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Income Tax Appellate Tribunal, “A” BENCH, CHENNAI
Before: SHRI A.MOHAN ALANKAMONY & SHRI S.S. GODARA
आदेश / O R D E R
PER S.S. GODARA, JUDICIAL MEMBER
This assessee’s appeal for assessment year 2008-09; emanates from order dated 17.12.2013 passed by the Commissioner of Income Tax (Appeals)-II, Chennai in sustaining I.T.A.No890/Mds/2014. :- 2 -: deemed dividend’s addition of � 32,14,906 u/s. 2(22)(e), in proceedings under section 143(3) of the Income Tax Act, 1961 [in short the “Act”].
The assessee is an associate concern of M/s. Fairmacs group of companies engaged in the businesses of logistics, ship handling, imports and exports. It had filed its ‘return’ on 25.12.2008 stating income of �82,037/--. The same was ‘summarily’ processed.
The Assessing Officer took up ‘scrutiny’. He noticed from the assessee’s books, balance sheets and other details that unsecured loans had been obtained from its group entity Fairmacs Shipping & Transport Services Pvt. Ltd. S/Sh. D.R. Shete and Sunil R. Shete hold 50% each of the assessee’s shareholdings and 75% : 25% in case of the lender entity. The latter entity had accumulated profits of �3,76,48,555/- as on 31.03.2008. The Assessing Officer invoked section 2(22)(e) and viewed the impugned loans as deemed dividends u/s. 2(22)(e) of the Act resulting in the addition in question.
The Commissioner of Income Tax (Appeals) also affirmed the Assessing Officer’s findings. The assessee argued in the lower appellate proceedings that it itself is not a shareholder in the lender I.T.A.No890/Mds/2014. :- 3 -: entity to invoke section 2(22) (e). The lower appellate authority held the assessee to be ‘’ a concern in which the shareholders of the lender entity are interested’’. This leaves the assessee aggrieved.
We have heard both sides and gone though the case file.
Factual backdrop of the case already stands narrated. The assessee reiterates its argument raised in the lower appellate proceedings that it is not a shareholder in the lender company. The Revenue fails to convert this factual position. We find that a Special Bench of the ‘tribunal’ in Bhaumik Colour [2009] 313 ITR 146 Mumbai has held in the very circumstances that section 2(22) (e) does not apply in case of common shareholders and the debtor entity itself should be a shareholder in the creditor entity. The parties inform us that hon’ble Bombay high court has affirmed this decision. The hon’ble Delhi high court in CIT vs ANKITECH Private Limited decided on 11.05.2011 has also taken a similar view. We draw support therefrom and hold that the authorities below have erred in adding impugned unsecured loans of �32,14,906/- as deemed dividend u/s.2(22)(e) of the Act despite the fact that the assessee is not a shareholder in the lender company. It is made clear that the Assessing Officer shall be at liberty to add the aforesaid loans as I.T.A.No890/Mds/2014. :- 4 -: deemed dividends in the hands of the above said shareholders as per law. The assessee’s ground succeeds.
The assessee’s appeal is allowed.
Order pronounced on Friday, the 27th of February, 2015, at Chennai.