DCIT (OSD) 8(2), MUMBAI vs. ILLUSION DENTAL LABORATORY P.LTD, MUMBAI

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ITA 4617/MUM/2014Status: DisposedITAT Mumbai29 February 2016AY 2010-115 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The tribunal held that the CIT(A) correctly deleted the addition as the assessee company was not a shareholder of the lending company. Therefore, the loan received could not be treated as deemed dividend.

What were the facts?

The assessee received a loan of Rs. 1,36,01,530/- from Laxmi Dental Export Pvt. Ltd. The Assessing Officer treated this loan as 'deemed dividend' under Section 2(22)(e) of the Income Tax Act, 1961. The CIT(A) deleted this addition.

What were the issues?

Whether a loan received by a company from another company, where common shareholders exist but the recipient is not a shareholder of the lender, can be treated as 'deemed dividend' under Section 2(22)(e).

Which sections of the Income-tax Act were involved?

Section 2(22)(e)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI

Before: SHRI G.S.PANNU, AM & SHRI AMARJIT SINGH, JM

For Appellant: Shri None
Hearing: 15.02.2016Pronounced: 29.02.2016

PER AMARJIT SINGH, JM:

This is an appeal against the order dated 17.04.2014 passed by the Commissioner of Income Tax (Appeals) 17, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the assessment year 2010-11. ITA No.4617/M/14 A.Y. 2010-11

2.

The brief facts of the case are that the assessee e-filed its return of income for A.Y. 2010-11 on 30.09.2010 declaring total income to the tune of Rs.33,41,380/-. The said return of income processed under section 143(1) of the Income Tax Act, 1961( in short “the Act”) on 21.05.2011 accepting its returned income. The case was selected for scrutiny and notices u/s. 143(2) dated 24.08.2011 was issued and was duly served upon the assessee on 14.09.2011. Thereafter, notice under section u/s.142(1) of the Act dated 14.06.2012 was issued and was served upon the assessee calling for details. In response to the said notices, Mr. Abhay Mori, Chartered Accountant appeared on behalf of the assessee. During the assessment year, the assessee received loan of Rs.1,36,01,530/- from Laxmi Dental Export Pvt. Ltd. On examination of the accounts books and after comparing the share holding patterns of both the companies. It was observed that Shri Sameer Merchant and Shri Rajesh Khakar were common shareholders in both companies. The details of the same are as under:-

Name of the Shareholder Illusion Dental Laboratory Laxmi Dental Pvt. Ltd. Exports Pvt. Ltd. (% of shareholding) (%of shareholding) Sameer Merchant 29% 20% Rajesh Khakar 45% 30% A.Y. 2010-11

Thereafter on seeing the record of M/s. Laxmi Dental Exports Pvt. Ltd., the reserve and surplus of the company was found to be Rs.9,88,14,120/-. Since advances outstanding to a holding company having substantial interest in the assessee-company and having more than 10% of voting power, the recipient holding company M/s. Illusion Dental Laboratory Pvt. Ltd. was liable to pay the income tax on outstanding loan amount of Rs.1,36,01,530/- as “Deemed dividend” in view of the provisions contained in section 2(22)(e) of the Act. Subsequently, the assessee preferred an appeal before the learned CIT(A) and learned CIT(A) deleted the said addition.

3.

The sole point which has been raised before us is that the learned CIT(A) was earned in deleting the addition of Rs.1,36,01,530/- u/s. 2(22)(e) of the Act. The learned representative of the department has argued that the case of the assessee has duly been covered by the CBDT Circular No.495 of 2nd September 1987, therefore in the said circumstances the learned CIT(A) has wrongly deleted the addition of Rs.1,36,01,530/- u/s. 2(22)(e) of the Act, and requested to set aside the order in question. On the other hand learned representative of the assessee has refuted the said contentions. In view of the contention raised by the parties and going through the record, it is observed that the assessee company received the loan to the tune of Rs.13,60,530/- from Laxmi Dental Export Pvt. Ltd.. The Assessing Officer assessed the said loan as deemed dividend and the A.Y. 2010-11 A.Y. 2010-11

of the said circumstances, the appeal of the Revenue is hereby ordered to be dismissed.

4.

Accordingly, appeal of the Revenue is hereby dismissed.

Order pronounced in the open court on 29th February, 2016 (AMARJIT SINGH) (G.S.PANNU) लेखा सद"य / ACCOUNTANT MEMBER "या"यक सद"य/JUDICIAL MEMBER मुंबई Mumbai; "दनांक Dated : 29th February, 2016 MP MP MP MP

आदेश क" ""त"ल"प अ"े"षत/Copy of the Order forwarded to : 1. अपीलाथ" / The Appellant

2.

""यथ" / The Respondent. 3. आयकर आयु"त(अपील) / The CIT(A)- 4. आयकर आयु"त / CIT

5.

"वभागीय ""त"न"ध, आयकर अपील"य अ"धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड" फाईल / Guard file. आदेशानुसार/ BY ORDER, स"या"पत ""त //// उप/सहायक पंजीकार (Dy./Asstt.

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