| The Tax Publishers2020 TaxPub(DT) 1518 (Mum-Trib) INCOME TAX ACT, 1961
Section 2(22)(e)
Assessee was not a registered shareholder of BTPL as such, the preference share application money received by the assessee can thus, not be treated as deemed dividend in the hands of the assessee as the basic condition as envisaged by section 2(22)(e) was not satisfied as such, addition made by the lower authorities was therefore, deleted.
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Divident - Deemed dividend - Assessee was not shareholder of lender company - Condition precedent not satisfied --- Business transaction
During the course of assessment proceedings, AO observed that assessee had received preference share application of Rs. 90.00 crores from BTPL. Accordingly, the AO called upon the assessee to furnish details of the share application money along with the necessary documents/evidences. In response to the notice, the assessee submitted the board resolution and financial statements of the entity from whom the assessee had received preference share application money. The AO, in order to verify the genuineness of the transactions, issued summon under section 131 to the Principal Officer of M/s. BTPL. Director of the said entity Mr. A Shiva of M/s. BTPL appeared before the AO and his statement was recorded under section 131. AO concluded that since M/s. Merind Ltd. had given share application money (Rs. 19 crores) to M/s. BTPL who had further given the money as share application money to the assessee and without getting into the share holding pattern of M/s. Merind Ltd. the back to back transaction tantamounts to virtual lending by M/s. Merind Ltd. to the assessee and therefore provisions of section 2(22)(e) had been clearly attracted. Transferring the money from one company to another within the group and money advanced by the M/s. CISPL to the assessee indirectly through M/s. BTPL in order to avoid tax liability was covered under section 2(22)(e). Finally, the AO added the amount of Rs. 90.00 crore as share application money as deemed dividend under section 2(22)(e). CIT(A), after taking into consideration the contentions and submissions of the assessee, dismissed the ground raised by the assessee. Held: Undisputedly and factually, the assessee was not a registered shareholder of M/s. BTPL and therefore the condition as envisaged in the provisions of section 2(22)(e) were not satisfied. Further, there was a meirt in the contentions of the assessee that the preference share application money received by the assessee could not be treated as deemed dividend in the hands of the assessee as the basic condition as envisaged by section 2(220(e) was not satisfied. The assessee had to be registered as well as beneficial shareholder of the lender company in order to attract the provisions of section 2(22)(e) as held by the Apex court in the case of CIT v. Madhur Housing and Development Co. Civil Appeal No. 3961 of 2013. Tribunal was therefore, not in agreement with the decision of the lower authoriteis on this issue and hold that the preference share application money received by the assessee from M/s. BTPL was outside the purview of section 2(22)(e) and consequently had to be deleted. Tribunal was also not in agreement with the conclusion drawn by the lower authorities that the transaction of receiving preference share application money from M/s. BTPL were sham transactions.
Followed:CIT v. Madhur Housing & Development Co. civil Appeal No. 3961 of 2013. Relied:CIT v. Jignesh P. Shah (2015) 372 ITR 392 (Bom.) : 2015 TaxPub(DT) 618 (Bom-HC), Pr. CIT v. Rajeev Chandrashekhar (2017) 397 ITR 263 (Karn-HC) : 2016 TaxPub(DT) 1894 (Karn-HC), HDFC Bank Ltd. v. ACIT (2019) 410 ITR 247 (Bom) : 2018 TaxPub(DT) 7969 (Bom-HC), CIT v. Pravin Bhimshi Chheda (2015) 228 Taxman 340 (Bom-HC)(MAG), CIT v. Jayant H. Modi (2015) 232 Taxman 337 (Bom-HC) : 2015 TaxPub(DT) 2836 (Bom-HC), ITO v. Ajay Dilkhush Sarupriya (2015) 70 SOT 449 (Mum-Trib.) : 2015 TaxPub(DT) 2705 (Mum-Trib), CIT v. Parle Plastics Ltd. (2011) 332 ITR 63 (Bom-HC) : 2011 TaxPub(DT) 0481 (Bom-HC), Ravi Agarwal v. ACIT (2016) 287 CTR 581 (All-HC) : 2015 TaxPub(DT) 4055 (All-HC), CIT v. Hede Consultancy Co. (P) Ltd. (2015) 231 Taxman 421 (Bom-HC), Coromandel Cables Ltd. v. ACIT (2016) 71 Taxmann.com 346 (Chen) (Trib.), CIT v. Mehta (P) Ltd. (2008) 174 Taxman 104 (Bom-HC) : 2008 TaxPub(DT) 2296 (Bom-HC), Porrits and Spencer (Asia) Ltd. v. CIT (2010) 329 ITR 222 (P&H) : 2010 TaxPub(DT) 1751 (P&H-HC), F.E. Dinshaw Limited v. CIT (1959) 36 ITR 114 (Bom-HC) : 1959 TaxPub(DT) 204 (Bom-HC) and CIT v. Walfort Shares & Share Brokers (P) Ltd. (2010) 326 ITR 1 (SC) : 2010 TaxPub(DT) 2087 (SC). Distinguished:Pee Aar Securities Ltd. v. Dy. CIT ITA No. 4978/Delhi/2014 assessment year 2005-06 Order, dated 23-8-2018.
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