TMI Blog2011 (8) TMI 1236X X X X Extracts X X X X X X X X Extracts X X X X ..... and substance the same revolve around single core issue of deletion by the ld. CIT(A) u/s 2(22)(e) of the Act. ITA No. 514/Chandi/2011 AY 2007-08 Revenue s appeal 2. The brief and undisputed facts, as culled out from the record revealed that the assessee had filed return of income, for the Assessment Year 2007-08, on 15.11.2007, showing income at ₹ 29,65,142/-. The return was processed u/s 143(1) of the Act at an income of ₹ 29,65,142. The case was selected for scrutiny and assessment was framed u/s 143(3) of the Act at ₹ 1,57,87,650/-. 3. In the course of assessment proceedings, the AO invoked provisions of sec 2(22)(e) of the Act and made an addition of ₹ 1,12,44,952/-, on the foundation of observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85.71% M/s Arora Fabrics Pvt Ltd is a company largely owned by four shareholders i.e. Mr. Ravinder Singh Arora, Mr. Mohinder Singh Arora, Ms. Harjit Kaur and Ms. Neena Arora, the family as a whole and Ms. Neena Arora has substantial shareholding in the company. These four persons have a combined shareholding of 85.71% and Ms. Harjit Kaur has 58.84% shareholding in M/s Arora Knit Fab Pvt Ltd. which is substantial and decisive in decision making of the company. The loan from M/s Arora Fabrics Pvt Ltd to the assessee is, therefore, a loan to a concern in which the shareholders have substantial interest. In this case the combined substantial shareholding of 85.71% actually satisfies the condition that M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. M/s AFPL had reserve and surplus of ₹ 1,12,44,452/- as on 31.3.2006 and ₹ 1,12,02,870/- as on 31.3.2007. In view of the above, the AO was of the opinion that loan from M/s AFPL to the assessee is a loan to a concern in which the shareholders have substantial interest and therefore after giving an opportunity to the assessee treated the same as dividend u/s 2(22)(e) of the Act. However, addition was restricted to an amount of ₹ 1,12,44,452/- being the amount of reserve and surplus of M/s AFPL as on 31.3.2006 as against loans and advances of ₹ 4,43,00,000/-. Assessee, however, has objected to the above addition in eh written submissions reproduced above primarily on the following grounds: (i) That only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee is therefore, rejected. 4.3 As regards assessee s contention that there cannot be anyh clubbing of different shareholders such as individual, HUF, Minor and wife, same in my opinion is justified. In this case, the AO has reached the conclusion that provisions of section 2(22)(e) are applicable on the ground that the family as a whole and Ms. Meena Arora have substantial shareholding in the assessee company and Ms. Harjit Kaur has 58.84% (actually it is 9.26%) in the assessee company. As noted in the written submissions, none of the share holder who is the beneficial owner of shareholding not less than 10% of the voting power in the assessee company holdsl substantial interest in M/s AFPL. Ms. Neena Arora is holding 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of present proceedings, the Ld. DR brought under sharp focus, the dubious nature of the transactions, resorted to by the assessee, with the sole object of indulging in tax-evasion. He also referred to, page 6 of the impugned assessment order and drew our attention, to the shareholding pattern of the assessee. He supported the findings of the AO on the basis of case-laws cited in the assessment order, in respect of colourable device resorted to by the assessee. 6. Ld. AR for the assessee submitted paper book and cited many decisions therein but placed reliance on the following cases and, further, vehemently contended that the core issue is squarely covered by the following decisions: 1 CIT v. Universal Medicare P Ltd (2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held as under: The important aspect, being the requirement of Sec 2(22)(e) is that the payment may be made to any concern in which such shareholder is a member, or the partner and in which he has substantial interest or any payment by any such company on behalf or for the individual benefit of any such shareholder Thus, the substance of the requirement is that the payment should be made on behalf of or for the individual benefit of any such shareholder. , obviously the provision is intended to attract the liability of tax on the person, on whose behalf or for whole individual benefit the amount is paid by the company whether to the shareholder or to .concerned firm. In which event, it would fall within the expression deemed di ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
