TaxTMI 
TaxTMI 
2015 (11) TMI 1611
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....ing Officer towards deemed dividend under Section 2(22)(e) of the Income Tax Act?" 2. It has been stated that the assessee Company had filed its return of income, for the assessment year 2006-07, on 24.6.2006. The return was processed, under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act'). As the assessee is a holding company having 100% shareholding in all the subsidiary companies and in view of the provisions of Section 2(22)(e) of the Act, a notice under Section 148 of the Act had been issued to the assessee, on 19.3.2012. By a letter, dated 29.3.2012, the assessee had requested the revenue to treat the return filed earlier, by the assessee, as compliance of the notice issued under Section 148 o....
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....s been further stated that an explanation was sought from the assessee as to why it was not a deemed dividend, as contemplated under Section 2(22)(e) of the Act. The objection submitted by the assessee had been considered and it had been rejected by the assessing officer holding that the Section had contemplated under four classes of payment. The said section prescribes two basic conditions in order to bring the transaction under the category of deemed dividend. 6. It had been further stated that only loan and other payments made therein can be deemed dividend and to the extent that the company has accumulated profit on the date of the payment. Relying on the decision of the Supreme Court, in SADHNA TEXTILE P LTD Vs. CIT (188 ITR 318) and ....
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....order passed by the Commissioner of Income Tax (Appeals)-II, Chennai. 8. Aggrieved by the same, the Revenue has filed the present appeal, before this Court, under Section 260 A of the Income Tax Act, 1961, based on the following grounds: "a) The Tribunal missed to note the intention of the legislature is to tax the accumulated profit if it is utilized without paying the tax on it by the closely held group company. In the present case, the profit making subsidiary company utilized the accumulated profits without paying tax on the same. b) The Tribunal failed to note that the conditions specified under Section 2(22)(e) such payment of loans/payments to shareholders who are beneficial owner of shares and when there are accumulated profits t....
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....umulated profits Section 2(22)(e) was attracted and the further transfer to its subsidiary is only an application of funds which no way restrict the power of AO to invoke the provisions of Section 2(22)(e) in the hands of the holding company. h) The Tribunal failed to note that for the assessment year 2005-06 on similar issue the department has filed an SLP against the decision of the Hon'ble High Court and the matter is pending before the Supreme Court and the same has not attained finality." 9. At this stage of the hearing of the appeal, the learned counsel appearing for the respondent/assessee had placed before this Court an order passed by the Division Bench of this Court, dated 17.6.2013, made in Tax Case (Appeal) No.16 of 2010. ....
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....ut of the accumulated profits. Thereafter, the assessee was asked to show cause as to why the loans received by the assessee company from its subsidiaries should not be treated as deemed dividend under Section 2(22)(e) of the Income Tax Act. The assessee filed its reply on 3.12.2007, wherein it is stated that the amounts received by the assessee from its subsidiary companies are for the purpose of advancing amounts to sub subsidiaries without any benefit of interest being derived by the assessee company and cannot be treated as dividend amount under Section 2(22)(e) of the Income Tax Act. However, the Assessing Officer arrived at the conclusion that the assessee company had received loans in cash from its subsidiary companies to the tune of....
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.... conclusion that the assessee company is only a intermediary between the two subsidiary companies and no beneficial interest has been accrued to the assessee company by the advances between the subsidiary companies and sub subsidiary companies. Consequently, the ingredients of Section 2(22)(e) of the Income Tax Act is not attracted. 4. In the circumstances, we hold that the order passed by the Income Tax Appellate Tribunal confirming the order of the Commissioner of Income Tax (Appeals) does not call for interference. The above Tax Case Appeal is therefore, dismissed. No costs." 10. The learned counsel appearing for the appellant, while reiterating the grounds raised on which appeal had been filed, has also submitted that the Revenue had ....