AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (10) TMI 922
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 2(22)(e) it is basic condition that assessee must be shareholder of the company from which amount is received. But, assessee is not a shareholder of EIPL. Therefore section 2(22) (e) cannot be applicable in the case of the assessee. 3. The Ld. CIT(A) erred in confirming the charging of interest under section 234B and 234C of the Income Tax Act 1961. 4. The Ld. CIT(A) erred in confirming the initiation of the penalty proceeding under section 27 l(l)(c) of the Income Tax Act 1961. 5. The Assessee craves leave to add further grounds or to amend or alter the existing grounds of appeal on or before the date of hearing. 3. Rival contentions have been heard and record perused. 4. Facts in brief are that assessee is a company engaged in the business of real estate construction - Builder & Developer. During the year assessee (NHBPL) received a Loan of RS.56.32 Crore from Equator Investment Pvt. Ltd. (EIPL) which was repaid during the year. Reserve and surplus of EIPL was Rs. 10,82,10,904/-, therefore upto that amount AO made addition u/s.2(22)e. Plea of Department was that EIPL is not lending concern and that voting Power of Paras Gundecha and Poonam Gundecha (share holders in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e company representing bonus shares allotted of its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965 (ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off; (iv) any payment made by a company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of the Companies Act, 1956 (1 of 1956); (v) any distribution of shares pursuant to a demerger by the resulting company to the shareholders of the demerged company (whether or not there is a reduction of capital in the demerged company). In simple words Provision of sec 2(22)(e) are as under, 2(22)(e) - Any Loan, Advances given by a closely held company. (a) To a beneficial owner of equity share holding atleast 10% of Voting power. OR (b) To any concern in wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er. This provision also does not reduce the requirement of being a registered shareholder to a requirement of merely holding a beneficial interest in the shares without being a registered holder of shares. The expression 'being a person who is the beneficial owner of shares' is therefore a further requirement before a shareholder can be said to fall within the parameters of section 2(22)(e) of the Act. In the Act, section 2(22)(e) imposes a further condition that the shareholder has also to be beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten percent of the voting power. However, in the instant case assessee is neither a registered shareholder nor a beneficial shareholder of EIPL, therefore, provisions of Sec 2(22)(e) will not be applicable. 10.. Hon'ble Supreme Court has approved the decision of Hon'ble Delhi High Court in case of Ankitech Pvt. Ltd., (2011) 199 Taxman 341, while deciding the Civil Appeal No.3961 of 2013. Hon'ble Supreme Court observed that once it is found that such a loan or advance cannot be treated as deemed dividend at the hands of such....
X X X X Extracts X X X X
X X X X Extracts X X X X
....olders between the two companies. The High Court followed the aforesaid judgment and dismissed revenue's appeal." 14. From the record, we also found that assessee has not invested even a single rupee in share capital of EIPL. Both the companies EIPL as well as NHBPL are part of Gundecha Group of Companies. The transactions between the group companies were current and inter banking accounts containing both type of entries i.e. receipts and payments. There are total 61 transactions entered during the year on need basis. In case where both receipts and payments is taking place in inter banking accounts the same cannot be regarded as Loans and Advances as contemplated u/s 2(22)(e) and thus no addition could be made as Deemed Dividend. Our view is supported by the decision of Gujarat High Court in the case of Schutz Dishman Bio-tech (P) Ltd., (IT Appeal Nos. 958 & 959 of 2015 of 2015) (Guj. HC) observed as under:- "If there are transactions in the form of current accommodation entries, they cannot be regarded to be loans and advances for the purpose of deemed dividend." 15. ITAT Mumbai Bench in the case of Ravindra R Fotedar (2017) 85 taxmann.com 314 observed as under:- "Whe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the beneficial owner of shares, as it was holding more than 10% of voting power. On this basis, after noticing that the audited accounts of the Company was showing a balance of Rs. 1,20,10,988/- as "Reserve & Surplus" as on 31st March, 2006, this amount was included in the income of the assessee as deemed dividend. 20. It is also found as a fact, from the audited annual return of the Company filed with ROC that the money towards share holding in the company was given by the assessee / HUF. Though, the share certificates were issued in the name of the Karta, Shri Gopal Kumar Sanei, but in the annual returns, it is the HUF which was shown as registered and beneficial shareholder. In any case, it cannot be doubted that it is the beneficial shareholder. Even if we presume that it is not a registered shareholder, as per the provisions of Section 2(22)(e) of the Act, once the payment is received by the HUF and shareholder (Mr. Sanei, karta, in this case) is a member of the said HUF and he has substantial interest in the HUF, the payment made to the HUF shall constitute deemed dividend within the meaning of clause (e) of Section 2(22) of the Act. 21. It is clear from the above order t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ttled fact that the assessee is neither a registered nor a beneficial shareholder. Thus with no stretch of imagination the assessee can be covered under the definition of Section 2(22)(2) i.e., deemed dividend. 25. The similar issue was come before the Hon'ble Kerala High Court in case of CIT v/s Settlement Commission (IT & WT) (2009) 176 Taxman 421 (Kerala) where the Hon'ble High Court held as under:- "In this case, the Settlement Commission has rejected Ext. P2 on the ground that the issue raised is a debatable issue. But, I feel that when there is a decision of the Apex Court, no Inferior Court or Tribunal can say that the issue is a debatable issue for the reason that a Bench of two Judges of the Apex Court has doubted the correctness of the decision of the Constitution Bench. Even assuming there is a final judgment of a two Judges Bench of the Apex Court, the same has to be ignored and Inferior Courts and Tribunals are bound to follow the decision of the Constitution Bench in view of the law relating to precedents and also article 741 of the Constitution of India. So, the rejection of Ext. P2 application is unjustified." 26. In view of the above, the decision of the Hon'b....