Tribunal deletes disputed tax addition, remands VRS payment issue for review.

The Tribunal ruled in favor of the appellant, deleting the addition made under section 2(22)(e) of the Income Tax Act. The issue concerning the disallowance of Voluntary Retirement Scheme (VRS) payment claimed was remanded back to the Assessing Officer for further verification. The appellant's appeal was allowed for statistical purposes.

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Issues:
1. Addition made under section 2(22)(e) of the Income Tax Act.
2. Disallowance of VRS payment claimed.

Issue 1: Addition under section 2(22)(e) of the Income Tax Act:

The appeal centered on the addition made by the Assessing Officer (AO) on deemed dividend under section 2(22)(e) of the Income Tax Act. The Appellant contended that the provisions of section 2(22)(e) were incorrectly applied to the sum received from M.Ct.M Corporation Private Limited. The Appellant argued that the shareholders did not hold substantial interest in both the lending and receiving companies, thus the provisions should not apply. The Commissioner of Income Tax (Appeals) upheld the AO's decision, citing the Supreme Court's decision in Navnith Lal C Jaweri Vs. K.K. Sen. The Appellant then appealed to the Tribunal, presenting the shareholding pattern to support their case. The Tribunal referred to the Supreme Court's ruling in CIT vs. Madhur Housing and Development Company, emphasizing that a concern receiving a loan is not a shareholder of the lending company, hence cannot be treated as receiving a dividend. Consequently, the Tribunal ruled in favor of the Appellant, deleting the addition under section 2(22)(e) of the Act.

Issue 2: Disallowance of VRS payment claimed:

The second issue revolved around the disallowance of Voluntary Retirement Scheme (VRS) payment claimed by the assessee. The AO added back a sum towards VRS payments, which the assessee had already disallowed while computing the loss. During the Tribunal proceedings, the ld.counsel for the assessee presented the computation of total income, showing the disallowed VRS payment. The matter was suggested to be verified by the AO and remanded back for further examination. After considering both sides, the Tribunal remanded the issue to the AO to verify if the assessee had indeed disallowed the VRS payment in the income computation. As a result, this issue of the assessee's appeal was set aside and allowed for statistical purposes.

In conclusion, the Tribunal ruled in favor of the assessee, deleting the addition made under section 2(22)(e) of the Income Tax Act. The issue regarding the disallowance of VRS payment claimed was remanded back to the AO for further verification. The appeal filed by the assessee was allowed for statistical purposes.

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