When the assessee is not a shareholder of the lender company the ICDs and the advances to the assessee cannot be treated as deemed dividend at the hands of the assessee
1. Assessee is a company engaged in the business of manufacture of automotive tyres
2. During the year under consideration, the assessee company had received ICD of Rs.7.5 crores from M/s. Excel Rubber Pvt. Ltd. being a closely held company
3. According to the Assessing Officer, the said company having accumulated profit, the amount of ICD received by the assessee from the said company was liable to be added to its total income as deemed dividend under S.2(22)(e)
4. The submissions made by the assessee that the transaction involving receipt of ICD being regular business transaction and it being not a share holder in M/s. Excel Rubber Pvt. Ltd., the amount of ICD was not liable to be treated as deemed dividend in its hands, was not accepted by the Assessing Officer
5. Assessee moved to the CIT(A) and following the decision of the Tribunal rendered in assessee’s own case for assessment year 2006-07 deleting the similar addition made by the Assessing Officer under S.2(22)(e), the learned CIT(A) deleted the addition made by the Assessing Officer on account of ICD received by the assessee from M/s Excel Rubber Pvt. Ltd.
6. Revenue moved to the Tribunal and after hearing both parties decided in favour of the assessee
Respectfully following the decision rendered by the coordinate bench of this Tribunal in assessee’s own case for the assessment years 2006-07 and 2010-11, we uphold the impugned order of the learned CIT(A), deleting the addition made by the Assessing Officer under
S.2(22)(e) by treating the amount of ICD received by the assessee form M/s. Excel Rubber Pvt. Ltd. as deemed dividend.
Cases referred to
5. MARC Manufacturers Pvt. Ltd. Vs. ACIT in ITA No. 555/Hyd/2008 dt. 31/08/2009
7. Seamist Properties Pvt. Ltd. vs. ITO reported in (2005) 1 SOT page 142