SIGN IN SUBSCRIBE

News Update

PM-STIAC discusses accelerating Industry-Academia Partnership for Research and InnovationIndia, Singapore hold dialogue over cyber policy44 bids received under 10th Round of Commercial Coal Mine AuctionsCops arrest former Dy PM of Nepal in cooperative fraud casePuri highlights India's Petrochemical potential at India Chem 2024UN reports record high cocaine production in ColombiaMinister unveils 'Aviation Park' showcasing India's Aviation HeritageED finds PFI wanted to start Islamic movement in IndiaBlocking Credit - Rule 86ASEBI says investors can use 3-in-1 accounts to apply online for securitiesI-T- Penalty u/s 271(1)(b) need not be imposed when assessee moved an adjournment application & later complied with notice u/s 142(1): ITAT4 Kanwariyas killed as vehicle runs over them in Banka, BiharI-T- Accounting principles do not prescribe maintaining of a day-to-day stock register, and the books of accounts cannot be rejected on this basis alone: ITATUN food looted and diverted to army in EthiopiaCus - Alleged breach of conditions for operating public bonded warehouse; CESTAT rightly rejected allegations, having found no evidence of any such breach: HCUS budget deficit surges beyond USD 1.8 trillionST - Onus for proving admissibility of Cenvat Credit rests with service provider under Rule 9(6) of the Cenvat Credit Rules, 2004: CESTATIf China goes into Taiwan, Trump promises to impose additional tariffsRussians love Indian films; Putin lauds BollywoodCus - Classification of goods is to be determined in accordance with Customs Tariff Act & General Interpretative Rules; Country-of-Origin Certificate may offer some guidance, but cannot solely dictate classification: CESTATCus - Benefit of such Country-of-Origin certificates cannot be denied if all relevant conditions are met under the applicable Customs Tariff rules: CESTATCuban power grid collapses; Country plunges into darknessCus - As per trite law, merely claiming a classification or exemption does not constitute mis-declaration or suppression - any misclassification does not equate to willful intent to evade duty: CESTATKarnataka mulling over 2% fee on aggregator platforms to bankroll gig worker welfare fundCus - Extended limitation cannot be invoked in case of assessee who is a regular importer with a consistent classification approach: CESTAT
 
I-T - Addition of deemed dividend u/s 2(22)(e) not sustainable if recipient assessee is not shareholder of lender company: ITAT

 

By TIOL News Service

BANGALORE, JAN 08, 2019: THE ISSUE IS - Whether addition of deemed dividend u/s 2(22)(e) of the Act is sustainable if recipient assessee is not a shareholder of the lender company. NO IS THE VERDICT.

Facts of the case

The assessee company engaged in the business of manufacture of valves, had filed return for relevant AY. The assessee borrowed a sum of Rs. 4 crores from M/s. Micofinish Pumps Pvt. Ltd. (MPPL). The AO noticed that there were common directors in both the assessee company and MPPL and therefore the sum of Rs. 4 crores received as advance from MPPL was liable to be added as deemed dividend u/s. 2(22)(e) of the Act in the hands of the assessee company. Aggrieved assessee filed appeal before the CIT(A) and submitted that the first condition to be satisfied for invoking the provisions of section 2(22)(e) of the Act was that the assessee should be a shareholder in the company which had given loan. But it was not a shareholder. However, CIT(A) confirmed the order of the AO. The assessee preferred appeal before the Tribunal.

Tribunal held that,

++ Special Bench of ITAT, Mumbai, in the case of Bhaumik Color Labs, considered the question Whether deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961 can be assessed in the hands of a person other than a shareholder of the lender? The Special Bench held that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. This view has since been approved in several decisions rendered by High Court of Bombay and Delhi in the case of CIT Vs. Universal Medicare Pvt. Ltd., CIT Vs. Ankitech Pvt.Ltd. & others and by Supreme Court in the case of CIT Vs. Madhur Housing and Development Co. Since the Assessee in the present case is not a shareholder in the lender company, the view is squarely applicable to the facts of the Assessee's case. It was noted that the action of the revenue authorities in bring to tax a sum of Rs. 4 Crores as deemed dividend u/s. 2(22)(e) of the Act cannot be sustained and the addition is directed to be deleted. The relevant ground of appeal of the Assessee is allowed.

(See 2019-TIOL-69-ITAT-BANG)


POST YOUR COMMENTS
   

TIOL Tube Latest

TIOL Tube
Shri Samrat Choudhary, Hon’ble Deputy CM & FM of State of Bihar, delivering inaugural speech at TIOL Tax Congress 2024.

TOP NEWS


AR not Afar by SK Rahman

VISION 360



Justice A K Patnaik, Mentor to Hon'ble Jury for TIOL Awards 2024, addressing the gathering at the event.

TII LATEST

TIOLCORPLAWS LATEST