TaxTMI 
TaxTMI 
TaxTMI 
2023 (11) TMI 629
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....ppeals is covered by the exemption provided by Hon'ble Supreme Court in Miscellaneous Application No.665 of 2021 vide order dated 23.03.2020 has given directions that the delay are to be condoned during this period 15.03.2020 to 14.03.2021 and they have condoned the delay up to 28.02.2022 in Miscellaneous Application No.21 of 2022 vide order dated 10.01.2022. Since the Hon'ble Supreme Court has condoned the delay during the said period, respectfully following the same we condone the delay and admit the appeals. 3. First we will deal with the Revenue's appeal in ITA No. 832/Chny/2020. The only issue in this appeal of Revenue is as regards to the order of CIT(A) in deleting the addition made by A.O holding that the loan received by the assessee-company from the seven parties are treated as deemed dividend within the provisions of Section 2(22)(e) of the Act. For this, the Revenue has raised the following Grounds No.2, 3 & 4: "2. The CIT(A) erred in allowing the appeal of assessee by holding that deemed dividend has to be taxed in the hands of registered shareholders only. In this case, the assessee company is not a registered shareholder of the lending companies. 3. The CIT(A) ....
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....76,78,082 Total dividend 6,69,17,137 7. And subsequently, he also gone through the shareholding pattern and accumulated profits of the three companies which is as under: Sl. No. Company from whom loan was availed by assessee Amount of loan Rs. 1. Susee Traders P. Ltd. 2.34.206 2. Susee Information Systems P Ltd. 11,87,250 3. Susee Auto Plaza P Ltd. 1,04,600 Total dividend 15,26,056 8. According to A.O, the assessee is covered by the provisions of Section 2(22)(e) of the Act and added deemed dividend u/s. 2(22)(e) of the Act at Rs. 6,84,43,193/-. Aggrieved, the assessee preferred an appeal before CIT(A). 9. The CIT(A) following the decision of Hon'ble Madras High Court in the case of PCIT vs. M/s. Ennore Cargo Container Terminal P. Ltd. in T.C(A) Nos.105 and 106 of 2017 dated 27.03.2017 (Mad.), held that the assessee-company neither a registered shareholder nor the beneficial shareholder and therefore, the deemed dividend cannot be taxed in the hands of the assessee-company. However, the CIT(A) directed the A.O to reopen the case in the hands of Shri J. Rajiv Subramanian and Shri S. Jeyabalan, Directors of the company. For this, the CIT(A)....
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....hich the Supreme Court was called upon to consider was whether loans and advances received by a HUF could be deemed as a dividend Within the meaning of Section 2 (22) (e) of the Act. The assessee in that case was the HUF and the payment in Question was made to HUF. The shares were held by the Karta of the HUF. It is in this context that the Supreme Court came to the conclusion that HUF was the beneficial shareholder. 5.2. In the instant case, however, both the registered and beneficial shareholders are two individuals and not the assessee-company. Therefore, in our view, the judgment of the Supreme Court does not rule on the issue Which has come up for consideration in the instant matter. 6. Accordingly, in so far as Questions Nos.3 and 4 are concerned, we find that no interference is called for With the view taken by the Tribunal via the impugned order. In these circumstances, the Revenue's appeal, i.e. T.C(A) No.105 of 2017, pertaining to AY 2007-08, with regard to the said questions, is dismissed." 5.8. In another decision which is relevant in the context is Shahir Sami Khatib Vs ITO (2018) 98 Taxmann.com 453 (Mum)/(2018) 259 Taxman 160 (Mum). ft was found that the ....
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....e was completed on 22.12.2016. The time was clearly available to reopen the assessment for assessment year 2014-15 and therefore, in terms of provisions contained u/s 150(2), there is no legal impediment to reopen the cases of the above mentioned two shareholders." Aggrieved, the Revenue is in appeal before us. 10. The facts are admitted and the assessee-company is neither registered shareholder nor beneficial owner and hence, deemed dividend cannot be assessed in the hands of the assessee. This view is also affirmed by Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra vs. CIT [2011] 338 ITR 538 (Cal.), wherein it is held as under: "4. We have heard rìval submissions and gone through facts and circumstances of the case. We have gone through the facts of the case and found from the perusal of ledger account of assessee in the books of account of Ganesh Wheat Products (P) Ltd., the lender Company, it is seen that as on the first day of the relevant accounting year 2005- 06 (A.Y. 2006-07) opening balance is at Rs.28,07,584/-. Thereafter, on several dates during the entire financial year there were several transactions through cheques and some in cash by eit....
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.... held as under: "The phrase "by way of advance or loan" appearing in sub- clause (e) of section 2(22) of the Income-tax Act, 1961, must be construed to mean those advances or loans which a shareholder enjoys simply on account of being 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 ín profits) holding not less than ten per cent. of the voting power; but if such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to be deemed dividend withín the meaning of the Act. Thus, gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder." From the above facts and legal proposition decided by Hon'ble jurisdictional High Court, it is clear that section 2(22) (e) of the Act was inserted to bring within the purview of taxation thos....