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Income Tax Appellate Tribunal, DELHI BENCH “F”: NEW DELHI
Before: SHRI KUL BHARAT & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This appeal is filed by the assessee against the order of the ld CIT(A)-9, New Delhi dated 28.03.2018 for the Assessment Year 2014-15 in which the appeal filed by the assessee against the order passed u/s 143(3) of the Act ld DCIT, Circle-26(1), New Delhi (AO) was dismissed. 2. Therefore, the assessee is aggrieved with that order and has preferred this appeal raising following grounds of appeal:- “1. That the Assessing Officer erred in law and on facts to make the addition of Rs. 1,18,42,525/- for A.Y. 2014-15 treating the advance amount for business transactions as deemed dividend u/s 2(22)(e) of the Act.
2. That the appellant company gave1 and received the amount to M/s. Vardhman Estate & Developers Pvt. Ltd. but appellant was not the shareholder in that company during the year under consideration. Therefore, the provisions of section 2(22)(e) were not applicable.
3. That the impugned assessment order is bad in law as the Assessing Officer failed to record that even if there are common shareholders in both the companies the additions cannot be made under the provisions of deemed dividend u/s 2(22)(e) of the Act. Since appellant company herself is not share holder in Vardhman Estate Developers (P) Ltd.
4. That the Assessing Officer has erred both on facts and in law in concluding that the amount given by appellant company to M/s Vardhman Estate & Developers Pvt. Ltd. was mere a loan/advance.
5. That Ld. CIT (A) was not justified to reject the contention of appellant about transaction between both company were in nature of current adjustment accommodation account, the movement of funds were both ways.
6. That transactions were in the nature of deposits and the same were between two Corporate it was nothing but Inter Corporate Deposits (ICD) which in any case was outside the preview of Section 2(22)(e). 7. That Ld. CIT (A) was not correct in law to say Ankitech Pvt. Ltd. 340 ITR 14 (Delhi) is now no more good law. Merely because the case of National Travel Services Vs. CIT 401 ITR 154 (SC) the Hon’ble Supreme Court had occasion to refer the decision M/s. Ankitech Pvt. Ltd to larger bench. The SLP is still pending. 8. That currently judgment of Delhi High Court in the case of Ankitech Pvt. Ltd. is prevailing and it is binding upon CIT (A) to accept the same.”
The brief facts of the case shows that the assessee is a company engaged in the business of real estate. It filed its return of income on 29.11.2014 declaring income of Rs. 84,00,970/-. During the course of assessment proceedings the ld AO found that the assessee has received unsecured loan of Rs. 1,18,42,505/- from M/s. Vardhman Estates and Developers Pvt. Ltd which has common share holder having 25% share holding in both the companies as on 31.03.2014. The ld AO further noted that Vardhman Estate and Developers Pvt. Ltd who has given loan to the assessee is having accumulated profit of Rs. 4,71,66,556/- as on 31.03.2014. Therefore, the ld AO was of the view that provisions of section 2(22)(e) are applicable in the case of the assessee. The assessee was asked to reply on this aspect. The assessee submitted that provision of deemed dividend does not apply to the assessee company and same is taxable in the hands of the share holders. The ld AO rejected the contentions of the assessee and held that the assessee has taken a loan from a company in which share holders are common having substantial interest in both the companies. Therefore, the provision of section 2(22)(e) are satisfied and the additions in the hands of the company was made at Rs. 1,18,42,525/-. Assessment order u/s 143(3) of the Act was passed on 23.12.2016 determining the total income of the assessee at Rs. 2,02,43,500/-. The only addition was of deemed dividend of Rs. 1,18,42,525/-.
The assessee preferred appeal before the ld CIT(A). The ld CIT(A) held that the reliance placed by the assessee on the decision of the CIT Vs. Ankitech Pvt Ltd 340 ITR 14 is no more a good law in view of the decision of Hon'ble Supreme Court in National Travel Services Vs. CIT 401 ITR 154. He further rejected the argument of the assessee that the above addition can be made in the hands of Page | 2 the share holder only. He also rejected the argument of the assessee that receipt and payment of the transaction from the group concern was in the nature of financial accommodation for business purposes. Accordingly, he held that that when the assessee is found to have received the loan from a group concern who was having equal accumulated reserve having common share holders with substantial holding and the decision of Ankitech Pvt. Ltd subjected to review before the Hon’ble Supreme Court order, he confirmed the addition of deemed dividend in the hands of the assessee. Therefore, the assessee is aggrieved with that order and has preferred this appeal.
The case of the assessee is fixed for hearing, notice was issued to the assessee at the address given in Form No. 36, however, none appeared, and therefore, the issue is decided on the merits of the case as per facts available on record.
The ld DR was heard. He supported the order of the lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. The issue is that the assessee has received a loan of Rs. 1,18,42,525/- from M/s. Vardhman Estate and Developers Pvt. Ltd wherein, there is common substantial share holding in both the companies by 4 persons, the lender company is having the free reserve more than the amount of loan and therefore, the amount of loan was taxed in the hands of the assessee as deemed dividend by invoking the provision of section 2(22)(e) of the Act. The Hon'ble Supreme Court in the case of Ankitech Pvt. Ltd in 340 ITR 14 has clearly held that deemed dividend is chargeable to tax in the hands of the share holders. The decision of the Hon'ble Supreme Court in the case of the National Travel Services [ supra] has in fact not impacted the situation that the dividend is always taxable in the hands of the share holder and not in the hands of the person who has received loan and who is not the share holder of the company. Apparently, in this case the assessee is not the shareholder of the lender company. The share holders are four different individuals who were holding 25% of the share in the assessee as well as in the lender company. The decision of the Hon'ble Supreme Court in the case of National Travel Services the division bench has referred matter to the larger bench on the issue of applicability of deemed dividend provisions u/s 2 (22) (e) of the income tax act observing that the shareholder has only to be a person who is the beneficial owner of the shares. The movement there is a shareholder, who need not necessarily be a member of the company on its register who is the beneficial owner of the shares, provisions of Section 2 (22) (e) of the act gets attracted. Therefore the Page | 3