2012 (10) TMI 1237

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....eeding, the A.O. observed that one of the group of company M/s Durian Inds. Ltd. (in short DIL) advanced a loan of Rs. 90 lakhs to another group concern M/s Cedar Décor P. Ltd. (in short CDPL). The assessee held 22.10% shares in the said M/s DIL and 11.65% in the previously mentioned CDPL. On the basis of the aforesaid fact that the A.O. issued a show cause notice to the assessee as to why deemed dividend income should not be taxed to the extent of accumulated profits of the said M/s DIL. In response the assessee replied that the chargeability of deemed dividend income u/s 2(22)(e) of the Income Tax Act, 1961 (the Act) did not arise in the case of the assessee on the facts of the case. The A.O., however, concluded that the assessee w....

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....in deleting addition u/s 2(22)(e) applying the definition of substantial interest in section 2(32) of the Act without appreciating the provisions of section 2(22)(e) define 'substantial interest' as 10% of share holding and above and not 20% or above share holding as per provisions of section 2(32) of the I.T. Act. (ii) On the facts and in the circumstances of the case, the Ld. CIT(A) erred in law in relying on the decision in Bhaumik Color (P) Ltd. 118 ITD 1 (Spel. Bench) which has been overruled by the Delhi High Court in 'National Travel Services' 269.0 KiB 549 DLS (ITATONLINE.ORG)". 4. At the time of hearing the ld. D.R. supports the order of the A.O. 5. On the other hand, the ld. counsel for the assessee, after giving th....

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....t is also not in dispute that the assessee is holding only 11.,65% of voting power in CDPL. Section 2(32) of the Act clearly defines that "person who has a substantial interest in the company" in relation to company, as a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits, carrying not less than twenty percent of the voting power. We further find that similar issue has been considered by the Tribunal in Anand Rathi Direct India (P.) Ltd. (supra) wherein the Tribunal vide para 6 of its order has held as under:- "6. We have considered the issue. As seen from order of Assessing Officer, he has considered that a common share holde....