TaxTMI 
TaxTMI 
2015 (8) TMI 82
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....mpany named as M/s Gemstar Construction Pvt Ltd. The AO noticed that the assessee has borrowed funds from the above said company and hence he proceeded to examine the applicability of the provisions of section 2(22)(e) of the Act on the amount borrowed by the assessee from the above said company. The AO has extracted the account copy of the assessee as available in the books of the company and the same is reproduced below: Date Particulars Debit Credit 1.4.2006 Opening balance 56,22,575 - 17.4.2006 Amt.paid towards premises deposit 50,000 - 19.4.2006 Payment for public issue RPL-IPOHNIR 62,00,000 - 24.4.2006 Amt.paid towards premises deposit 1,00,000 - 26.4.2006 Amt.paid towards premises deposit 1,00,000 - 15.5.2006....
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....ectors. However, the assessee was allotted the shares only to the tune of Rs. 1,04,160/- and the balance amount of Rs. 60,95,840/- was refunded by M/s RPL. The refund amount was duly returned back by the assessee to the above said company. Accordingly, it was contended before the AO that the assessee has not borrowed any funds as contemplated under section 2(22(e) of the Act and hence the amount of Rs. 62 lakhs cannot be taxed as deemed dividend. With regard to the remaining amount of Rs. 18.10 lakh, the assessee submitted that it had received a sum as lease deposits in respect of the premises let out to the above said company and hence the provisions of section 2(22)(e) are not attracted to the same. The AO was not convinced by the explana....
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....roper resolution of board of directors were passed and hence the addition made as deemed dividend u/s 2(22)(e) was liable to be deleted. The main contention of the revenue is that the ratio of the decision rendered in the case of Sunil Sethi (supra) is not applicable to the facts prevailing in the instant case. 5. In the instant case, we have noticed that the assessee had received money from M/s Gemstar Construction P Ltd for the purpose of investing in the Initial Public Officer (IPO) of M/s RPL. It is not shown to the tax authorities that M/s Gemstar Construction P Ltd was engaged in the business of dealing in Shares & Securities. Hence, we agree with the contentions of the revenue that the amount of Rs. 62.00 lakhs was not given to the ....
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....PO, which militates against the explanation given by the above said company and also the resolution passed by the Board of Directors. 8. It is in the common knowledge of everyone that the allotment is done on proportionate basis in case of over subscription of public issue. When the IPO is made by reputed business houses, the IPO is usually subscribed several times and hence the allotment of shares tends to be very much lower than that applied for. Hence, the explanation of the assessee that M/s Gemstar Constructions P Ltd has decided to apply for shares of M/s RPL in his name with the expectation that more number of shares shall be allotted does not appeal to common sense. But the very fact that the shares so allotted by M/s RPL were not ....