TEAM TRANS LOGISTICS PRIVATE LIMITED,CHENNAI vs. ACIT, CHENNAI

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ITA 1/CHNY/2015Status: DisposedITAT Chennai05 February 2015AY 2010-20113 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 deemed dividend under Section 2(22)(e) can only be assessed in the hands of the beneficial or registered shareholder. Since the assessee did not hold any shares in the lending company, the addition was not sustainable.

What were the facts?

The assessee received a loan of ₹50 lakhs from M/s Beekeyer Freights Pvt. Ltd., a closely held company in which the assessee's directors held more than 10% shares. The Assessing Officer treated this loan as deemed dividend under Section 2(22)(e) of the Income-tax Act.

What were the issues?

Whether a loan received by a company from another closely held company, where the directors of the recipient company hold shares in the lending company, can be treated as deemed dividend in the hands of the recipient company.

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, CHENNAI

Before: SHRI B.R. BASKARAN & SHRI VIKAS AWASTHY

For Respondent: Shri A.V. Sreekanth, JCIT
Hearing: 05.02.2015Pronounced: 05.02.2015

आदेश /O R D E R

PER B.R. BASKARAN, ACCOUNTANT MEMBER:

1.

The appeal filed by the assessee is directed against the order dated 27.10.2014, passed by the Ld. Commissioner of Income Tax (Appeals)-III, Chennai and it relates to assessment year 2010-

11.

The assessee is aggrieved by the decision of Ld. CIT(Appeals) in confirming the assessment of `50 lakhs as deemed dividend in (in short 'the Act').

2.

We heard the parties and perused the record. The Assessing Officer noticed that the assessee has received a loan of ` 50 lakhs from a concern named M/s Beekeyer Freights Pvt. Ltd..

The assessee-company as well as the above said company are closely held companies. The A.O. further noticed that the three Directors of the assessee-company are holding more than 10% of the shares in M/s Beekeyer Freights Pvt. Ltd. Hence, the Assessing Officer took the view that the amount of `50 lakhs received by the assessee is assessable as deemed dividend under Section 2(22)(e) of the Act. The Ld. CIT(Appeals) also confirmed the same and hence the assessee has filed this appeal before us. At the time of hearing, it was brought to our notice that the Hon'ble Madras High Court in the case of CIT v. Printwave Services (P.) Ltd. [Tax Case (Appeal) No.747 of 2014 dated 10th November, 2014] has held that the deemed dividend under Section 2(22)(e) of the Act can be assessed only in the hands of the beneficial or registered shareholder. The Ld. counsel submitted that the assessee herein does not hold any shares in the company M/s Beekeyer Freights Pvt. Ltd. Hence, the decision rendered by the Hon'ble Madras High Court in the above said case squarely applies to the assessee and

3.

The Ld. counsel also submitted that the assessee had received advance from M/s Beekeyer Freights Pvt. Ltd. in the course of business transactions and hence the provisions of Section 2(22)(e) of the Act shall not apply to the same. However, we do not find it necessary to go into the issue in view of the decision mentioned in the earlier paragraph.

4.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open court after conclusion of hearing on the 5th day of February, 2015 at Chennai.

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