IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `C' : NEW DELHI
BEFORE SHRI G.C. GUPTA, VICE PRESIDENT
AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
ITA No. 6302 /Del/2013
Assessment Year: 2005-06
IAG Promoters and Developers Vs. Asstt. Commissioner of
Pvt. Ltd., M-11, Middle Circle, Income Tax, Central Circle-23,
Cannaught Circus, New Delhi. New Delhi.
(PAN:AAACI7995R)
(Appellant) (Respondent)
Assessee by : Sh. V.S. Rastogi, AR
Department by: Sh. T. Vasanthan, Sr. DR
Date of hearing: 07.05.2015
Date of pronouncement: 10.06.2015
ORDER
PER INTURI RAMA RAO, A.M.:
This is an appeal for the assessment year 2005-06 filed by the assessee
company against the order of learned CIT(A), dated 26.08.2013 on the following
grounds of appeal:
i. That the orders passed by the Assessing Officer and Commissioner of
Income Tax (Appeals)-XXXIII, New Delhi are bad in law and void ab-
initio.
ii. That on the facts and circumstances of the case and in law, the
Commissioner of Income Tax (Appeals)-XXXIII, New Delhi erred in
confirming the addition of Rs.l,73,262/- as deemed dividend u/s 2(22)(e)
of the IT Act.
iii. That both the Assessing Officer and the Commissioner of Income Tax
(Appeals)-XXXIII, New Delhi misread the directions given by the Hon'
ble Income Tax Appellate Tribunal in their order dated 06.04.2010 in ITA
No. 3556/DEL/09 for making the fresh assessment and resultantly treating
the sum of Rs. l,73,262/- as deemed dividend u/s 2(22)(e) of the IT Act all
over again.
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iv. That both the Assessing Officer and the Commissioner of Income Tax
(Appeals)-XXXIII, New Delhi erred in confirming the addition of
Rs.173262/- on account of deemed dividend u/s 2(22)(e) despite the fact
that M/s IAG Promoters and Developers Pvt. Ltd is not a shareholder of
M/s Countrywide Promoters Pvt. Ltd , the addition of Rs. l,73,262/- as
dividend u/s 2(22)(e) of the IT Act was unwarranted in view of the
judgment of Hon'ble Jurisdictional Delhi High Court in CIT vs. Ankitech
Pvt. Ltd 2011 11 taxmann.com 100 Delhi.
v. The appellant craves permission to add, amend, alter or vary all or any
grounds of appeal on or before the date of hearing of the appeal.
2. Briefly stated facts of the case are that the return of income for the
assessment year 2005-06 was filed on 31st October, 2005, declaring total income
at Rs. 39,04,210/-. The return was processed under Section 143(1) of the
Income-tax Act, 1961 (for short "the Act") and subsequently the case was
selected for scrutiny. The assessment was completed by the Deputy
Commissioner of Income Tax, Circle-11, New Delhi on 28.12.2007 at a total
income of Rs. 8,98,94,480/-. While doing so, the Assessment Officer made
additions of Rs. 84,993/- and Rs. 1,73,261/- on account of deemed dividend
under Section 2(22)(e) of the Act. The short facts leading to these additions are
that the appellant company received loans of Rs. 23 lakhs and Rs. 4.01 crores
from M/s Triangle Builders & Promoters Pvt. Ltd. and M/s Countrywide
Promoters Pvt. Ltd. respectively. The appellant reflected these transactions in its
balance sheet as loan received during the year. The Assessing Officer was of the
opinion that these are covered by the scope of the provisions of Section 2(22)(e)
of the Act to the extent of accumulated profits of Rs. 84,993/- and Rs.
1,73,261/- respectively. On appeal, the CIT(A) upheld the addition of a Rs.
1,73,261/-, however, deleted the addition of Rs. 84,993/-. Aggrieved by this
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order, the appellant filed an appeal before the ITAT, Delhi Bench, who vide
order dated 06.04.2010 in ITA No. 3556/Del/2009 set aside the issue of addition
of Rs. 1,73,262/- under Section 2(22)(e) of the Act to the file of Assessing
Officer for re-examination. Pursuant to this direction of the Tribunal, the order
under Section 143(3) read with Section 254 of the Act was passed vide order
dated 29.12.2011, wherein the addition of Rs. 1,73,262/- was again made on the
ground that the appellant had failed to furnish the status of the addition made in
M/s Fragrance Construction Pvt. Ltd. Aggrieved by this addition, an appeal was
filed before the CIT(A) who vide order dated 26.08.2013 dismissed the appeal.
Aggrieved by that order of CIT(A), the appellant had come up before us with the
present appeal.
3. The learned Authorized Representative vehemently argued that the
provisions of Section 2(22)(e) of the Act have no application to the case,
inasmuch as, the appellant is not a shareholder of M/s Countrywide Promoters
Pvt. Ltd. having an interest of 10% per annum in the said company. In support
of this, the appellant filed a list of shareholders of M/s Countrywide Promoters
Pvt. Ltd. vide page 16 of the paper book. When the appellant company is not a
registered shareholder of M/s Countrywide Promoters Pvt. Ltd., the provisions
of Section 2(22)(e) of the Act have no application to the appellant. In support of
this, the learned AR has relied upon the decision of Hon'ble Delhi High Court in
the case of CIT Vs. Ankitech Pvt. Ltd, 340 ITR 14 (Del.)
4. On the other hand, the learned Departmental Representative strongly
relied upon the orders of the authorities below.
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5. We have heard the rival submissions and perused the material on record.
Undisputedly, the appellant is not a shareholder of M/s Countrywide Promoters
Pvt. Ltd. It is trite law that the provisions of Section 2(22)(e) have no application
to non-registered shareholders. The Hon'ble Apex Court in the case of CIT Vs.
C.P. Sarathy Mudaliar (1972) 83 ITR 170 (SC) while construing the provisions
of Section 2(6A)(e) of the Act, 1922 which are in pari materia with the
provisions of Section 2(22)(e) of the Income-tax Act, 1961, held that the
provisions governing the deemed dividend can be made applicable only in the
hands of the registered shareholders. Since, admittedly, in the present case, the
appellant is not a shareholder of M/s Countrywide Promoters Pvt. Ltd. the
amount of Rs. 1,73,262/- cannot be taxed in the hands of the appellant company.
Hence the appeal filed by the assessee is allowed.
6. In the result, the appeal is allowed.
The decision is pronounced in the open court on 10th June, 2015.
Sd/- Sd/-
(G.C. GUPTA) (INTURI RAMA RAO)
VICE PRESIDENT ACCOUNTANT MEMBER
Dated: 10th June, 2015.
RK/-
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
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