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TMI Blog2018 (12) TMI 687X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. CIT(A) failed to appreciate that as per the amended provisions of section 2(22)(e) the assessee concern is very much liable to be taxed with respect to the said amount of deemed dividend and decision of the AO to tax the same in the hands of the assessee concern finds support from the decision on the issue in the cases of M/s Skyline India Recruit.com Private Limited vs. ITO (2008) 24 SOT 420 (Mumbai) and Extempore Security and Investments Private Limited vs. DCIT 116 TTJ (Mumbai) 525. CIT(A) has not appreciated the impossibility of taxing the deemed dividends in the hands of shareholder instead of the concern to whom the loan/ advance is given. In a given situation it may be that the qualifying shareholders i.e. the shareholders holding not less than 10% of the voling power in the lending company and having substantial interest in the borrowing concern have different percentage of shareholding in the lending company say 17% & 27% and again a different percentage of shareholding say 21% & 28% interest in the borrowing concern. In such a situation what amount of the deemed dividend will be taxed in the hands of which of the qualifying shareholders cannot be determined. Viewed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 ("the Act"). 2. That the CIT(A) erred on facts and in law in not appreciating that the provisions of Section 2(22)(e) of the Act were not attracted since out of the aforesaid, moneys totaling to Rs. 2.40 crores were received by the appellant as business advance towards construction and sale of property to OEIPL. 3. That the CIT(A) erred on facts and in law in not appreciating that the provisions of Section 2(22)(e) of the Act were not attracted since out of the aforesaid, moneys totaling to Rs. 2.94 crores were received by the appellant as share application money for allotment of share of the appellant company to OEIPL. 3.1 That the CIT(A) erred on facts and in law in alleging that the submission that the appellant had received share application money from OEIPL was an after¬thought, without appreciating that (a) the shares had actually been allotted to OEIPL on 01.10.2009, i.e. much prior to date of the assessment order, and (b) the factum of allotment stood established by contemporaneous statutory forms and other documents which constituted part of records of the Registrar of Companies. 3.2 That the CIT(A) erred on facts and in law in not considering the annual r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not provide for taking the loan/ advance in the hands of the recipient company having prescribed interest/ shareholding of shareholders, unless it itself is a shareholder." 6. The only issue involved in these four appeals of the assessee for two assessment years is taxation of deemed dividend under section 2 (22) (e) of the act. The assessee is a company engaged in the business of trading and marketing of cigar, liquor and cigar accessories. The assessment for assessment year 2006 - 07 was completed under section 143 (3) of the act on 28/11/2008 Where the learned assessing officer noted that the assessee company had received certain amount from another company M/s Optic Electronics India private limited (the lender) wherein one Mr Chetan sheth is holding 28% shares and he also holds 54.2% shares in the assessee company. Consequently the learned assessing officer held that the amount of loan given by the lender to the appellant is covered under the definition of deemed dividend as per the income tax act, and accordingly, the addition for assessment year 2006 - 07 was made of INR 126098087/-. The assessee preferred appeal before the learned Commissioner of income tax Appeals who f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r with respect to the direction of the learned CIT A to tax the above amount in the hands of the shareholder on the ground that shareholder is a common shareholder of both the appellant and the lender. The grievance of the assessee is that CIT - A, has exceeded his jurisdiction. 8. The revenue is aggrieved that the learned Commissioner of income tax appeals has deleted the addition of INR 6 2587356/- as deemed dividend in the hands of the assessee company. According to the revenue assessee is very much liable to be taxed with respect to the above amount on account of deemed dividend. 9. The facts for assessment year 2007 - 08 are also similar but for the reason that in the present case for assessment year 2007 - 08. There are 2 shareholders, namely Mr Chetan and Ambi finance and investment private limited, where the AO made an addition of INR 52363198/- as deemed dividend in the hands of the assessee company which was deleted by the learned Commissioner of income tax appeals holding that the same should be chargeable to tax in the hands of the shareholders Sri Chetan Seth and Ambi finance and investment private limited proportionately in the ratio of the inter se shareholding in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ITA number 3123/del/2010 and ITA number 3815/del/2011 for assessment year 2007 - 08. The assessee is aggrieved with ground number 1 of the appeal and has challenged the extraneous findings of the learned Commissioner of income tax appeals holding that the amount under consideration was liable to tax as deemed dividend under section 2 (22) (e) of the act and in directing the addition to be made in the hands of Mr Chetan sheth. Assessee is also aggrieved that the above amount lent by the lender in the business advance and therefore same cannot be considered for the purpose of taxability as deemed dividend. 15. The learned authorised representative submitted that though CIT appeal has concurred with the legal submission of the assessee company that the amount received could not be taxed as deemed dividend in its hands, since the assessee was not a shareholder of the lender company, should not have returned the findings, on merit with regard to the applicability of the provisions of deemed dividend, thereby resulting in detriment and prejudice to the case of Mr Chetan who was not a party to the present appeal before the learned Commissioner of income tax appeals. It was further stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e it is chargeable to tax as deemed dividend hence, now it cannot be said by the assessee that Mr Chetan would be free to raise all the contentions. 17. We have carefully considered the rival contentions and find that the learned Commissioner of income tax appeal has given a correct finding on the issue that the amount of loan given by the lender to the appellant company is chargeable to tax in the hands of the shareholders. The proper opportunity was also given by the Commissioner of income tax appeals to the shareholder. The shareholder did not comment that this amount is not chargeable to tax in his hands, but has only stated that the above amount given by the lender to the appellant is only a business advance and therefore provisions of deemed dividend does not apply to the facts of the case. On careful analysis of the order of the learned Commissioner of income tax appeals, he has merely directed the learned assessing officer to add the said amount as deemed dividend under section 2 (22) (e) in the hands of the shareholder. No infirmity is found in the order of the learned Commissioner of income tax appeals in holding so after giving proper opportunity of hearing to the share ..... X X X X Extracts X X X X X X X X Extracts X X X X
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