TMI Blog2018 (10) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... do not find it necessary to interfere in the order of the Ld.CIT(A). - Decided against revenue. - I.T.A. No. 3136/Chny/2017 - - - Dated:- 12-6-2018 - Shri N.R.S. Ganesan, Judicial Member And Shri A. Mohan Alankamony, Accountant Member For the Appellant : Shri V. Nandakumar, JCIT For the Respondent : Shri S. Sridhar, Advocate ORDER PER A. MOHAN ALANKAMONY, AM:- The appeal by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-15, Chennai, dated 29.09.2017 in New ITA No.288/2016-17/CIT(A)-15 for the assessment year 2014-15 passed U/s.250(6) r.w.s. 143(3) of the Act. 2. The Revenue has raised several grounds in its appeal however the crux of the issue is that the Ld.CIT(A) has erred in deleting the addition of ₹ 2,77,98,930/- made by the Ld.AO towards deemed dividend U/s.2(22)(e) of the Act. 3. The brief facts of the case are that the assessee is an individual and Shareholder / Director of M/s. Samba Publishing Co. Pvt. Ltd. and Proprietor of M/s. Samba Publishing, filed her return of income for the assessment year 2014-15 on 28.09.2014 admitting total income of ₹ 2,78,36,670/-. The case wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a result of commercial exigency was rejected by the Ld.AO. Thereafter relying on the various decisions cited in the order of the Ld.AO, made addition of ₹ 2,77,98,930/- invoking the provisions of deemed dividend U/s.2(22)(e) of the Act. 5. When the matter cropped up before the Ld.CIT(A), analyzing the issue he arrived at the following findings:- (i) The CBDT vide circular No.19/2017 dated 12.06.2017 had specifically prescribed to exclude trade advances arising out of commercial transactions from the purview of the provisions of Section 2(22)(e) of the Act. Thus the CBDT has narrowed down the scope of applicability of Section 2(22)(e) of the Act. (ii) The Ld.AO had failed to recognize the business relationship between the assessee as a substantial shareholder in M/s. Samba Publishing Company Pvt. Ltd., Director of M/s. Samba Publishing Company Pvt. Ltd., and proprietor of the proprietary concern M/s. Samba Publishing Company. (iii) The assessee had imported two printing machines during the year 2003-04 and installed the same in the premises of M/s. Samba Publishing Company Pvt. Ltd., and utilized for the purpose of the business of M/s. Samba Publishing Co. Pvt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between the registered shareholder and the company. (5) The absence of the personal benefit derived by the registered shareholder in the transaction entered into by the company would negate the applicability of the sections 2(22)(e) of the Act. The said ratio was laid down by the jurisdictional High Court in the case reported in 94 CCH 320 and the High Court has held that the intermediary getting the benefit in the process of supporting the business of the company cannot be considered as taxation as deemed divided under section 2(22)(e) of the Act. (6) Recently the Gujarat High Court, in the case reported in 394 ITR 50 has ruled that if amounts advanced are for business purposes, such payments would not fall within the ambit of provisions of section 2(22)(e) of the Act. Therefore, the role of the registered shareholder in managing the business of the company in the capacity of the Managing Director while appreciating the history of the business growth of the company captured In the preceding paragraphs cannot be brushed aside lightly in approving mechanically the taxation of incremental outstanding in the business transaction as deemed dividend. From the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Chennai Bench, m the case of Farida Holding Pvt. Ltd. Vs. DCIT [32 CCH 308 (2012)] has held as under: Section 2(22) of the Income-tax Act, 1961 - Deemed dividend - Assessments years 2003-04 and 2004-05 - Assessee-company was mainly functioning in role of a holding company over eleven fully owned subsidiary companies - During relevant year, it had received loans amounts from different subsidiaries and advanced same to other subsidiaries - Assessing Officer held that loans obtained by assessee were in nature of deemed dividends as per section 2(22)(e) and were liable to be taxed - Whether as a holding company, assessee was bound to monitor financial discipline of its subsidiaries, especially when all subsidiaries were fully owned by holding company - Held, yes - Whether since assessee was transacting loans as a treasury manager for its fully owned subsidiaries and it had not availed any benefit out of those loans, those financial transactions managed by assessee as a holding company did not partake character of deemed dividend under section 2(22)(e) - Held, yes [In favour of assessee] B) The Hon'ble ITAT, Chennai Bench, m the case of ACIT Vs. Smt.G.Sreevidya [33 CCH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s High Court made in Tax (Appeal) No. 16 of 2010, dated 17-6-2013, wherein a similar issue had been decided in favour of assessee, order of Tribunal deserved to be upheld - Held, yes [Para 11] [In favour of assessee] . E) The Hon'ble High Court of Gujarat, in the case of Gujarat Mall Management Co. P. Ltd. Vs. ITO - Ward 2(1)(1)[84 taxmann.com 242(Gujarat)] has held as under: Section 2 (22), read with section 147, of the Income-tax Act, 1961 - Deemed dividend (Loans and advances) - Assessment year 2008-09 - Notice for reopening assessment in case of assessee was issued beyond a period of four years from end of relevant assessment year where original assessment was framed after scrutiny - According to Assessing Officer, assessee company had received loan of ₹ 2.17 crores from another company, however, it had not disclosed information regarding share holding pattern; hence Assessing Officer desired to tax said loan received by assessee as a deemed dividend under section 2(22)(e) - Whether assessee having made disclosures about borrowings from another company and also having filed necessary details thereof along with audited return, did not thereafter have onus of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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