2014 (6) TMI 471

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.... to the transactions undertaken by the appellant with the other companies of the Saamag Group in the course of its business. 2. The CIT(A) has erred in holding that the provisions of Section 2(22)(e) of the Act will apply to loans given for business purposes and for purposes other than business. Such findings are opposed to settled legal principles. 3. That the above grounds of appeal are independent and without prejudice to one another. 4. Appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing." REVENUE'S APPEAL (ITA No. 3704/Del/2013) 3. The grounds raised read as under:- "1. The CIT(A) erred in law and on facts of the case in deleting the addition of Rs. 40,84,000/- made u/s. 2(2....

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.... and beneficial shareholders on substantive basis by seeking or resorting to the appropriate action as per the provisions of the Act, more so when based on the judicial pronouncements and also the intention behind the insertion of the provisions of section 2(22)(e), deemed dividend is to be assessed in hands of the beneficial and registered shareholder. In this regard, CIT vs Universal Medicar Limited, 324 ITR 264 (Bom-HC), CIT vs. Hotel Hilltop, 217 CTR 527 (Raj HC), ACIT vs Bhaumik Colours Pvt. Ltd. 118 ITD 001 (Mumbai - ITAT Special Bench), are some of the judicial classics worth mentioning and worth relying. In this regard, CIT vs. Universal Medicare Limited, 324 ITR 264 (Bom-HC), CIT vs. Hotel Hilltop, 217 CTR 527 (Raj. HC), ACIT Bhaum....

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....essee's appeal ld. CIT(A) deleted the addition by holding as under:- "As mentioned earlier, the addition in the instant case were made in the hands of the lender, whereas section 2(22)(e) does not contemplate the same, rather it provides for the treatment of deemed dividend in the hands of the borrowers. Under section 2(22)(e), there is no distinction between a loan given for the business purpose of otherwise. Moreover, the appellant has not brought on record any cogent evidence in support of its contention that the amounts advanced were for business purposes. The so called master land development agreement amongst the various group companies was not produced either before the AO or before the special auditors, hence, the same cannot be re....

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....termined and accordingly, based on the assessment order being passed in the following cases, Rs. 40,84,000/- are being assessed in the hands of the assessee 2(22)(e) read with section 56 of the Act on protective basis. 7.1 We find that if the AO is making the addition on the ground that assessee has given advances to group companies, it is clear that AO has erred in understanding the provisions of the Act. Section 2(22)(e) does not contemplate the addition in the hands of the lenders rather it provides for addition as deemed dividend in the hands of the borrowers. Furthermore, as expounded by the Special Bench of the Tribunal in ACIT vs. Bhaumik Colours P Ltd. section 2(22)(e) can be invoked only in the hands of the borrowers who were regi....