S 2(22)(e) held inapplicable as there was no substantial interest in a company
S 2(22)(e) held inapplicable as there was no substantial interest in a company
Assessee individual was director of General Cement Products Pvt. Ltd. (GCP), in which he held 12.05% shares, and from which he availed an advance of Rs 1 crore. AO treated the loans and advances received by assessee from GCP as deemed dividend u/s 2(22)(e), and made an addition. CIT(A) deleted the addition and held that as per assessee’s revised return, he was not having substantial interest in GCP, and s 2(22)(e) did not apply. ITAT concurred.-501310
1. The Assessee individual was the director of a company by name M/s.General Cement Products Pvt. Ltd. (GCP). The assessee held 68300 shares of GCP which constituted 9.7% of the paid up share capital of GCP. AO found from the website of Ministry of Corporate Affairs (MCA) that the GCP filed annual return of allotment of shares made for the financial year ending 31.03.2008 that the assessee in fact held 88,300 shares out of the total paid up capital of 7,06,600 equity shares of GCP. The share holding of the assessee in GCP was 12.05%. AO, therefore concluded that the assessee had substantial interest in GCP because he was holding more than 10% of the paid shares of GCP. AO further found that in the books of GCP the assessee's account showed that the assessee had availed of advance of Rs.1 crore on 30.06.2008. AO further found that the accumulated profit of GCP were to the extent of Rs.69,46,102/-. The AO was of the view that to the extent GCP possessed accumulated profits, the loans and advances received by the assessee from GCP had to be treated as deemed dividend within the meaning of section 2(22)(e) of the Act. The AO was of the view that the provisions of Sec.22(22)(e). The AO rejected the stand taken by the assessee and made addition of Rs.69,46,102/- to the total income declared by the assessee by invoking the provision of section 2(22)(e) of the Act.
2. CIT(A) held that the addition made u/s 2(22)(e) of the Act cannot be sustained.
3. On appeal, the ITAT held as under:
“From the evidence available on record it is clear that the actual transfer of shares took place only on 30.8.2008. The wrong mention of date in the annual return filed by GCP was the only basis on which the entire addition has been made. The Annual return has since been rectified by GCP by mentioning the correct date of transfer of 20,000 shares in the name of the Assessee as 30.8.2008. The other documentary evidence showed that there was legal transfer of 20000 shares of GCP in the name of the Assessee only on 30.8.2008. In the given facts and circumstances, we are of the view that the mere claim of the revenue that all the documents are not contemporaneous and have been brought about by the Assessee to get over the rigours of Sec.2(22)(e) of the Act cannot be accepted. In this regard it is seen that even in the remand proceedings the AO did not make any enquiries nor examined concerned persons to establish his case. In such circumstances, we are of the view that the order of the CIT(A) does not call for any interference. The same is confirmed and this appeal by the Revenue is dismissed.”
Case Reference - I.T.O., Ward-9(1) -versus- Bimal Kumar Khaitan
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH 'A' KOLKATA
[Before Hon'ble Shri N.V.Vasudevan, JM & Shri M.Balaganesh, AM ]
ITA No.1658/Kol/2012
Assessment Year : 2009-10
