NAMADHARI SEEDS PVT. LTD. vs. DCIT,

PDF · subscribers
ITA 1746/BANG/2013Status: DisposedITAT Bangalore20 February 2015AY 2003-043 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 held that the addition under Section 2(22)(e) cannot be made in the hands of the assessee firm. This was based on the jurisdictional High Court's decision in the assessee's own case for subsequent years, which clarified that the loan must be advanced to a registered shareholder.

What were the facts?

Shri Thakur Uday Singh, a significant stakeholder in both the assessee firm and a private limited company, took a substantial loan from the company. The Assessing Officer treated this loan as deemed dividend in the hands of the assessee firm.

What were the issues?

Whether a loan taken by a partner from a company, in which the partner has a substantial interest, can be treated as deemed dividend in the hands of the assessee firm under Section 2(22)(e) of the Income-tax Act.

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, ‘C’ BENCH: BANGALORE

Before: SMT. P. MADHAVI DEVI & SHRI ABRAHAM P GEORGE

For Appellant: Shri H.N.Khincha, CA
Hearing: 10/02/2015Pronounced: 20/02/2015

This is an appeal filed by the assessee against the order of the CIT(A)-I, Bangalore, dated 23/2/2013 confirming the addition made by the Assessing Officer (AO) u/s 2(22)(e) of the Income- tax Act, 1961 [hereinafter referred to as 'the Act' for short] for the assessment year 2003-04.

M/s.Namdhari Seeds. Page 2 of 3 2. Brief facts relating to this issue are that Shri Thakur Uday Singh who holds 64% stake in the company M/s.Namdhari Seeds Pvt. Ltd., and also has substantial interest in the assessee- firm i.e. M/s.Namdhari Seeds, had taken a loan of Rs.2,02,74,802/- from the company. The AO treated the same as deemed dividend u/s 2(22)(e) of the Act, in the hands of the firm. On appeal, the CIT(A) has confirmed the order of the AO and the assessee is in second appeal before us.

3.

Learned counsel for the assessee, while reiterating the assessee’s submissions before the authorities below, has placed reliance upon the decision of the Hon’ble High Court of Karnataka in the assessee’s own case for the assessment years 2006-07 to 2008-09 in to 324/2012 wherein it was held that it is only where loan is advanced by the company to the registered shareholder and where other conditions set out in sec.2(22)(e) are also satisfied, that the amount of loan would be liable to be regarded as deemed dividend within the meaning of sec.2(22)(e) of the Act. The learned counsel for the assessee submitted that in the relevant assessment year also, it is the partner and not the assessee-firm who has taken loan from the company and also that the assessee-firm is not the registered shareholder of the company. The learned Departmental Representative, however, supported the orders of the authorities below.

M/s.Namdhari Seeds. Page 3 of 3 4. Having regard to the rival contentions and the decision of the jurisdictional High Court in the assessee’s own case for the subsequent assessment years, we hold that addition u/s 2(22)(e) cannot be made in the hands of the assessee.

5.

In the result, the assessee’s appeal is allowed.

More judgments on Section 2(22)(e)

All 1,757 judgments and leading authorities on Section 2(22)(e) →

Recent GST High Court judgments

Search GST case law →