TMI Blog2018 (5) TMI 1908X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in normal course of business is beyond the purview of section 2 (22) (e) of the IT Act. Even otherwise also an it is an admitted fact that the assessee company is not a shareholder in M/s. IRIS Associates Pvt. Ltd. the Hon ble Supreme Court in the case of CIT Vs. Madhur Housing Development Company [ 2017 (10) TMI 1279 - SUPREME COURT] where it has been held that although there were persons having substantial interest in the assessee company and company which gave the loan, the assessee company not being shareholder of the company which gave the loan, the loan was not assessable as deemed dividend in assessee s hands. Although this decision has been doubted by the Hon ble Supreme Court in the case reported as National Travel Services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny and M/s. Iris Associates Pvt. Ltd are as under :- S. NO. NAME OF SHARE HOLDER AAKAR DESIGN CONSULTANTS PVT LTD IRIS ASSOCIATES PVT LTD 1. GURPREET SINGH 50% 53.10% 2. SANCHITA SINGH 50% 46.90% 3. He further observed that the accumulated profit of M/s. Iris Associates Pvt. Ltd as on 31.03.2012 is ₹ 4,21,40,118/-. He therefore, asked the assessee to explain as to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 5. Based on the arguments advanced by the assessee the Ld. CIT(A) deleted the addition made by the Assessing Officer u/s 2 (22) (e) of the Act. While doing so, he observed that the assessee company is not holding any shares in M/s. IRIS Associates (P) Ltd. Similarly M/s. IRIS Associates is not holding any shares in the assessee company. According to Ld. CIT (A) the deeming provision of dividend is applicable only on the registered shareholders. Since, none of the companies are holding shares in each other company, therefore, deemed dividend cannot be assessed in the hands of the person who is not a shareholder. He, therefore, held that application of the provision of Section 2(22)(e) in the hands of the assessee company is not j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 2 (22) any payment to a concern in which the share holder has substantial interest is also covered. He submitted that since the Directors of both the companies are common and hold substantial interest in both the companies which is more than 10% of voting power, therefore, the provisions of section 2 (22) (e) are clearly applicable in the instant case. He accordingly submitted that the order of the CIT(A) be reversed and that of the Assessing Officer be restored. 8. Ld. Counsel for the assessee on the other hand while supporting the order of the CIT(A) submitted that the Hon ble Supreme Court in the case of CIT Vs. Madhur Housing Development Company has upheld the decision of the Hon ble Delhi High Court holding that although t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,40,118/- from M/s. IRIS Associates Pvt. Ltd. Since Sh. Gurpreet Singh and Sanchita Singh are common shareholders having more than 20% shareholding in both the companies, the Assessing Officer, invoking the provisions of section 2(22) (e) of the Act treated an account of ₹ 4,21,40,118/- as deemed dividend under section 2 (22) (e) of the IT Act. We find the Ld. CIT (A) deleted the above addition on the ground that assessee is not a shareholder in M/s. IRIS Associates Pvt. Ltd and the money was received in normal course of business and therefore, outside the purview of section 2 (22) (e) of the Act. A perusal of the grounds raised by the revenue shows that the revenue has not challaneged the finding given by the CIT(A) that the money re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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