Appeal dismissed against addition under Section 2(22)(e) - shares ownership requirement clarified

The appeal of the revenue against the order of Ld. CIT(A) XIV, Ahmedabad for the assessment year 2008-09 was dismissed. The addition under Section 2(22) (e) of the Act was deleted as the assessee company did not hold the required shares in the loan giver company. The Tribunal upheld the decision based on the interpretation that the receiver of the loan must be a registered and beneficial owner of the shares to trigger Section 2(22) (e). The challenge to the admission of additional evidence and the order of the Assessing Officer was also rejected.

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Issues involved: Appeal against order of Ld. CIT(A) XIV, Ahmedabad for assessment year 2008-09. Addition of Rs. 1,86,95,782/- u/s.2(22) (e) of the Act, admission of additional evidence in violation of Rule 46A, and challenge to the order of the Assessing Officer.

Addition u/s.2(22) (e) of the Act:
The revenue appealed against the deletion of the addition of Rs. 1,86,95,782/- u/s.2(22) (e) of the Act. The Ld. counsel for the assessee argued that the assessee company, not being a shareholder of the loan giver company, cannot attract the provisions of Section 2(22) (e) of the Income tax Act, 1961. It was highlighted that Shri Rashmin Majithia held almost all shares of the loan giver company, Zen Tobacco, and the assessee company did not hold the required shares to fall under Section 2(22) (e).

Decision and Rationale:
After considering the submissions and the Special bench decision in the case of Bhaumik Colour Pvt. Ltd., it was concluded that for Section 2(22) (e) to apply, the receiver of the loan must be a registered as well as beneficial owner of the shares to the required extent of the company providing the loan. Since Shri Rashmin Majithia held 99.99% shares of Zen Tobacco, the assessee company did not hold the necessary shares in Zen Tobacco to trigger Section 2(22) (e). Consequently, the provisions of Section 2(22) (e) were deemed not applicable to the assessee regarding the loan from Zen Tobacco. The order of Ld. CIT(A) was upheld based on this interpretation.

Additional Evidence and Order Challenge:
The revenue also contested the admission of additional evidence by Ld. CIT(A) in violation of Rule 46A and sought to set aside the order of Ld. CIT(A) in favor of the Assessing Officer. However, the Tribunal declined to interfere in the order of Ld. CIT(A) based on the above analysis.

Conclusion:
The appeal of the revenue was dismissed, affirming the decision of Ld. CIT(A) XIV, Ahmedabad for the assessment year 2008-09.

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