SHRI D. BALASUNDHARAM,COIMBATORE vs. ITO, CORPORATE WARD - 3, COIMBATORE

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ITA 2419/CHNY/2019Status: DisposedITAT Chennai20 April 2022AY 2012-133 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal noted that a separate assessment for the HUF had accepted similar additions under Section 2(22)(e) where the HUF was found to hold shares in the company. Therefore, the Tribunal accepted the assessee's contention that the shares were held by the HUF.

What were the facts?

The assessee received an unsecured loan of Rs. 100 Lacs from a company in which he held 50% shares. The Assessing Officer treated this loan as deemed dividend under Section 2(22)(e) of the Income Tax Act. The assessee contended that the shares were held by his HUF, not in his individual capacity.

What were the issues?

Whether the loan received by the assessee from a company where he held shares constitutes deemed dividend under Section 2(22)(e) when the shares are claimed to be held by the HUF.

Which sections of the Income-tax Act were involved?

Section 2(22)(e)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, CHENNAI

Before: HON’BLE SHRI V. DURGA RAO & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

For Appellant: Shri R. Venkataraman (CA) – Ld. AR, Shri ARV Sreenivasan (Addl. CIT) – Ld. DR
For Respondent: Shri ARV Sreenivasan (Addl. CIT) – Ld. DR

आयकरअपीलसं./ (िनधा�रणवष� / Assessment Year: 2012-13) D. Balasundhram ITO बनाम/ No. 15, G.D. Street, Corporate ward -3, Vs. Race Course, Coimbatore – 641 018. Coimbatore. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AKLPB-0311-J (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri R. Venkataraman (CA) – Ld. AR ��थ�कीओरसे/Respondent by : Shri ARV Sreenivasan (Addl. CIT) – Ld. DR सुनवाईकीतारीख/ : 19-04-2022 Date of Hearing घोषणाकीतारीख / : 20-04-2022 Date of Pronouncement आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of the order of learned Commissioner of Income Tax (Appeals)-1, Coimbatore [CIT(A)] dated 03.07.2019 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s. 147 of the Act on 28.12.2018. Thought the assessee has raised multiple grounds, however, Ld. AR made arguments on merits of the case. The legal grounds which challenge the reopening have not been pressed.

2 - The sole issue under the appeal is addition made by Ld. AO u/s 2(22)(e) for Rs.100 Lacs.

2.

The Ld. AR submitted that the assessee was not the beneficial owner of the shares rather the shares were held in the name of HUF entity. To support the same, the Ld. AR placed on record assessment framed by revenue in the name of HUF wherein similar additions have been made & accepted. The Ld. Sr. DR submitted that the assessee failed to establish the aforesaid fact before lower authorities. Having heard rival submissions and after due consideration of material facts, our adjudication would be as under.

3.

During assessment proceedings, it transpired that the assessee received unsecured loan of Rs.100 Lacs from a corporate entity namely M/s Srevari Alloy Steels Private Ltd. (SASPL). Since SASPL had accumulated profits and the assessee was holding 50% shares of that entity, the provisions of Sec.2(22)(e) were held applicable. The assessee defended its stand and submitted that the shares were not held in individual capacity but only the HUF entity of the assessee was the stakeholder. However, in the absence of any satisfactory documentary evidences forthcoming from assessee in this regard, Ld. AO invoked the provisions of Sec.2(22)(e) and added the loan to the income of the assessee as deemed dividend. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is in further challenge before us.

4.

Upon perusal of documents on record (page nos. 39 & 40 of paper- book), it could be seen that an assessment has been framed for the year in the name of ‘Balasundhram Doraiswamy HUF’ u/s 143(3) r.w.s.147 on 03.12.2019. In the said assessment, Ld. AO has invoked provisions of Sec.2(22)(e) in case of HUF entity by rendering a finding that HUF entity 3 - is holding 50% shares in SASPL. M/s SASPL has advanced loan of Rs.8.50 Lacs to HUF entity and since it was having accumulated reserves, the provisions of Sec.2(22)(e) have been held to be applicable. The HUF entity has already offered deemed dividend of Rs.10.50 Lacs under the head ‘income from other sources’ and the same has been accepted by Ld. AO while framing the assessment. This being so, the explanation of Ld. AR that the shares were held in the capacity of HUF was to be accepted and impugned additions would not have any legs to stand. Accordingly, by deleting the same, we allow the grounds on merits.

5.

The appeal stands partly allowed in terms of our above order.

Order pronounced on 20th April, 2022.

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