TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 718
X X X X Extracts X X X X
X X X X Extracts X X X X
....s received unsecured loan amounting to Rs. 2,70,50,000/- form M/s. Cygnet Infotech Pvt. Ltd. during the year under consideration. The Assessing Officer further noticed that in the assessee company from whom it has obtained unsecured loan there were two common directors namely Niraj Hutheesing and Smt. Chatura Hutheesing The detail of share holding of these two persons in both the companies are as under:- Name of Director/ Shareholder Shareholding & Voting rights in Assessee Co. i.e. M/s Cygnet Enterprise Pvt. Ltd. Shareholding & Voting rights in M/s Cygnet Infotech Pvt. Ltd. Shri Niraj Hutheesing 45% 72% Smt. Chatura Hutheesing 45% 1% The Assessing Officer observed that Shri Niraj Hutheesing was having share holding more than 10% of the voting power in the lender company and also having substantial interest in the assessee company, therefore, assessee was asked to explain why the amount of loan of Rs. 2,66,42,000/- should not be treated as deemed dividend u/s. 2(22)(e) of the act. The assessee has given the detailed submission which was reproduced by the Assessing Officer at page no. 3 to 10 of the assessment order. The assessee has briefly explained that Cygnet Inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... less than 10% of the voting power in the lender and also had substantial interest in the receiving concern by virtue of having shares holding more than 20% of voting power since he held 45% and 72% in the borrowing company and the lending concern respectively. He was of the view that payment made by Cygnet Infotech Pvt. Ltd. to the assessee company in the form of unsecured loan is clearly in the nature of deemed dividend in the hands of the assessee. Therefore, the Assessing Officer has assessed the amount of unsecured loan of Rs. 2,70,50,000/- as deemed dividend u/s. 2(22)(e) in the hands of the assessee and added to its total income. 4. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of ld. CIT(A) is reproduced as under:- "2.7. I have carefully perused the assessment order and the written submission made by the learned A.Rs. It is observed that it is fact that Shri Niraj Hutheesing and Smt. Chatura Hutheesing were having substantial shares holding in both the companies i.e. Giver Company as well as the Recipient company. The express provisions of section 2(22)(e) show that ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....P.) Ltd. (2012) 340 ITR 14 (Del) wherein it was held that if the assessee-company does not hold a share in other company from which it had received deposit then it cannot be treated to be a deemed dividend under Section 2(22)(e) of the Act From the reading of the provisions of section 2(22)(e), it is seen that the provision is intended to tax the dividend in the hands of a shareholder and the deeming provision as it applies to the case of loan or advance by a company to a concern in which is shareholder and has substantial interest, is based on the presumption that the loan or advance would ultimately be made available to the shareholder of the company giving loan or advance. Various court decisions e.g. Asstt. CIT v/s. Bhaumik Colour (P.) Ltd. [2009] 118 ITD 1 (Mum.) (SB) & jurisdictional High Court decision in the case of CIT v/s Daisy Packers (P.) Ltd [2G13] 40 taxmann.com 480 (Gujarat), and Hon'ble Supreme Court has in the case of CIT v/s. Madhur Housing and Development Co. Support this view that the deemed dividend u/s 2(22)(e) can only be assessed in the hands of the person who is a shareholder of the lender company and not in the hands of a person other than the shareh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee as per the above referred decisions of Tribunal and High Courts. The ld. Departmental Representative could not disprove contrary to the submission of the assessee that issue is covered in favour of the assessee as per the various decisions as referred above. 6. Heard both the sides and perused the material on record. During the course of assessment on verification, the Assessing Officer noticed that assessee has obtained unsecured loan from M/s. Cygnet Infotech Pvt. Ltd. and in both the companies there was common directors having share holding not less than 10% of the voting power. Without reiterating the facts as cited above in this order, the Assessing Officer was of the view that any payment in the nature of an advance or loan by a closely held company in which a share holder holds more than 10% of voting to any concern in which such share holder has a substantial interest is deemed as dividend, therefore, amount of unsecured loan given by Cygnet Infotech Pvt. Ltd. to the assessee company was treated as deeded dividend u/s. 2(22)(e) of the act on account of a common share holder holding more than 10% of voting power in these concerns. With the assistance of ld. representat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the addition under section 2(22)(e). We, therefore, approve the conclusion arrived at by the learned CIT(A) in this regard, and decline to interfere in the matter on that count." We have also through the decision of Hon'ble Gujarat High Court in the case of Pr. CIT vs. Mahavir Inducto Pvt. Ltd. supra wherein the identical issue on same facts was decided in favour of the assessee after following the decision of Bombay High Court in the case of CIT vs. Impact Containers Pvt. Ltd. and others vide IT Appeal No. 114 of 2012 and the decision of Delhi High Court in the case of CIT vs. Ankitech Pvt. Ltd. Ltd. reported in 340 ITR 14 Delhi. The relevant part of the decision is reproduced as under:- "50. Identical question came to be considered by the Division Bench of this Court in Tax Appeal No. 253 of 2015. After considering the decision of the B ombay High Court in the case of CIT vs. Impact Containers Private Limited & ors rendered in ITA No. 114 of 2012 and the decision of the Delhi High Court in thecase of CIT vs. Ankitech Pvt Ltd re ported in 340 ITR 14 (Del) and on interpreting Section 2(22)(e), in para 4 has observed and held as under: "4.Shri Bhatt, learned Counsel appea....