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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANOJ KUMAR AGGARWAL & SHRI MANOMOHAN DAS
per details of Shareholding pattern as placed on record, it could be
7 -: seen that Shri P. Ravindran was holding more than 57% of shareholding whereas remaining shareholding is held by another 7 members. It is undisputed fact that there is reduction in the asset with corresponding reduction in reserve and surplus which amount to distribution of the accumulated profits entailing release of assets by the company to its shareholders. Accordingly, the assessee has been held liable to pay dividend distribution tax in terms of Sec.115-O of the Act.
Upon further appeal, Ld. CIT(A) observed that (22) "dividend" includes any distribution by a company of accumulated profits, whether capitalized or not, if such distribution entails the release by the company to shareholders of all or any part of the assets of the company. The Ld. CIT(A) also considered the cited decision of Hon'ble Gujarat High Court in the case of Shashibala Navnitlal v. CIT (1964)
54 ITR 478 which held that to attract the provisions of Sec.2(22)(a), there must be distribution of accumulated profits and it must entail the release of all or any assets of the Company. Considering the facts of the case, the accumulated profits were reduced by the amount of loans written-off. The loans were receivable from a shareholding having substantial shareholding. Therefore, the conditions of Sec.
2(22)(a) were satisfied. The argument that payment of loan was in earlier years was also rejected since the amount will be taxable only
8 -: when the right to repay was extinguished. We concur with the adjudication of Ld. CIT(A) since the conditions of Sec.2(22)(a) were duly satisfied and the provisions of Sec.115-O were attracted in assessee’s case. The decision of Hon’ble Calcutta High Court in CIT vs. Jamunadas Srinivas Private Ltd. (76 ITR 656) renders no assistance to the case of the assessee since the decision has been rendered in different context. The argument of Ld.AR that there should be distribution to all the shareholders also do not impress us since it is not the requirement of the law that similar distribution should be given to all the shareholders. Therefore, the arguments thus raised stand rejected.
At the same time, upon perusal of additional grounds of appeal, it is apparent that a corresponding addition has been made by revenue u/s 2(22)(e) in earlier assessment years in the case of Shri P.
Ravindran and the assessee seeks exclusion of the same from impugned addition on the ground that there would be double addition.
We are of the considered opinion that the provisions of Sec. 2(22)(a) and 2(22)(e) are mutually exclusive. Therefore concurring with the same, we admit the additional grounds and restore the impugned matter back to the file of Ld. AO to exclude the amounts already taxed u/s 2(22)(e). The ground raised thus stand partly allowed.
9 -: 8. The appeal stand partly allowed in terms of our above order. Order pronounced on 12th July, 2023.