TMI Blog2019 (3) TMI 1106X X X X Extracts X X X X X X X X Extracts X X X X ..... No.2615/M/2017 - - - Dated:- 7-2-2019 - Shri Mahavir Singh, Judicial Member And Shri Rajesh Kumar, Accountant Member For the Assessee : Shri Vimal Punmiya, A.R. For the Revenue : Shri Chaudhary Arunkumar Singh, D.R. ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER: The present appeal has been preferred by the assessee against the order dated 23.12.2017 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12. 2. The issue raised in ground No.1 by the assessee is against the order of Ld. CIT(A) confirming the addition of ₹ 1,29,61,420/- as made by the AO on account of deemed dividend under section 2(22)(e) of the Income Tax Act by ignoring the fact that assessee is not a shareholder of M/s. Golani Construction India Pvt. Ltd. and provisions qua deemed dividend as envisaged under section 2(22)(e) are not applicable to the assessee who is not shareholder of the company who has advanced the money. Whereas the issue raised in ground No.2 is as regards bogus purchases to the tune of ₹ 4,09,657/-. 3. The Ld. A.R. at the time of hearing submitted before the Bench that ground No.2 is not p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is not at all the shareholder of M/s. Karodai Constructions P. Ltd. Shri Binal S Karodia is a share holder in his individual capacity only and, therefore, assessee HUF cannot be said to be a shareholder or a beneficial share holder. Id CIT(A) by considering the decision of ITAT Special Bench in the case of ACIT vs. Bhaumik Colour Pvt Ltd. 118 ITD 1/(313 ITR 146(AT), held that loans received by the assessee from M/s. karodia Constructions PLtd., cannot be treated as deemed dividend u/s.2(22)(e) of the Act as recipient of money should be a registered share holder as well as beneficial share holder whereas in the case of the assessee none of the above conditions are satisfied. 5. Ld D.R, has not disputed above facts and as mentioned above, but dutifully relied on order of Assessing Officer. 6. The ITAT, Special Bench in the case of Bhaumik Colour Pvt Ltd (supra) held that provisions of section 2(22)(e) of the Act create a fiction bringing any amount paid otherwise than as dividend into net of dividend. Therefore, this clause must be given strict interpretation. It was held therein that if the person is a registered holder but not the beneficiary share holder, then provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards the amount involved as per the ledger copy, the opening balance was ₹ 40 lacs, there were multiple transactions during the year which increased to ₹ 1,34,63,7497- and later a negative balance appearing of ₹ 15,73,0477- as on 09-02-2011 which later increased to ₹ 116,33,132/- of 31-03-2011. The closing balance is NIL. Thus, there were two instances of loans/advances given. As the reserves and surplus on 31-03-2010 was ₹ 1,29,61,420/-, the deemed dividend would be limited to such amounts only. The addition made is thus upheld. Grounds of Appeal No. 3,4 5 are dismissed. 6. The Ld. A.R. vehemently submitted before the Bench that the assessee is not a shareholder of M/s. Golani Construction India Pvt. Ltd. and therefore the provision of section 2(22)(e) of the Act would not apply to the assessee. The Ld. A.R. submitted that the assessee i.e. M/s. Golani Brothers a partnership concern have four partners Mira S. Golani, Kishore S. Golani, Ravi S. Golani and Nursing Lal D. Golani up to 17.02.2011 and were having profit share loading of 7%, 50%, 7% and 36% respectively. After reconstitution only first three partners remained in the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions both receipts and payments were entered into which can not be treated as deemed dividend within the meaning of section 2(22)(e) of the Act. In defence of his argument the Ld. A.R. relied on a series of decisions namely; (1) CIT vs. Jayant H. Modi (2015) 58 taxmann.com 366 (Bombay HC) (2) DICT vs. Schutz Dishman Bio-tech (P) Ltd. (ITA Nos.958 959 of 2015) (Guj HC) (3) Ravindra R Fotedar vs. ACIT (2017) 85 taxmann.com 314 (Mumbai-Trib) (4) Saamag Developers (P) Ltd. vs. ACIT (2018) 90 taxmann.com 20 (Delhi-Trib.) The Ld. A.R. also submitted distinguished the decision relied upon by the Ld. CIT(A) by submitting that the same are distinguishable on facts in the case of Gopal And Sons (HUF) Vs CIT [2017] 77 taxmann.com 71 (SC). The facts in this case are that the assessee was both registered as well as a beneficial shareholder of the company holding more than 10% of the voting power whereas in the present case the assessee is neither a registered shareholder nor a beneficial shareholder of M/s. Golani Construction India Pvt. Ltd. In the above case of Gopal and Sons (supra) the money to purchase the shares in the company was given by assessee HUF and the sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... KISHORE .S. GOLANI 15000 50% RAVI.S.GOLANI 5000 16.67% AKASH K GOLANI 1000 33.33% TOTAL 3000 100% It is clear from the above that two partners of the assessee firm Kishore S Golani and Ravi S. Golani were holding shares in the lender company i.e. M/s. Golani Construction India Pvt. Ltd. to the extent of 15000 and 5000 shares. The shareholding percentage worked out 15% 16.67% respectively for both the shareholders. This is also undisputed that these shareholders have bought the shares in the lender company on their own absolute right and not on behalf of the firm. Now the issue before us whether the loan advanced by the M/s. Golani Construction India Pvt. Ltd. of ₹ 2.10 crores to the assessee firm could be considered as deemed dividend under section 2(22)(e) of the Act to the extent the lender company has accumulated reserved and surpluses. It is clear from the above that the firm M/s. Golani Brothers is neither a registered shareholder nor a beneficial sharehol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re was a common shareholder (individual) who held more than 50% in both the companies. In view of the above facts the AO held that the amount received by the assessee from an another company was a deemed dividend u/s 2(22)(e) of the Act. The CIT(A) upheld the AO's order. On further appeal, the Tribunal deleted the addition made by AO following the decision of the jurisdictional High Court in CIT v. Ankitech (P.) Ltd. 340 ITR 14 (Delhi) where it has been held that deemed dividend provisions cannot be invoked merely because there are common shareholders between the two companies. The High Court followed the aforesaid judgment and dismissed revenue's appeal. 14. From the record, we also found that assessee has not invested even a single rupee in share capital of EIPL. Both the companies EIPL as well as NHBPL are part of Gundecha Group of Companies. The transactions between the group companies were current and inter banking accounts containing both type of entries i.e. receipts and payments. There are total 61 transactions entered during the year on need basis. In case where both receipts and payments is taking place in inter banking accounts the same cannot be regarded as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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