2021 (3) TMI 424 - AT - Income Tax

Tribunal rules in favor of assessee, dismissing Revenue's appeal on Income Tax Act section 2(22)(e)

The Tribunal upheld the Commissioner (Appeals)'s decision to delete the addition under section 2(22)(e) of the Income Tax Act, ruling in favor of the ... Deemed dividend addition u/s 2(22)(e) - Amount of loans to the extent of the reserves and surplus available with M/s. Shirdi Chemicals Pvt. Ltd., falls within the ambit of provisions of section 2(22)(e) of the Act and, hence, liable to be taxed in the hands of the assessee under the head “Income From Other Sources ' - HELD THAT:- The issue on applicability of provisions of section 2(22)(e) of the Act is squarely covered in favour of the assessee by the decision of the Co–ordinate Bench of the Tribunal in assessee’s own case in preceding assessment year 2019–10, 2010–11, 2011–12, 2012–13 and 2013–14 wherein the Bench in Revenue’s appeal declined to interfere with the order of the first appellate authority and upheld the same. Consequently, we do not find any infirmity in the order passed by the learned Commissioner (Appeals) by allowing the claim of the assessee. Revenue’s appeal is dismissed. Issues:- Whether the learned Commissioner (Appeals) was justified in deleting the addition made by the Assessing Officer under section 2(22)(e) of the Income Tax Act, 1961Rs.Analysis:1. The appeal was filed by the Revenue challenging the order passed by the Commissioner (Appeals) regarding the addition made in the hands of the assessee firm under section 2(22)(e) of the Income Tax Act for the assessment year 2010-11.2. The Assessing Officer observed that the assessee had borrowed loans from private limited companies with common shareholders holding over 10% of the voting rights. The loans taken by the assessee from M/s. Shirdi Chemicals Pvt. Ltd. were considered falling within the ambit of section 2(22)(e) and hence taxable under 'Income From Other Sources.'3. The Assessing Officer issued a show cause notice, and the assessee contended that being a firm and not a shareholder, the provisions of section 2(22)(e) did not apply. The Assessing Officer disagreed, stating that any payment by a company as an advance or loan falls under section 2(22)(e), and the lenders were not engaged in money lending business.4. The assessee argued during the first appellate proceedings that the loans were trade advances, not dividends, and the firm was not a shareholder of the lending company. The Commissioner (Appeals) deleted the addition based on the assessee's submissions and previous decisions in the assessee's favor.5. The Revenue appealed to the Tribunal, but neither the assessee nor representatives appeared. The Departmental Representative argued that the Commissioner (Appeals) misinterpreted section 2(22)(e) and cited a Supreme Court judgment. However, the Tribunal found in favor of the assessee based on previous decisions and distinguished the cited case law.6. The Tribunal upheld the Commissioner (Appeals)'s decision, stating that the issue was covered in favor of the assessee by previous Tribunal decisions. The Supreme Court judgment cited by the Revenue was deemed inapplicable to the present case. Consequently, the Revenue's appeal was dismissed, and the order of the Commissioner (Appeals) was upheld.7. In conclusion, the Tribunal found no infirmity in the Commissioner (Appeals)'s decision to delete the addition under section 2(22)(e), as the issue was already settled in favor of the assessee by previous Tribunal decisions, and the cited Supreme Court judgment did not apply to the current appeal.