TaxTMI 
TaxTMI 
2019 (3) TMI 1106
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.... is as regards bogus purchases to the tune of Rs. 4,09,657/-. 3. The Ld. A.R. at the time of hearing submitted before the Bench that ground No.2 is not pressed. Therefore, the same is dismissed as not being pressed. 4. The facts in brief are that the assessee filed return of income on 29.09.2011 declaring income of Rs. 1,50,61,430/- which was revised on 30.03.2013 declaring income of Rs. 1,91,57,582/-. Thereafter, the case of the assessee was selected under scrutiny. During the course of assessment proceedings, the AO observed that assessee has taken a loan of Rs. 2,10,00,000/- from its sister concern a closely held company M/s. Golani Construction India Pvt. Ltd. The AO observed that two of the partners of the assessee firm are holding 20000 shares out of total share holding 30000 shares of the said company and the accumulated profit of the said company as on 31.03.2010 was Rs. 1,29,61,420/- and on 31.03.2011 Rs. 1,95,84,331/-. Accordingly, the AO issued show cause notice to the assessee calling upon to explain as to why the loan receipt from M/s. Golani Construction India Pvt. Ltd. should not be assessed as deemed dividend in the hands of assessee firm under the provision o....
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.... given strict interpretation. It was held therein that if the person is a registered holder but not the beneficiary share holder, then provisions of section 2(22)(e) will not apply. Similarly, if a person is a beneficiary share holder but not a registered share holder, then also the first limb of provisions of section 2(22) (e) will not apply. The Hon'ble Rajasthan High Court in the case of Hotel Hill Top (2009) 313 ITR 116(Raj) has held that in order to attract the provisions of section 2(22)(e) of the Act, following four conditions are the sine quo non i.e. (i) the assessee should be a shareholder of the company; (ii) the company should be a closely held company in which the public are not substantially interested ; (i) there must be payment by way of advance or loan to a shareholder or any payment by the company on behalf of or for the individual benefit of the shareholder ; and (iv) there must be sufficient accumulated profits in the hands of the company up to the date of such payment. It is evident from the above that the recipient of the loan from a closely held company in which the public are not substantially interested shoul....
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....up to 17.02.2011 and were having profit share loading of 7%, 50%, 7% and 36% respectively. After reconstitution only first three partners remained in the assessee firm with profit sharing ratio of 7%, 68.50% and 24.50% respectively. In the M/s. Golani Construction India Pvt. Ltd. there were three shareholders Kishore S. Golani, Ravi S. Golani and Akash K. Golani with shareholdings of 15000, 5000 and 10000 share aggregating to 30000 shares. The Ld. A.R. submitted that the assessee is neither a registered shareholder nor a beneficial shareholder of M/s. Golani Construction India Pvt. Ltd. and therefore the provisions as contained in section 2(22)(e) of the Act in respect of deemed dividend are not applicable to the assessee. The Ld. A.R. submitted that the section 2(22)(e) of the Act further states that a shareholder has to be a beneficial owner of the shares not being shares entitled to fixed rate of dividend whether with or without a right to participate in profits holding not less than 10% of the voting power. Therefore, the Ld. A.R. submitted that expression 'shareholder' has to be both registered shareholder as well as beneficial shareholder. The Ld. A.R. submitted that if a per....
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.... assessee is neither a registered shareholder nor a beneficial shareholder of M/s. Golani Construction India Pvt. Ltd. In the above case of Gopal and Sons (supra) the money to purchase the shares in the company was given by assessee HUF and the shares were issued in the name of karta Shri Gopal Kumar Sanei but in general returns the HUF was shown as registered as well as beneficial owner whereas in the present case the facts are different. In the case of National Travel Services (2018) 89 taxmann.com 332 SC, the two partners were members of the company/shareholders of the company and they held the shares on behalf of the firm which happens to be a beneficial shareholder. However, in the present case again the assessee is neither a registered shareholder nor a beneficial shareholder. The Ld. A.R. submitted that AO also relied on the above case namely CIT vs. National Travel Services (supra) which is distinguishable on facts and finally submitted that in view of the aforesaid facts and the ratio laid down by the various courts the decision of Ld. CIT(A) may be reversed and addition made by the AO on account of deemed dividend should be deleted. 7. The Ld. D.R., on the other han....
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....'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 a concern which is not shareholder, the provisions of Section 2(22)e cannot be applied. Hon'ble Supreme Court further observed as under:- "Having perused the judgment and having heard arguments, we are of the view that the judgment is a detailed judgment going into Section 2(22)(e) of the Income Tax Act which arises at the correct construction of the said Section. We do not wish to add anything to the judgment except to say that we agree therewith." 11. Hon'ble Bombay High Court in the case of Impact Containers Ltd., (2014) 48 Taxman.com 294 observed that where certain companies advanced money to assessee-company in which one director of assessee was holding more than 10 per cent equity shares, since assessee itself was not shareholder of those lending companies, impugned addition made by Assessing Officer by invoking provisions of sec....
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....e 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:- "Whether where Assessing Officer made addition to assessee's income "Under section 2(22)(e) in respect of loan given by one company to another company by taking a view that assessee was holding substantial interest i.e. more than ten per cent shareholding in both companies, in view of fact that transactions were in form of current accommodation entries and there was movement of funds in both ways on need basis, amount in question could not be regarded as deemed dividend and, consequently, impugned addition was to be deleted - Held, yes." 16. Delhi Tribunal in the case of Saamag Developers (P) Ltd., (2018) 90 taxmann.com 20 observed as under:- "Transactions between group concerns being current and inter banking accounts, additions made to assessee's income und....