TMI Blog2021 (8) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT on the similar issue. Since the assessee company was not registered share holder in the company from whom the loan was obtained therefore no addition can be made as deemed dividend in the hands of the assessee company merely because there was a common shareholder in the payee company and the assessee company. Therefore, we do not find any error in the decision of the ld. CIT(A). Accordingly, the appeal of the revenue is dismissed. - ITA No. 304/Ahd/2018 - - - Dated:- 16-8-2021 - Shri Amarjit Singh, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Assessee : Shri Sanjay R. Shah, A.R. For the Revenue : Shri L.P. Jain, Sr. D.R. ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This revenue s appeal for A.Y. 2014-15, arises from order of the CIT(A)-1, Ahmedabad dated 30-11-2017, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The solitary ground of appeal of the revenue is directed against the order of ld. CIT(A)-1 Ahmedabad in deleting the disallowance of ₹ 2,70,50,000/- made by the Assessing Officer u/s. 2(22)(e) of the Act. 3. The fact in brief is that return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 2(22)(e) the person should be a shareholder and he should beneficially own at least 10% of the equity capital. A shareholder means a person in whose name the shares stand in the share register of the company. If a person is mere beneficiary owner of shares without being the registered shareholder, this clause would not apply to him. 3.3 The assessee has also submitted that the provision of the section would also not apply provided the loan is made by the company in the ordinary course of its business and money lending is a substantial part of the company s business. The assessee has also referred various judicial pronouncements mentioned at page no. 10 of the assessment order including case of CIT vs. Ankitech (P.) Techn Pvt. Ltd. (2011), 199 taxmann.com 341 wherein the Hon ble High Court held that the amount of loan cannot be taxed in the hands of the person who is not the share holder. The assessee has also submitted before the Assessing Officer that Hon ble Gujarat High Court in the case of Daisy packers Pvt. Ltd. after relying upon the ruling of Hon ble Delhi High Court in the above referred case held that where assessee had received a deposit but it did not own ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the Hon'ble Supreme Court of India has admitted special leave petitions against the decision of various courts and other appellate authorities in favour of the revenue, setting aside such decisions and acknowledging the validity of the interpretation adopted by Revenue. The A.O. has observed that SLP in the cases of CIT vs. N.S.N. Jewellers (P) Ltd. [2015] 64 taxmann.com 327(SC) and CIT vs. Namdhari Seeds [20'i5{ 56 taxmann.com 19 (SC).The appellant has submitted that Departmental Appeal in case of N.S.N. Jewellers (P.) Ltd is dismissed by Hon'ble Apex Court as tax effect VMS less than ₹ 25 Lacs. Thus, Hon'ble Apex court has not decided the underlying issue arised u/s. 2(22)(e) of the act. In the case of CIT vs. Namdhari Seeds [2015] 56 taxmann.com 19 (SC) the SLP is pending. Therefore, the ratio of jurisdictional Gujarat l-ligh Court in the case of CIT v/s Daisy Packers (P) Ltd decided the issue in favour of the assessee, relying on the decision of the Division Bench of the High Court in CIT v. Ankitech (P.) Ltd. (2012) 340 ITR 14 (Del) holds the ground. Hon. Supreme Court vide its order Dated 5thOctober, 2017 (In Civil Appeal No. 3961 of 2013) has uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of the appellant the receiver company CEPL (Cygnet Enterprises pvt. Ltd.) is not shareholder in the giver company CIPL(Cygnet Infotech Pvt. Ltd.) which is a pre requisite to treat any loan payment between associate companies as deemed dividend u/s. 2(22)(e) in the hands of the receiving company. In view of the above facts and on the basis of the above referred decisions (supra), the addition made by the Assessing Officer u/s.2(22)(e) is held to be not justified and the same is deleted. The additions made by the A.O as deemed dividend u/s 2(22)(e) of IT Act for ₹ 2,70,50,000/~ in the hands of the appellant company is directed to be deleted. The ground of the appellant is allowed. 5. During the course of appellate proceedings before us, ld. Departmental Representative has supported the order of Assessing Officer. On the other hand, the ld. Authorized Representative submitted paper book comprising detail of information and copy of document furnished before the lower authorities. The ld. counsel has also referred various decisions of Coordinate Bench of the ITAT Ahmedabad i.e. CIT vs. M/s. Cama Hostel Ltd. in Appeal No. 430/Ahd/2016, ACIT vs. M/s. Krishna Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above facts, the Assessing Officer has made an addition to the extent of ₹ 13,21,198/- being accumulated profit of Gaurav Security Pvt. Ltd. for the reason that section 2(22)(e) prohibits advancing money among entities having common shareholders with substantial interest in the case of closely held company having accumulated profit. After perusal of the judicial pronouncements it is noticed that identical issue on common facts have been adjudicated by the Co-ordinate Bench of the ITAT Ahmedabad in the case of ACIT vs. Leela Ship Recyling Pvt. Ltd. vide ITA No. 1658/Ahd/2012 dated 12th March, 2020 and by the Jurisdictional High Court in the case of Pr. CIT vs. Mahavir Inducto Pvt. Ltd. dated 12-01-2017. With the assistance of ld. representatives, we have gone through the aforesaid two judicial pronouncements, it is noticed that in the case of ACIT vs. Leela Ship Recycling Pvt. Ltd. supra the Coordinate Bench of the ITAT has adjudicated the identical issue on same facts as under:- 4. We have heard the rival contentions, perused the material on record and duly considered facts of the case and the applicable legal position. 5. Learned representatives fairly agree t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eating the third category / class, which is not permissible. What is provided under Section 2(22) (e) of the Act seems to be that the assessee HC-NIC Page 4 of 5 Created On Sat Aug 12 04:34:00 IST 2017 O/TAXAP/891/2016 JUDGMENT Company must be a shareholder in the Company from whom the loan or advance has been taken and should be holding not less than 10% of the voting power. It does not provide that any shareholder in the assessee- Company who had taken any loan or advance from another Company in which such shareholder is also a shareholder having substantial interest, Section 2(22)(e) of the act may be applicable. 5.1. Considering the aforesaid decision of the Division Bench of this Court and the facts narrated herein above, more particularly, considering the fact that the assessee was not share holder of Mahavir Rolling Mills P vt Ltd to whom loan was given, it cannot be said that the learned Tribunal has committed any error in deleting the addition made by the Assessing Officer on deemed dividend. In view of the findings as supra Hon ble Jurisdictional High Court wherein it is held that for the applicability of section 2(22)(e), it is required that the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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