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Income Tax Appellate Tribunal, DELHI BENCH ‘F’, NEW DELHI
Before: SH. N. K. BILLAIYA & MS. ASTHA CHANDRA
BEFORE SH. N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER Assessment Year: 2015-16 Pawa International Pvt. Ltd. Vs. ACIT M-102, Greater Kailash Part- Circle-19 (2) I, New Delhi-110048 New Delhi PAN No.AAACP6108P (APPELLANT) (RESPONDENT) Appellant by Dr. Rakesh Gupta, Advocate Sh. Somil Agarwal, Advocate Respondent by Sh. Vivek Vardhan, Sr DR Date of hearing: 04/12/2023 Date of Pronouncement: 04/12/2023 ORDER
PER N. K. BILLAIYA, AM:
This appeal by the assessee is preferred against the order dated 13.09.2023 by NFAC, Delhi.
The sum and substance of the grievance of the assessee is that the CIT(A) erred in confirming the addition of Rs.53808475/- on account of deemed dividend u/s.2 (22)(e) of the Act by ignoring the fact that the assessee company is not a share holder.
Briefly stated the facts of the case are that the return of income filed on 27.10.2015 was selected for scrutiny through CASS and accordingly statutory notices were issued and served upon the assessee.
While scrutinizing the return the AO considered the following :- Name of Assessee Designer Pawa Pawa Shiela Hotels shareh Company Apartments Infrastructure Knowledge Older city 31/10 31/10 31/0 31/0 31/10 31/10 31/10 31/10 31/10 31/10 3/14 3/15 3/14 3/15 3/14 3/15 3/14 3/15 3/14 3/15 Satish Kumar 29.90 29.90 46.52 46.52 50.00 50.00 50.00 50.00 41.30 41.30 Pahwah % % % % % % % % % % SheeIP 23.45 23.45 53.45 53.45 50.00 50.00 50.00 50.00 40.00 40.00 % Awha % % % % % % % % % Name of Accumulated profits Security against Dividend u/s. 2 company Rent (22) (e) (lowest of the three) 31/03/2014 31/03/2015 Designer 7,30,56,067 7,29,98,176 2,74,00,000 2,74,00,000 Apartments Pawa 8,82,18,258 9,85,93,853 65,00,000 65,00,000 Infrastructure Pawa Knowledge 6,53,963 6,08,475 70,00,000 6,08,475 City Shiela Hotels 2,12,16,444 2,11,47,811 1,93,00,000 1,93,00,000 Total 5,38,08,475
The AO was of the firm belief that all companies providing fund are closely held companies, therefore, loan shall be treated as dividend to the extent of accumulated profits and invoking the provisions of section 2(22)(e) of the Act, the AO made the addition of Rs.53808475/-.
Assessee carried the matter before the CIT(A) but without any success.
Before us the Counsel for the assessee vehemently stated that the assessee is not even a share holder in the impugned company, therefore, there is no question of invoking the provisions of section 2 (22)(e) of the Act.
The DR placed strong reliance on the orders of the authorities below.
We have carefully considered the orders of the authorities below. On perusal of the chart explaining the share holding pattern as exhibited elsewhere it can be seen that the assessee is not a share holder in the impugned company. The Hon’ble Jurisdictional High Court of Delhi in the case of Ankitech Private Limited 340 ITR 14 has clearly held that legal fiction created u/s. 2 (22)(e) enlarges definition of dividend only and legal fiction is not to be extended further for broadening concept of share holders. This has been affirmed by the Hon’ble Supreme Court in the case of Madhur Housing and Development Company 401 ITR 152.
Respectfully following the ratio laiddown by the Hon’ble High Court and the Hon’ble Supreme court (supra) we direct the AO to delete the impugned addition. The appeal of the assessee is accordingly allowed.
Decision announced in the open court on 04.12.2023.