JHV STEELS LTD.,KOLKATA vs. D.C.I.T., CENTRAL CIRCLE - 2(2), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘B’ BENCH AT KOLKATA Before SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER ITA No(s). 1274/KOL/2024 Assessment Year(s) 2016-17 JHV Steels Ltd. DCIT, CC-2(2), Kolkata Vs. (Appellant) (Respondent) PAN: AACCJ1814E Appearances: Assessee represented by : Rajeeva Kumar, Advocate. Department represented by : Dr. Anup Biswas, CIT, DR. Date of concluding the hearing : 11.05.2026 Date of pronouncing the order : 22.06.2026 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Pr. Commissioner of Income Tax-Kolkata-1 [hereinafter referred to the ‘Ld. PCIT'] passed u/s 263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2016-17 dated 27.03.2024. 1.1 The Registry has informed that the appeal is barred by limitation by 11 days. The assessee has filed a petition for condonation of delay explaining the reasons that the memorandum of appeal along with the required documents for the filing of appeal were given to the tax consultant on 23.05.2024, however, due to his father's illness, the tax consultant left for his native place in Odisha and therefore he could not file the appeal in time. After perusing the same, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from

“8. We have considered the submissions made, gone through the facts of the case and perused the record and the order of the Ld. CIT(A). It has been held in Commissioner of Income Tax. vs. Madhur Housing & Development Co. [2018] 93 taxmann.com 502 (SC)/[2018] 401 ITR 152 (SC)[05-10-2017] in which the order in the case of Commissioner of Income-tax v. Ankitech (P.) Ltd. [2011] 11 taxmann.com 100 (Delhi) by the Hon'ble High court had been affirmed which had stated that in which it was held that (i) legal fiction created under section 2(22)(e) enlarges definition of dividend only and it cannot be extended further for broadening concept of shareholders, (ii) a concern in which shareholder of payer company has at least 20 per cent of voting power and loan or advance under this category is given admittedly not to a shareholder/member of payer company, under no circumstances, said concern can be treated as shareholder/member receiving dividend, (iii) in a case where conditions stipulated in section 2(22)(e) treating loan and advance as deemed dividend are established, revenue can treat dividend income at hands of shareholders and tax them accordingly, and (iv) where loans and advances are given in normal course of business and transaction in question benefits both payer and payee companies, provisions of section 2(22)(e) cannot be invoked. 9. In this case, since Shri Heera Lal Jaiswal was holding 95.93% share of JHV Construction Co. Pvt. Ltd. and 87.32% share of Welcome Distilleries Private Limited and M/s. Welcome Distilleries Private Limited had accumulated profits, the loan received by the concern in which the shareholder of the assessee company had substantial interest was to be assessed as deemed dividend in the hand of the shareholder viz. Shri Heera Lal Jaiswal and the same could not be treated as deemed dividend in the hand of the company which had received the loan as the company was not the registered shareholder. Hence, the order of the Ld. Pr. CIT being based upon incorrect appreciation of law, the order of the Ld. AO being neither erroneous nor prejudicial to the interests of the Revenue in the case of the assessee, therefore, the order u/s 263 of the Act of the Ld. Pr. CIT is hereby quashed and Ground No. 1 of the appeal is allowed. Ground No. 2 is not adjudicated as the Ld. Pr.CIT has addressed this issue in his order and the Ld. AO had also passed the order u/s 153A of the Act which is under appeal.” 7.1 The Ld. DR vehemently argued that since the Ld. AO had failed to carry out the requisite enquiries, the Ld. Pr. CIT was justified in

“14. From the fact it transpires that Welcome Distilleries Private Limited paid an amount of Rs 6,07,00,000/- to JHV Steels Ltd, wherein Shri Hira Lal Jaiswal was a common shareholder of both the companies. The company's business was not money-lending and it could not be said that the loans had been advanced by the company in the ordinary course of its business. In such circumstances, in the instant case, all the amounts advanced to the assessee under the head unsecured loans and advances fall squarely within the ambit of section 2(22)(e) of the Act. 15. The Hon’ble Supreme Court while delivering judgement in the case of National Travel Services v. Commissioner of Income Tax, Delhi, VIII [2018] 89 taxmann.com 332 (SC) defines the shareholder as follows: "This is why "shareholder" now, post amendment, has only to be a person who is the beneficial owner of shares. One cannot be a registered owner and beneficial owner in the sense of a beneficiary of a trust or otherwise at the same time. It is clear therefore that the moment there is a shareholder, who need not necessarily be a member of the Company on its register, who is the beneficial owner of shares, the Section gets attracted without more. To state, therefore, that two conditions have to be satisfied, namely, that the shareholder must first be a registered shareholder and thereafter, also be a beneficial owner is not only mutually contradictory but is plainly incorrect. Also, what is important is the addition, by way of amendment, of such beneficial owner holding not less than 10% of voting power. This is another indicator that the amendment speaks only of a beneficial shareholder who can compel the registered owner to vote in a particular way, as has been held in a catena of decisions starting from Mathalonev. Bombay Life Assurance Co. Ltd. [1954] SCR 117" So the contention of the assessee that as the assessee is not shareholder of Welcome Distilleries Pvt Ltd, the loan transaction should not be treated as deemed dividend, is not tenable. 16. The following judicial pronouncement may also be referred in this regard: