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Facts
Assessee, M/s. Linde India Ltd., received a loan of Rs. 100 Crore from M/s. Linde Engineering India Private Limited (M/s. LEIPL). The Pr. CIT initiated revision proceedings under Section 263 to treat this loan as deemed dividend under Section 2(22)(e), arguing that both companies are fellow subsidiaries of a common holding company. The original assessment was completed under Section 143(3).
Held
The Tribunal noted that the assessee was not a shareholder of the lending company, M/s. LEIPL. Citing the Special Bench decision in Bhaumik Colour (P) Ltd. and its approval by the Calcutta High Court, the Tribunal ruled that Section 2(22)(e) provisions for deemed dividend are applicable only when the lendee is a shareholder of the lender. Consequently, the loan could not be treated as deemed dividend, and the Pr. CIT's order under Section 263 was quashed as unsustainable.
Key Issues
Whether a loan received by the assessee from a fellow subsidiary, where the assessee is not a shareholder of the lending company, can be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act, thereby justifying a revision order under Section 263 by the Pr. CIT.
Sections Cited
263, 143(3), 2(22)(e)
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Income Tax Appellate Tribunal, “C” BENCH KOLKATA
Before: SHRI GEORGE MATHAN & SHRI RAKESH MISHRA
Present for: Appellant by : Shri Ketan Ved, AR & Shri Alpesh Gupta, AR Respondent by : Shri Praveen Kishore, CIT, DR Date of Hearing : 26.02.2025 Date of Pronouncement : 26.02.2025 O R D E R Per Bench : This is an appeal filed by the assessee against the revision order of the Ld. Pr. Commissioner of Income Tax , Kolkata-2 [hereinafter referred to as “the Ld. Pr. CIT”] vide order no. ITBA/REV/F/REV5/2022- 23/1051751459(1) dated 31.03.2023 passed u/s. 263 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2016-17.
Shri Ketan Ved, AR & Shri Alpesh Gupta, AR appeared on behalf of the assessee and Shri Praveen Kishore, CIT, DR appeared on behalf of the revenue.
It was submitted by the Ld. AR that the assessee company had received a loan of Rs.100 Crore from M/s. Linde Engineering India Private M/s. Linde India Ltd. AY: 2016-17 Limited (M/s. LEIPL). It was the submission that the original assessment in the case of the assessee came to be completed u/s. 143(3) of the Act on 30.03.2021. The Ld. Pr. CIT invoked his powers u/s. 263 of the Act and issued a show cause notice on 16.03.2023 wherein the Ld. Pr. CIT has raised the issue that the loan received by the assessee from M/s. LEIPL and M/s. Linde India Ltd. (M/s. LIL) being fellow subsidiary of the holding company M/s. Linde AG (Germany) was deemed dividend. It was submitted by the Ld. AR that as per the decision of the Special Bench of the ITAT in the case of ACIT Vs. Bhaumik Colour (P) Ltd. 118 ITD 1 (Mum. SB), deemed dividend was liable to be taxed only when the lendee is the shareholder of the lender company. It was a submission that in the present case the assessee is not a shareholder of M/s. LEIPL. It was thus submitted that in view of the decision of the Hon’ble Special Bench of the ITAT in the case of Bhaumik Colour (P) Ltd. (supra), the loan received by the assessee of Rs. 100 Crore is not hit by the provisions of deemed dividend u/s. 2(22)(e) of the Act. It was a further submission that the principles laid down by the Hon’ble Special Bench of the ITAT in the case of Bhaumik Colour (P) Ltd. (supra) have been approved by the Hon’ble jurisdictional Calcutta High Court in the case of Apeejay Pvt. Ltd. in GA No. 1/2024 dated 01.05.2024. It was the prayer that the order passed u/s. 263 of the Act was in itself erroneous and is liable to be quashed.
In reply, the Ld. CIT, DR vehemently supported the order of the Ld. Pr. CIT. It was the submission that loans have been given between shareholding by jugglery of the accounts and, therefore, sec. 2(22)(e) of the Act should be made applicable.
We have considered the rival submissions. A perusal of the facts of the present case clearly shows that the assessee is not a shareholder of M/s. LEIPL, who has given the loan of Rs. 100 Crore to the assessee. As this fact remains uncontroverted and as the principles laid down by the Hon’ble Special Bench of the ITAT in the case of Bhaumik Colour (P) Ltd. M/s. Linde India Ltd. AY: 2016-17 (supra) is squarely applicable and the same have also been upheld by the Hon’ble jurisdictional Calcutta High Court in the case of Apeejay Pvt. Ltd. (supra), therefore, the loan of Rs. 100 Crore cannot be treated as deemed dividend. It is found that the order passed u/s. 263 of the Act by the Ld. Pr. CIT, Kolkata-2 is unsustainable and the same is hereby quashed.
In the result, the appeal of assessee is allowed. Order pronounced in the open court.