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Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD
Before: SHRI PRADIP KUMAR KEDIA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER PRADIP KUMAR KEDIA - AM: The captioned appeal by the Revenue is directed against the order of the Commissioner of Income Tax(Appeals)-1, Ahmedabad [CIT(A) in short] dated 03/03/2015 in the matter of assessment order dated
ITA No. 1707/Ahd/2015 DCIT vs. Casil Health Products Ltd. Asst.Year –2004-05 - 2 - 30/12/2011 passed by the AO s.143(3) rws 147 of the Act relevant to Assessment Year (AY) 2004-05.
The grounds of appeal raised by the Revenue read as under:- The CIT(A) has erred in law and on facts by deleting the addition of Rs.1,99,78,921/- towards deemed dividend u/s.2(22)(e) despite the fact that the advance given by Cadila Pharmaceuticals Ltd. to ass company is covered by definition of deemed dividend and such a loan is required to be treated as deemed dividend in the hands of the assessee as per the provisions of section 2(22)(e) of the Act.
On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the Assessing Officer to the extent mentioned above since the assessee has failed to disclose his true income/book profit.
The Ld.Senior Counsel for the assessee at the outset submitted that the issue involved in the Revenue’s appeal is no longer res itegra. Identical issue came up for determination in assessee’s own case relevant to AY 2006-07 in ITA No.1429/Ahd/2014 order dated 15/05/2017 wherein the order of the CIT(A) that the loans/advances received by the assessee does not fall within the purview under s.2(22)(e) of the Act and thus not susceptible to tax was approved by the Coordinate Bench.
The Ld.DR relied upon the order of the AO.
ITA No. 1707/Ahd/2015 DCIT vs. Casil Health Products Ltd. Asst.Year –2004-05 - 3 - 5. We have considered the rival submissions. The taxability of loans/advances received by the assessee under s.2(22)(e) of the Act is the subject matter of controversy in the present appeal. We note the plea on behalf of the assessee that it is not the shareholder of the lender-company per se. It is well settled that the recourse under s.2(22)(e) can be taken only in the hands of shareholder of lender-company and not in the hands of a mere recipient loans/advances. The relevant operative para of the Tribunal order (both of us are party to the aforesaid decision) dealing with the issue in assessee’s own case is reproduced hereunder for the sake of ready reference.
“6. The short controversy in the present case is whether the assessee- company can be taxed towards the loans/advances received from the lender by virtue of deeming fiction under s.2(22)(e) of the Act where the assessee- company itself is not a shareholder of the lending company, notwithstanding the fact that both the companies (lender-company and assessee-company) had common shareholders having substantial interest in both the companies.
6.1 As observed by the Hon’ble Supreme Court in the case of Gopal And Sons (HUF) vs. CIT (Supreme Court) in Civil Appeal No. 12274 of 2016 arising out of SLP (C) No. 22059 of 2015, section 2(22)(e) of the Act creates a fiction thereby bringing any amount paid otherwise than as a dividend into the net of dividend under certain circumstances. It gives an artificial definition of ‘dividend’. It does not take into account that dividend which is actually declared or received. The dividend taken note of by this provision is a deemed dividend and not a real dividend. Loans or advances given by company to its shareholder is actually not a dividend. In fact, such a loan to a shareholder
ITA No. 1707/Ahd/2015 DCIT vs. Casil Health Products Ltd. Asst.Year –2004-05 - 4 - has to be returned by the shareholder to the company. It does not become income of the shareholder. Notwithstanding the same, for certain purpose, the legislature deemed such a loan/advance as of ‘dividend’ and made it taxable at the hands of the said shareholder. It is therefore ostensible that such a provision which is a deeming provision and fictionally creates certain kind of receipts as dividends is to be given strict interpretation. It follows that unless all the conditions contained in the said provision are fulfilled the receipt cannot be deemed as dividend.
6.2. It is an undisputed fact that the assessee-company is not a shareholder per se in the lender company of the Act. We note that the CIT(A) has decided the issue in favour of assessee on the ground that the deemed income can be taxed only in the hands of shareholder of the lending company notwithstanding the fact that both the lender-company as well as the assessee-company has common shareholder having substantial interest in both the companies. For this proposition, the CIT(A) relied upon certain judicial precedents as noted in the operative para quoted above.
6.3. We find that the legal fiction in section 2(22)(e) enlarges the definition of dividend but does not extend to or broaden the concept of a ‘shareholder’. As the assessee is not a shareholder of the lender-company, the receipt is not susceptible to tax under s.2(22)(e) in its hands in view of long line of judicial precedents including Baumik Colour Pvt.Ltd. 313 ITR 146 (Bom)[SB] approved in Universal of Medicare 324 363 (Bom) and CIT vs. Impact Containers (P) Ltd. (2014) 367 ITR 346 (Bom). In view of the judicial precedents governing the issue, we find no reason to interfere with the order of the CIT(A).
In the result, the appeal of the Revenue is dismissed.”
ITA No. 1707/Ahd/2015 DCIT vs. Casil Health Products Ltd. Asst.Year –2004-05 - 5 -
In consonance with the aforesaid order, we do not find any infirmity in the order of the CIT(A).
In the result, appeal of the Revenue is dismissed. This Order pronounced in Open Court on 16 / 10 /2017
Sd/- Sd/- (महावीर �साद) (�द�प कुमार के�डया) �या�यक सद�य लेखा सद�य ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 16/ 10 /2017
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-1, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 11.10.17 (dictation-pad 4- pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …12.10.17 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….16.10.17 7. Date on which the file goes to the Bench Clerk…………………16.10.17 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………