TaxTMI 
TaxTMI 
2015 (6) TMI 239
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....aw, the Ld.CIT(Appeals) has erred in holding that payment made to M/s Aims Max Gardenia Developers and M/s G.S. Developers could not be treated as deemed dividend on the ground that they are not shareholders of the assessee company by ignoring the fact that payment to above entities is covered by the definition of dividend given in provisions of section 2(22)( e) of the IT Act, 1961. 2. On the facts and in the circumstances of the case as well as in law, the Ld.CIT(A) has erred in not considering the fact that reasonable opportunity was given to asssessee during the assessment proceeding before charging interest u/s 201 (1A) for late payment." 3. Briefly stated the facts giving rise to this appeal are that the assessee company is enga....
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....ore us inter alia order of the AO dated 23.2.2012, impugned order of the CIT(A) and paper book filed by the assessee spread over 131 pages. 6. At the very outset, we note that after detailed deliberations about contentions of the AO and explanation and submissions of the assessee and ratio of the legal proposition and citations relied by both parties on ground no. 2 and 3 of the assessee before the CIT(A), the first appellate authority has decided the issue in favour of the assessee with following observations and conclusions:- "4.1 The AR has given his explanations above on the merits of the case with details of share holders in the table in page 3,4 & 5 of this order. The main partners in Gardenia India Ltd. are Sh.Manoj Kumar Ray a....
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..../ firms (AOP) to whom loans and advances are made, the deemed dividend cannot be applied in the hands of Sh.Manoj Kumar Ray and Sh.Sanjeev Sharma, as they are not getting any direct/indirect benefit. The AO(TDS) is of the view that M/s Gardenia India (P) Ltd is playing loans /advance to itself as it is a partner/share holder in other 3 firms/ company, to whom payments are made as per Table-1(supra). The section 2(22)( e) says that the payment of dividend should be made to a shareholder(10%) or to a concern in which such shareholder has substantial internet (20%) and in the present case, the above facts are not proved from Tables Supra. Therefore, such loans and advances cannot be considered as dividends. If there is no deemed dividend u/s 2....
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....eciate that the provisions of deemed dividend u/s 2(22)(e) of the Act are attracted if loan is given to a shareholder and all the three alleged parties are not holding any shares in Gardenia India Ltd. i.e. assessee company and therefore under aforesaid peculiar facts and circumstances, the provisions of section 2(22)(e) and section 194 of the Act are not attracted at all and the whole order has been passed by the AO on incorrect appreciation of provisions of the Act and, thus, the same deserves to be quashed. 10. On careful consideration of above rival submissions, we note that the ld. DR has fairly accepted that the three alleged companies as pointed out by the AO do not hold any share in the assessee company. At the same time, as per ....
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....vance has been given to a non-shareholder entity. This is our humble understanding that the liability expressly provides for TDS requirement only when the payment is made or loan/advance is given to the shareholder which is enlisted in the list of shareholders register maintained by the company u/s 150 of the Act. We may also point out when the loans/advances have not been given to a shareholder, then the provisions of section 2(22)(e) and 194 of the Act do not require the payer assessee company to deduct TDS u/s 194 of the Act. Therefore, section 194 of the Act is synchronised with the requirement of section 150 and 206 of the Companies' Act and the AO is not allowed to go beyond these provisions for invoking provisions of section 201(1)/2....