TMI Blog2021 (12) TMI 922X X X X Extracts X X X X X X X X Extracts X X X X ..... al High Court in the matter of CIT Vs. Daisy Packers P.Ltd.[ 2015 (7) TMI 253 - GUJARAT HIGH COURT] as have been relied upon by the ld.AR before us, have also been duly considered by the ld.CIT(A). In fact, the judgment passed by the Hon ble Delhi High Court in the case of Anitech P.Ltd. [ 2011 (5) TMI 325 - DELHI HIGH COURT] was also taken into consideration while deleting the addition. On perused the judgments passed by different judicial forums as relied upon by the Ld. AR. The ratio laid down therein is that, in a case, in which an amount is received from a person, other than the shareholder, provision of section 2(22)(e) of the Act cannot indeed be invoked. In the instant case, the appellant company was not a registered shareholder of the lender-company viz. JP Iscon Ltd. from which the assessee-company has obtained ICD during the year under consideration, and therefore, the addition made by the Ld. AO by invoking provisions of section 2(22)(e) of the Act, has rightly been deleted by the ld.CIT(A) without any ambiguity so as to warrant interference. Hence, appeal preferred by the Revenue is found to be devoid of any merit and thus stands dismissed. - ITA No.279/Ahd/2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied as under: With reference to the above subject- matter, your goodself has given us the opportunity vide letter dated 19/12/2014 in respect of Re- Assessment proceeding for the AY 2007-08 of M/s Dhwani Infrastructure Private Limited. In this regard, we would like to produce following details alongwith case laws for your kind perusal. Relevant Provisions concerning Deemed Dividend Clause (e) of section 2(22) provides as under:- Any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1986, by way of advance or loan to a shareholder, being a person who is the, beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a pattern and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital of the company). (b) A Perusal of the above provision read with explanation 3 reveals that the following types of payments by a company are deemed as dividend by way of deeming fiction though in common parlance of the term such payments are not in the nature of dividend - i) Payment by way of advance or loan to a shareholder a shareholder (holding 10% or more). (ii) Payments by way of advance or loan to a concern/company in which such shareholder (i.e. who holds 10% or more of voting power of the lender company) also holds 20% or more shares (of the loan recipient company). It may, however, be noted that in case (ii) scenario, the loan recipient company is not a shareholder of the loan giver company. There is only an indirect linkage through common shareholder. Further to state your goodself that as per various judgements of the Courts benefit should be passed to the common shareholder to attract section 2(22)(e). In our case even common shareholder are not being individually benefitted from the above transaction. In this regard, we would like to submit the following facts alongwith Case Laws 1) Dhwani Infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax V/S MCC Marketing(P) Ltd Delhi High Court 2011 (2011) 16 Taxmann.com 411/(2012) 204 taxmann 56/(2012 343 ITR 350) Enclosed Copy of Judgement as Exb. 4 5 Commissioner of Income Tax V/S Impact Containers (P.) Ltd. High Court of Bombay 2014 (2014) 48 taxmann.com 294 (Bombay)/2014 225 Taxman 322(Bombay)/(2014) 367 ITR 346 (Bombay)(2014) 270 CTR 337 (Bombay)j Enclosed Copy of Judgement as Exb.5 6 Asstt. Commissioner of Income Tax V/S Britto Amusement (P.) Ltd. High Court of Bombay 2014 (2014 ) 49 taxmann.com 256(Bombay)/2014 226 Taxman 45 (Bombay) (MAG.)/[2014J 360 ITR 554 Enclosed Copy of Judgement as Exb. 6 7 Commisioner of Income Tax Central IV V/S Jignesh P. shah High Court of Bombay 2015 [2015] 54 toxmann.com 293(Bombay) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdictional High Court in the case of CIT Vs. Daisy Packers P.Ltd., 40 taxamnn.com 48 (Guj) wherein issue has been decided in favour of the assessee by relying upon the decision passed by the Hon ble Delhi High Court in the matter of CIT Vs. Anitech P.Ltd., reported in 340 ITR 14 (Del). Finally, it was submitted by the ld.AR that the issue is squarely covered by the judgment and order dated 11.2.2021 passed in the assessee s own case in ITA No.2232/Ahd/2016 and CO No.157/Ahd/2016 wherein addition of ICD to the tune of ₹ 3,30,50,859/- under section 2(22)(e) of the Act has been deleted. 6. On the other hand, the ld.DR relied upon order passed by the Ld. AO. It was contended by him before us that while making addition, the ld.AO applied his mind which is clearly evident from paragraph-5.7 of the order passed by the ld.AO. Payer-company was closely held company; it has accumulated profit on the date of such payment and the payment was made to the appellant-company out of such accumulated profits. Instead of distributing accumulated profits as dividend, the company has distributed the same as loan or advance to the assessee-company, and therefore, provision of section 2(22) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company. The view taken by the I.T.A.T. Mumbai Special Bench in the case of ACIT Mumbai vs. Bhaumik Colour (P) Ltd has been approved by the Hon'ble Bombay High Court in the case of CIT vs. Universal Medicare Private Limited (2010) 324 ITR 263 (Bom.) The Gujarat High 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) wherein it was held that if the assessee-company does not hold a share in other company from which it had received deposit then it cannot be treated to be a deemed dividend under Section 2(22)(e) of the Act From the reading of the provisions of section 2(22)(e)t it is seen that the provision is intended to tax the dividend in the hands of a shareholder and the deeming provision as it applies to the case of loan or advance by a company to a concern in which is shareholder and has substantial interest, is based on the presumption that the loan or advance would ultimately be made available to the shareholder of the company giving loan or advance. Various court decisions e.g. Asstt. CIT v/s. Bhumi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the assessee company. The case of the assessee was reopened for the reasons that J.P. Escon Ltd. had provided loan of ₹ 68,35,2624/- to the assessee company which attracts the provision of section 2(22)(e) of the Act. At the assessment stage, the assessee has categorically explained after referring various judicial pronouncements that the amount received from J.P. Escon Ltd. cannot be taxed as deemed dividend in its hand as it was not the registered share holder of J.P. Escon Ltd. The Assessing Officer after considering the substantial common share holding of Shri Pravin Kotak and Shri Amit Gupta, treated the amount of ₹ 3,30,50,859/- upto the accumulated profit received by the assessee company from J.P. Escon Ltd. as deemed dividend u/s. 2(22)(e) of the act. The ld. CIT(A) has deleted the addition holding that assessee company was not a registered share holder of J.P. Escon Ltd. after placing reliance on the various judicial pronouncements as elaborated in his findings as cited above in this order. After perusal of the material on record, it is noticed that assessee company was not a registered share holder in J.P. Escon Ltd. who has given inter corporate deposit to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017) wherein Their Lordships have extensively reproduced from Hon'ble Delhi High Court's judgment in the case of Anitech Pvt Ltd (supra), and concurred with the same. Thus, in a case in which an amount is received from a person other than the shareholder, as is the admitted position in this case, the provisions of Section 2(22)(e) cannot indeed be invoked. The CIT(A) was thus justified in granting the impugned relief in respect of the addition under section 2(22)(e). We, therefore, approve the conclusion arrived at by the learned CIT(A) in this regard, and decline to interfere in the matter on that count. We have also through the decision of Hon'ble Gujarat High Court in the case of Pr. CIT vs. Mahavir Inducto Pvt. Ltd. supra wherein the identical issue on same facts was decided in favour of the assessee after following the decision of Bombay High Court in the case of CIT vs. Impact Containers Pvt. Ltd. and others vide IT Appeal No. 114 of 2012 and the decision of Delhi High Court in the case of CIT vs. Ankitech Pvt. Ltd. Ltd. reported in 340 ITR 14 Delhi. The relevant part of the decision is reproduced as under:- 50. Identical question came to be consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance from another company in which such shareholder is also a shareholder having substantial interest. Since the facts of the case of the assessee are squarely covered by the aforesaid decisions of Hon'ble High Court and Coordinate Bench of the ITAT, the impugned addition is deleted. Accordingly, this ground of the assesse is allowed. After taking into consideration, the aforesaid facts and judicial findings as referred above, it is undisputed fact that assessee company was not a registered share holder in J.P. Escon Ltd. from whom it has obtained loan during the year under consideration. Therefore, the addition made by the Assessing Officer as deemed dividend u/s. 2(22)(e) of the Act is not justified. In the light of the above facts and findings, we do not find any infirmity in the decision of ld. CIT(A), therefore, this appeal of the revenue is dismissed. 9. We have also perused the judgments passed by different judicial forums as relied upon by the Ld. AR. The ratio laid down therein is that, in a case, in which an amount is received from a person, other than the shareholder, provision of section 2(22)(e) of the Act cannot indeed be invoked. In the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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