ACIT, CHENNAI vs. TALLBOY STATIONERY PRIVATE LIMITED, CHENNAI
What did the Tribunal hold?
The Tribunal held that if a loan is advanced for the benefit of shareholders, any deemed dividend should be assessed in the hands of the shareholders, not the recipient company, if the recipient company is not a shareholder of the lending company.
What were the facts?
The Revenue appealed against the deletion of an addition made by the Assessing Officer under Section 2(22)(e) of the Income-tax Act. The addition was for a loan received by the assessee-company from another company with common directors and shareholders.
What were the issues?
Whether a loan received by a company from another company with common shareholders can be treated as deemed dividend in the hands of the recipient company under Section 2(22)(e) when the recipient company is not a shareholder of the lending company.
Which sections of the Income-tax Act were involved?
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- Commissioner of Income Tax v. Printwave Services P. Ltd.26 citing373 ITR 665 · 2015 · HC
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
Both the appeals of the Revenue are directed against the respective orders of the Commissioner of Income Tax (Appeals)-11, Chennai, dated 14.10.2015, for the assessment years 2011-12 and 2008-09. Since common issue arises for consideration in both these appeals, we heard these appeals together and disposing of the same by this common order.
Sh. A.B. Koli, the Ld. Departmental Representative, submitted that the only issue arises for consideration in both the appeals is with regard to addition made by the Assessing Officer under Section 2(22)(e) of the Income-tax Act, 1961 (in short 'the Act'). According to the Ld. D.R., the Assessing Officer found that the assessee received a loan of `3,92,05,903/- from M/s Chennai Micro Print Pvt. Ltd. The assessee-company and M/s Chennai Micro Print Pvt. Ltd. had common Directors. One Shri S. Ramu is holding 50% shares in the assessee-company and also holding 50% shares in Chennai Micro Print Pvt. Ltd. Similarly, one Shri V.
Ramesh is holding 50% shares in the assessee-company and 50% in Chennai Micro Print Pvt. Ltd. Since both the companies are having common shareholders, the Assessing Officer found that the loan was advanced for the benefit of shareholders. Therefore, the same was treated as dividend under Section 2(22)(e) of the Act. The Ld. D.R. further submitted that Chennai Micro Print Pvt. Ltd. has accumulated profits of `7,98,16,378/- as on 01.04.2010 and their accumulated profits as on 31.103.2011 was `9,53,94,286/-.
Therefore, the CIT(Appeals) is not justified in deleting the addition made by the Assessing Officer.
On the contrary, Shri G. Baskar, the Ld.counsel for the assessee, submitted that receiving the loan by the assessee- company is not in dispute. Both the companies, namely, assessee- company and Chennai Micro Print Pvt. Ltd. had common shareholders. When the loan was advanced for the benefit of the shareholders, the addition has to be made only in the hands of shareholders and not in the hands of others. In the case before us, according to the Ld. counsel, the assessee-company is not a shareholder of Chennai Micro Print Pvt. Ltd. Therefore, the CIT(Appeals) by placing reliance on the judgment of Madras High Court in CIT v. Printwave Services P. Ltd. (2015) 373 ITR 665 and the decision of this Bench of the Tribunal in assessee's own case for assessment year 2010-11 in deleted the addition made by the Assessing Officer.
We have considered the rival submissions on either side and perused the relevant material available on record. As rightly submitted by the Ld.counsel for the assessee, receipt of loan by the assessee-company from M/s Chennai Micro Print Pvt. Ltd. is not in dispute. It is also not in dispute that both the companies have common shareholders. The only contention of the assessee is that if at all any deemed dividend is to be assessed, it has to be assessed only in the hands of shareholders and not in the hands of other persons. This is what exactly held by the Madras High Court in Printwave Services P. Ltd. (supra), which was followed by this Tribunal in the assessee's own case for assessment year 2010-11 in I.T.A. No. 562/Mds/2015. In view of the above, this Tribunal is of the considered opinion that the deemed dividend has to be assessed only in the hands of the shareholders for whose benefit the loan was given to the assessee-company. The assessee- company admittedly is not a shareholder of Chennai Micro Print Pvt. Ltd. Therefore, there cannot be any addition under Section 2(22)(e) of the Act in the hands of assessee-company. Therefore, this Tribunal do not find any reason to interfere with the orders of the CIT(Appeals) and accordingly, the same are confirmed.
In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced on 29th April, 2016 at Chennai.
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