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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN, & SHRI A. MOHAN ALANKAMONY
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
the Order of the Commissioner of Income Tax (Appeals)-9, Chennai, in dated 28.02.2017 for the AY 2004-05.
2.0 Mr. N.Madhavan, ACIT, represented on behalf of the Revenue and Mr. R.M.Narayanan, FCA, represented on behalf of the assessee.
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3.0 It was submitted by the Ld.DR that Ground Nos.2.1 & 2.2 were against the action of the Ld.CIT(A) in allowing the assessee’s claim of interest on the term loan and the packing credit, especially in view of the fact that the interest has not been paid to the bank. The Ld.DR drew our attention to Page No.3, Para Nos.5.1 & 5.2 of the Assessment Order wherein the interest on the term loan and the packing credit has been disallowed on the ground that the same had not been paid. It was a submission that the Ld.CIT(A) in Para No.7.3 of his order at Page No.9, has directed the AO to call for the bank statements and the packing credit statements from the assessee in order to examine whether the same has been debited by the bank and if the same has been debited, delete the addition. It was a submission that the order of the Ld.CIT(A) was liable to be reversed.
3.1 In reply, the Ld.AR supported the order of the Ld.CIT(A)
3.2 We have considered the rival submissions. A perusal of the Para No.7.3 at Page No.9 of the order of the Ld.CIT(A) shows that the Ld.CIT(A) has restored the issue to the file of the AO for examination as to whether the amount claimed as interest, has been debited by the bank, if the amount has been debited, admittedly, the same to be treated as having been paid. This being so, we find no error in the findings of the Ld.CIT(A) on this issue. Consequently, the same stands upheld. In the result, Ground Nos.2.1 & 2.2 of the Revenue’s appeal stands dismissed.
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4.0 In regard to Ground Nos.2.3 to 2.9, it was submitted by the Ld.DR that the issue was against the action of the Ld.CIT(A) in deleting the addition representing the deemed dividend u/s.2(22)(e) of the Act. It was a submission that the assessee had received a loan of Rs.62,00,000/- from M/s.Estee Auto Pressings Pvt. Ltd. It was a submission that one of the shareholders of the assessee company was holding 41.90% shares in the lender company and consequently, the deemed dividend had rightly been assessed in the hands of the assessee.
4.1 In reply, the Ld.AR drew our attention to the decision of the Hon’ble Delhi High Court in the case of M/s.Ankitech (P.) Ltd. reported in [2011] 11 taxmann.com 100 (Delhi), wherein it has been held as follows:
Further, it is an admitted case that under normal circumstances, such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by legal fiction created under Section 2(22)(e) of the Act. We have to keep in mind that this legal provision relates to ‘dividend’. Thus, by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to ’shareholder’. When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under Section 2(22)(e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under Section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the intention of the Legislature was to tax such loan or advance as deemed dividend at the hands of ‘deeming shareholder’, then the Legislature would have inserted deeming provision in respect of shareholder as well, that has not happened. Most of the arguments of the learned counsels for the Revenue would stand answered, once we look into the matter from this perspective.
4.2 It was a submission that the findings of the Hon’ble Delhi High Court has been upheld by the Hon’ble Supreme Court in the case of M/s.Madhur Housing and Development Co., in Civil Appeal No.3961 of 2013 dated 05.10.2017 wherein the Hon’ble Supreme Court has held as follows:
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The impugned judgment and order dated 11.05.2011 has relied upon a judgment of the same date by a Division Bench of the High Court of Delhi in of 2009. Having perused the judgment and having heard arguments, we are of the view that the judgment is a detailed judgment going into Section 2(22)(e) of the Income Tax Act which arises at the correct construction of the said Section. We do not wish to add anything to the judgment except to say that we agree therewith.
4.3 It was a submission that the issue is squarely covered by the decision of the Hon’ble Supreme Court, the findings of the Ld.CIT(A) was liable to be upheld.
4.4 We have considered the rival submissions. As it is noticed that the issue of the deemed dividend in the Revenue’s appeal is squarely covered by the Hon’ble Supreme Court in the case of M/s.Madhur Housing and Development Co., referred to supra, respectfully following the decision of the Hon’ble Supreme Court, the findings of the Ld.CIT(A) on this issue stands confirmed. Consequently, Ground Nos.2.3 to 2.9 of the Revenue’s appeal are dismissed.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the Open Court on January 16, 2018 at Chennai.