2021 (4) TMI 856

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....e of assessee. 2. Briefly the facts of the case are that the assessee, an individual filed his return of income for the AY 2013-14 on 17/07/2015. During the course of assessment proceedings in the case of M/s. Kurnool cylinders Pvt. Ltd., for the A.Y. 2013-14, the AO noticed that M/s. Kurnool Cylinders Pvt. Ltd. has given loans and advances of Rs. 3,22,51,851/- to Dharmaja Cylinders Pvt. Ltd. The AO noted that following directors are common shareholders in both the companies: Name of the shareholder(s) % of holding in Kurnool Cylinders % of holding in Dharmaja Cylinders % of directors in 50% of shareholding in Kurnool Cylinders B.S. Reddy 31% 80% 31x100/50 = 62% B. Hari Prasad Reddy 19% 20% 19x100/50 =....

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....linders pvt ltd and assessee is shareholder in both the companies. 2.3. In response, assessee, vide his letter 20.6.2016 has made submissions, which were extracted by the AO in his order at pages 2 to 4. After rejecting the submissions of the assessee, the AO held that an amount of Rs. 1,99,96,148/- is assessed as income of the assessee u/s. 56(2) rws 2(22)(e) of the Act. 3. Aggrieved, the assessee preferred an appeal before the CIT(A). 4. Before the CIT(A), the assessee reiterated the submissions as made before the AO and the same were considered by the CIT(A) and discussed the issue at length and analysed the same with case law to hold that the provision of section 2(22)(e) has no application in case of the assessee and therefore....

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....e following case laws: a. Provision must be strictly construed - Section 2(22)(e) creates a fiction bringing in amounts paid otherwise than as dividends, into the net of dividends. Section 2(22)(e) must, therefore, be given a strict interpretation - CIT v. P.V. John (1990) 181 ITR 1 (Ker.). b. Common Shareholders - Deemed dividend provisions cannot be invoked merely because shareholders are common in both companies CIT v. AR Magnetics (P.) Ltd. [2013] 40 taxmann.com 392/[2014] 220 Taxmann 209 (Delhi). Merely because one of the directors of the lending company holding more than 20 per cent shares therein was also director in the assessee company, the advance/loan made by that company to the assessee company could n....