TMI Blog2022 (2) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... structure Pvt. Ltd. and Palitana Sugar Mills Pvt. Ltd. whom loans and advances were given is deemed dividend is wrong per se. The same is factually incorrect since the appellant company does not owned 100% share in these companies and even if, the appellant company hold 100% shares in these companies the deemed dividend would arise when these companies give loans to the appellant holding company and not other way around when holding company gives loan to subsidiary company. Thus, we find the observation made hereinabove by the ITO(TDS) is not on the correct proposition of law. No justification in interfering with the order passed by the Ld. CIT(A) in deleting such addition made by the Ld. AO holding that under this particular facts and circumstances of the matter under Section 194 is not required to be made by the assessee - Decided in favour of assessee. - I.T.A. No. 220/Ahd/2015, C.O. No. 24/Ahd/2016 (in ITA No. 220/Ahd/2015), I.T.A. No. 421/Ahd/2017, C.O. No. 54/Ahd/2017 (in ITA No. 421/Ahd/2017) - - - Dated:- 7-2-2022 - Shri Waseem Ahmed, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Revenue : Shri Mohd. Usman, CIT DR Shri Purushottam Kumar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M Gupta treated the amount of ₹ 19,56,37,008/- up to the accumulated profit received by the assessee company namely J. P. Iscon Ltd. as deemed dividend under Section 2(22)(e) of the Act which was, in turn, deleted by the Ld. First Appellate Authority holding that the payee company is not the registered shareholder of the appellant company relying upon various judicial pronouncements made by different forums. Hence, the instant appeal filed by the Revenue before us. 4. We have heard the respective parties, we have also perused the relevant materials available on record. 5. It appears from the orders passed by the Ld. CIT(A) the following is the shareholding pattern of the appellant company and the six loan receiving companies: Details of registered shareholder of appellant company during financial year 2006-07: Name of shareholder Number of shares held during 1.4.2006 to 28.06.2006 Percentage of holding Number of shares held during 29.06.2006 to 14.02.2006 Percentage of holding Number of shares held during 15.2.2007 to 31.03.2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr Jateen M. Gupta 0 7,500 75 Total 10,000 10,000 100 (ii) Amit intertrade Pvt. Ltd. (Date of incorporation 03.07.2006): Name of shareholder Number of shares held during 03.07.2006 to 31.03.2007 Percentage of holding Mr Amit M. Gupta 5,000 50 Jateen M. Gupta 5,000 50 Total 10,000 100 (iii) Dwani Infrastructure Pvt. Ltd. (Date of incorporation : 13.11.2006): Name of shareholder Number of shares held during 13.11.2006 to 31.03.2007 Percentage of holding Mr Pravin T. Kotak 9,000 90 Mr Amit M. Gupta 1,000 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al loan and/or inter-corporate deposit of ₹ 13,09,57,700/- as against the alleged loan or inter-corporate deposit of ₹ 19,56,37,008/- is as follows: Name of Company Actual amount of loan or advance (Rs.) Reference of Para Dhanlaxmi Infrastructure Pvt. Ltd. 1,00,000 15.16.a Amit Intertrace Pvt. Ltd. 8,75,00,000 15.16.b Dhwani Infrastructure Pvt. Ltd. 3,50,00,000 15.16.c Rich Infrastructure Pvt. Ltd. 8,60,000 15.16.d Gujarat Mall Management Co. Pvt. Ltd. 74,97,700 15.16.e Palitana Sugar Mills Pvt. Ltd. 0 15.16.f Total 13,09,57,700 7. It is the case of the assessee that none of the loans and advances has been given to any shareholders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduct TDS before making any payment in cash or before issuing any cheque warrant in respect of any dividend or before making any distribution or payment to a shareholder. It is undisputed fact that loan has been advanced by the appellant company to six group companies which are not shareholders of appellant company. This issue on identical facts whether TDS is to be made where loan has been advanced by one company to other group company in which there are common share holders has been decided by Hon'ble Jaipur Bench of ITAT in the case of ANZ Reality (P) Ltd. Vs. ITO (2009) 26 SOT 61 (JP) [URO]. The Hon'ble Tribunal has held that TDS u/s 194 is not required to be made, unless the loans/advances are given to a share holder as under: 6. We have heard the rival contentions and perused the facts of the case. The arguments made by Shri Rajeev Sogani, learned Authorized Representative, appear to be convincing that section 194 casts obligation for TDS only when payment is made to a shareholder. It. is undisputed fact in the present case that the funds have been advanced by the assessee company to the following companies which are not shareholders of the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e we have further considered the judgment relied upon by the Ld. Counsel appearing for the assessee in the matter of Vidhi Infrastructure Pvt. Ltd. in ITA No. 554/Ahd/2017 C.O. No. 71/Ahd/2017 passed by the Coordinate Bench in the said Vidhi Infrastructure is one of the companies where the appellant had given inter-corporate deposit. The Coordinate Bench was pleased to hold that such inter-corporate deposit is not deemed dividend. While doing so the Coordinate Bench was pleased to observe as follows: 10. In this case, there are common share holder between JIPL (IDC giver) and the appellant company (ICD receiver) having Shri Amit Gupta as common share holders during the year and as on 31/03/2008 the appellant company is 100% subsidiary company of JPIL (ICD giver). 11. The appellant has contended that it has received an inter-corporate loan for a sum of ₹ 3,45, 59,000/- from M/s. JP Iscon Limited. The appellant company is not a subsidiary and was neither holding any shares of JP Iscon Limited. The appellant company is neither a registered shareholder of JP Iscon Limited nor beneficial owner of the shares, holding 10% or more of the voting power of JP Iscon Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T 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 Co-ordinate 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 that the issue in appeal is now covered by Hon'ble jurisdictional High Court's judgment in the case of CIT Vs Mahavir Inductomelt Pvt Ltd (TA No. 890 of 2011; judgment dated 13th January 2017) 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( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Pvt Ltd to whom loan was given, it cannot be said that the learned Tribunal has committed any err or 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 company must be a shareholder in the company from whom the loan or advance has been taken and 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. 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 assessee is allowed. 11. The judgment passed by the Hon ble Rajasthan High Court as relied upon by the Ld. AR in the matter of CIT vs. Sunny Developers Pvt. Ltd. i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rong per se. The same is factually incorrect since the appellant company does not owned 100% share in these companies and even if, the appellant company hold 100% shares in these companies the deemed dividend would arise when these companies give loans to the appellant holding company and not other way around when holding company gives loan to subsidiary company. Thus, we find the observation made hereinabove by the ITO(TDS) is not on the correct proposition of law. 14. Taking into consideration the entire aspect of the matter the order passed by the different Coordinate Benches and the Hon ble Rajasthan High Court as discussed hereinabove and relying upon the ratio laid down therein we, therefore, find no justification in interfering with the order passed by the Ld. CIT(A) in deleting such addition made by the Ld. AO holding that under this particular facts and circumstances of the matter under Section 194 is not required to be made by the assessee. The order seems to be without any ambiguity so as to warrant interference. The ground of appeal found to be devoid of any merit and hence dismissed. 15. Deletion of the order passed under Section 201(1) and interest charged u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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