Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

The Deputy Commissioner of Income-tax, Versus M/s Agile Electric Sub Assembly Pvt. Ltd.,

2016 (1) TMI 322 - ITAT CHENNAI

Addition on deemed dividend u/s 2(22) - Held that:- In the case of the assessee the provisions of Section 2(22)(e) of the Act will not be applicable because there is a close nexus between the business activity of the assessee-company and its sister concern and the loan received from the assessee’s sister concern is utilized for the very purpose of acquiring the shares of the sister concern itself in order to have a strategical edge over the competing business environment. The benefit of the enti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

egard to investments made for acquiring the shares of the assessee’s sister concerns. See EIH Associated Hotels Ltd v. DCIT [2013 (9) TMI 604] - Decided in favour of the assessee. - I.T.A.No.1272/Mds. /2015 & C.O. No.82/Mds/2015 - Dated:- 27-11-2015 - SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER Appellant by : Mr.V. Vivekanandan, CIT DR Respondent by : Mr.T. Banusekar, CA ORDER PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER:- This appeal is filed by the Revenue, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

res while working out average investment for the purpose of limb (iii). (2) The learned CIT(A) erred in deleting the investments made in the subsidiary companies while arriving at the average investments is not acceptable as such investments are capable of earning dividend income. (3) The learned CIT(A) erred in directing the AO to withdraw the addition made U/s. 2(22)(e) stating that the provisions of Sec.2(22)(e) are not attracted in the instant case. 2.1. The assessee has raised seven grounds .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essment year 2010-11 on 12.10.2010 admitting loss of 2,48,37,432/-. Subsequently, the return was taken up for scrutiny and the assessment was completed vide order dated 11.03.2013 wherein the Ld. AO made disallowed the expenditure of 2,64,09,499/- by invoking the provisions of Section 14A of the Act and also made addition of 7,26,03,874/- on account of Section 2(22)(e) of the Act. 4. During the course of assessment proceedings, it was observed by the Ld. A.O that the assessee-company had obtaine .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Rule 8D for having incurred the expenditure on interest of 74,39,591/- against the loan taken from the subsidiary company for ₹ 15 Crores and interest payment of ₹ 85,95,549 to M/s Igarashi Motors India Ltd., towards deferred settlement of dues for the purchase of the shares. Further the Ld.A.O also invoked Section 2(22)(e) of the Act since the assessee-company s subsidiary company Agile Electrical Sub Assembly Pvt. Ltd., from whom the assessee-company had obtained the loan of 15 Cr .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e of Southern Petrochemical Industries reported in 93 TTJ 161 and Escorts Ltd. reported in 102 TTJ 522. 5.2 With respect to the invoking of provisions of Section 2(22)(e) of the Act the ld. CIT(A) deleted the addition based on the finding that the advances given by M/s Agile Electrical Sub Assembly Pvt. Ltd. to the assessee-company is undoubtedly an advance in the ordinary course of business. 6. Ld. DR vehemently argued before us by stating that the provisions of Section 14A and Rule 8D will be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

chnologies which are in the related fields of business to that of the assessee company s business. The entire process of consolidation of business of all the three companies was made with an intention for deriving strategical benefits. These facts are not disputed. In similar circumstance, Hon ble Karnataka High Court in M/s Bagmane Constructions Pvt. Ltd. v. CIT dated 16th September, 2014 has held as under:- Deemed dividend - Trade advances - Receipt of advances from sister concern - Whether an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d payment of dividend distribution tax under Section 115-0 of the Act. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding payment of tax by having these companies pay or distribute money in the form of advance or loan. Loan or advance given to the shareholders or to a concern, under normal circumstances would not qualify as dividend, If such loan or advance is given to such shareholder a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nt, by the deeming provisions, such payment by the company is treated as dividend. It is so made by legal fiction created under Section 2(22)(e) of the Act. Even if the accumulated profit which ought to have been paid to the shareholders as the dividend paid to a sister concern for the purpose of acquisition of capital assets or as a consideration for the goods received which is required for carrying on the business, it would hot fall within the definition of Section 2(22)(e) of the Act as the o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ollowing the judgment of the Bombay High Court in the case of Commissioner of income Tax vs Universal Medicare (P) Limited reported in [2010 (3) TMI 323 - BOMBAY HIGH COURT] has categorically held that when any payment is made by a company to any concern, which falls under clause (e), the tax is leviable on the shareholder only and not on the concern - Therefore, the finding recorded by the Tribunal that, these advances made by the BDPL to the sister concern as well as to its shareholder do not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

te the business of the assessee and thereby derive benefit by stalling competition. Further, in the case Farida Holdings Pvt. Ltd. v. DCIT decided by the Chennai Bench of the Tribunal reported in 51 SOT 452, it has been held that regular business transaction carried on by the assessee in its ordinary course of business cannot be treated deemed dividend for the purpose of Section 2(22)(e) of the Act. Following the above cited decisions, we hereby hold that in the case of the assessee the provisio .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ained the loan from its sister company in order to purchase the shares of the very same sister company and thus avoid the perils of those shares being held by two entities thus endangering its existence. Accordingly, this issue is decided in favour of the assessee. 7.2 In regard to applicability of Section 14A of the Act read with Rule 8D also; the above view will be applicable. Moreover in the case EIH Associated Hotels Ltd v. DCIT reported in 2013 (9) TMI 604 in ITA No.1503, 1624/Mds/2012 date .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version