholder and not the borrowing concern in which such shareholder is a .....

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ied shareholding in both the companies and concern. CIT(A) further held that deemed dividend of ₹ 26,54,225/- was therefore to be taxed in the hands of the shareholders, i.e. Shri Chhaganbhai H. Patel and Shri Jaydevbhai C Patel in the ratio of their shareholding, i.e. 18010 shares : 15510 shares in Giriraj Developers Pvt. Ltd. as on 31.3.2007 i.e. 1.16:1 and it was further held that reasonable opportunity of hearing would be given by Assessing Officer to Shri Chhaganbhai H. Patel and Shri .....

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ganbhai H. Patel and Shri Jaydevbhai C Patel in the ratio of their share holding i.e. 18010 shares : 15510 shares in Giriraj Developers Pvt. Ltd. as on 31.3.2007 i.e. 1.16:1. At the same time, we direct the Assessing Officer to decide the issue at hand as per fact and law after providing reasonable opportunity of hearing to assessee. This takes care of issue raised by assessee in its appeal. 4. Next issue in Revenue s appeal is with regards to addition of ₹ 7,59,469/- u/s 41(1) on account .....

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eased or were remitted. Assessee is liable to pay certain amounts and liability. Once assessee recognize this as its liability, it does not cease to be its liability. Provisions of limitations are not applicable to the person liable for making payment. Under the facts and circumstances, CIT(A) was justified in deleting the addition of ₹ 7,59,469/-made u/s. 41(1) of the Act. In respect of creditors remained unpaid. Same is upheld. 5. Issue of interest u/s. 234A/234B/234C/234D is consequenti .....

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