DCIT, CHENNAI vs. M/S. LANSON HOMES PRIVATE LIMITED, CHENNAI

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ITA 2241/CHNY/2013Status: DisposedITAT Chennai04 February 2015AY 2008-094 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that a deemed dividend addition under Section 2(22)(e) can only be made in the hands of a registered or beneficial shareholder. Since the assessee was not a shareholder in the creditor entity, the protective addition was not sustainable.

What were the facts?

The assessee company received a loan from a group concern. The Assessing Officer made a 'protective' addition of this loan as deemed dividend under Section 2(22)(e) in the assessee's hands, while a 'substantive' addition was made in the hands of the shareholders of the lending entity.

What were the issues?

Whether a 'protective' addition of deemed dividend under Section 2(22)(e) is valid in the hands of a non-shareholder when a 'substantive' addition has been made in the hands of shareholders.

Which sections of the Income-tax Act were involved?

Section 2(22)(e),Section 153C,Section 143(3)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, ‘ B’ BENCH : CHENNAI

Before: SHRI B.R. BASKARAN & SHRI S. S. GODARA]

For Respondent: Dr. Anita Sumanth, Advocate

आदेश / O R D E R

PER S.S.GODARA, JUDICIAL MEMBER

1.

This Revenue’s appeal for assessment year 2008-09, is directed against order of the Commissioner of Income-tax (Appeals)- II Chennai dated 30.9.2013, passed in Appeal No.183/2013-14, in proceedings under section 153C r.w.s 143(3) of the Income-tax Act, 1961 (in short the ‘Act’).

I.T.A.No.2241/13 :- 2 -:

The Revenue’s grounds challenge the lower appellate order 2. deleting deemed dividend addition u/s 2(22)(e) of ` 64,89,407/- made on ‘protective’ basis in a regular assessment framed on 27.3.2013.

The assessee-company is engaged in property development 3. business. It is an associate concern of its eponymous group of companies engaged in diversified businesses. The assessee had filed its original return on 29.9.2008 admitting income of ` 14,87,400/-.

Thereafter, the department conducted a ‘search/survey’ in case of its group concerns/promoters on 23.4.2010. This culminated in issuance of section 153C notice dated 17.10.2012. The assessee responded by filing a fresh return dated 11.12.2012 reiterating the income already disclosed earlier.

4.

The Assessing Officer took up ‘scrutiny’. He noticed that the assessee had obtained a loan of ` 64,89,407/- from its group concern M/s Lanson Motors Pvt. Ltd. It has come on record that the assessee is not a shareholder in the aforesaid group entity. It is also evident that both these companies have common individual shareholders namely Shri Lankalingam and Smt. Reeta Lankalingam to the tune of 50% share each. There is no issue that the Assessing Officer had added the very amount in their hands on ‘substantive’ basis as deemed

I.T.A.No.2241/13 :- 3 -: dividend. He justified this protective addition in the assessee’s case by observing that the same is made till the aforesaid substantive assessments attain finality. The assessee’s income was accordingly computed as ` 79,76,810/-.

5.

The assessee preferred an appeal. The lower appellate authority observes that the assessee is neither a registered nor a beneficial shareholder in the creditor entity to invoke section 2(22)(e).

It has also been held that once ‘substantive’ additions stand made (supra), this ‘protective’ addition does not hold ground. The assessee has accordingly succeeded in the lower appellate proceedings. This leaves the Revenue aggrieved.

We have heard both parties and gone through the case file. 6.

It is an undisputed fact that the assessee has obtained loan from its group entity M/s Lanson Motors Pvt. Ltd amounting to ` 64,89,407/-.

The fact also remains that it is not a shareholder in the said entity. It has come on record that the present is only a ‘protective’ addition over and above the ‘substantive’ one already made in the hands of the concerned entity’s shareholders. In these circumstances, we quote case law ACIT vs Bhaumik Colour P. Ltd. [2009]118 ITD 1 (Mumbai)

(SB) and CIT vs Ankitech Pvt. Ltd [2011] 11 taxmann.com 100 (Delhi) and hold that a deemed dividend addition u/s 2(22)(e) of the Act can

I.T.A.No.2241/13 :- 4 -: only be made in the hands of a registered or beneficial shareholder. The Revenue fails to point out any distinction on facts. In these circumstances, we uphold the CIT(A)’s order. The Revenue’s grounds are rejected.

The Revenue’s appeal is dismissed. 7.

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