2011 (12) TMI 593

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.... law and on facts of the case. 2. That the Ld. Commissioner of Income Tax (Appeals) has erred in confirming addition of Rs. 75,22,683/- as made by the Assessing Officer. 3. That the provisions of section 2(22)(e) are not attracted on the facts of the case.   4. That in any case addition u/s. 2(22)(e) cannot be made in the hands of the appellant company as the appellant company is not the registered share holder of the payer/ lender company. 5. That the Ld. Commissioner of Income Tax (Appeals) has passed a mechanical and non reasoned order without dealing with the contentions raised and ignoring the material on record and for all those reasons individually his order is vitiated law. 6. That the Ld. Commissioner of Income ....

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....He is holding more than 20% shares in our assessee company as on 31.3.2005 and 31.3.2006. In other words he is having substantial interest in our company to which loan has been advanced by M/s Arcon (India) Pvt. Ltd. 3. M/s Arcon (India) Pvt. Ltd. possesses accumulated profits to the extent of Rs. 75,22,683/- as on 31.3.2005. 4. The loan provider company is not a company in which public are substantially interested. From the above it is quite clear that the loan advanced by M/s. Arcon (India) Pvt. Ltd., to the extent of  Rs.75,22,683/- is falling within the purview of the provisions of section 2(22)(e) of the IT Act, 1961 accordingly the same is taxed as deemed dividend u/s 2(22)(e) of the IT Act, 1961. To this extent the a....

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....lved is covered in favour of the assessee by the decision of the Hon'ble Jurisdictional High Court.   However, relying upon the assessment order and the order of the Ld. Commissioner of Income Tax (Appeals,) she pleaded that addition has rightly been sustained by the Ld. Commissioner of Income Tax (Appeals) and his order should be upheld. 7. We have carefully considered the submissions. We find that the Hon'ble Jurisdictional High Court in the case of Ankitech Pvt. Ltd. cited above has concluded as under:-" "Moreover, since the purpose of sec. 2(22)(e), as stated in Circular No. 495 dated 22.9.1987, is to tax the distribution of profits to shareholders, where the same is distributed not by way of dividend but by way of loan or....