Finco Holdings Pvt. Ltd., Chennai vs Assessee

अपीलाथ क ओर से / Appellant by : Shri. G. Seetharaman, C.A., यथ क ओर से / Respondent by : Shri. P. Radhakrishnan, IRS, JCIT.

सन ु वाई क तार ख/Date of hearing : 24.02.2015 घोषणा क तार ख /Date of Pronouncement : 27.02.2015

आदे श / O R D E R

PER S.S. GODARA, JUDICIAL MEMBER

This assessee's appeal for assessment year 2008-09;

emanates from order dated 17.12.2013 passed by the Commissioner of

Income Tax (Appeals)-II, Chennai in ITA No.433/13-14 sustaining :- 2 -: I.T.A.No890/Mds/2014.

deemed dividend's addition of D 32,14,906 u/s. 2(22)(e), in

proceedings under section 143(3) of the Income Tax Act, 1961 [in

short the "Act"].

2. The assessee is an associate concern of M/s. Fairmacs group of

companies engaged in the businesses of logistics, ship handling,

imports and exports. It had filed its 'return' on 25.12.2008 stating

income of D82,037/--. The same was 'summarily' processed.

3. The Assessing Officer took up 'scrutiny'. He noticed from the

assessee's books, balance sheets and other details that unsecured

loans had been obtained from its group entity Fairmacs Shipping &

Transport Services Pvt. Ltd. S/Sh. D.R. Shete and Sunil R. Shete hold

50% each of the assessee's shareholdings and 75% : 25% in case

of the lender entity. The latter entity had accumulated profits of

D3,76,48,555/- as on 31.03.2008. The Assessing Officer invoked

section 2(22)(e) and viewed the impugned loans as deemed dividends

u/s. 2(22)(e) of the Act resulting in the addition in question.

4. The Commissioner of Income Tax (Appeals) also affirmed the

Assessing Officer's findings. The assessee argued in the lower

appellate proceedings that it itself is not a shareholder in the lender :- 3 -: I.T.A.No890/Mds/2014.

entity to invoke section 2(22) (e). The lower appellate authority held

the assessee to be '' a concern in which the shareholders of the lender

entity are interested''. This leaves the assessee aggrieved.

5. We have heard both sides and gone though the case file.

Factual backdrop of the case already stands narrated. The assessee

reiterates its argument raised in the lower appellate proceedings that it

is not a shareholder in the lender company. The Revenue fails to

convert this factual position. We find that a Special Bench of the

'tribunal' in Bhaumik Colour [2009] 313 ITR 146 Mumbai has held in

the very circumstances that section 2(22) (e) does not apply in case of

common shareholders and the debtor entity itself should be a

shareholder in the creditor entity. The parties inform us that hon'ble

Bombay high court has affirmed this decision. The hon'ble Delhi high

court in ITA No.462/2009 CIT vs ANKITECH Private Limited decided

on 11.05.2011 has also taken a similar view. We draw support

therefrom and hold that the authorities below have erred in adding

impugned unsecured loans of D32,14,906/- as deemed dividend

u/s.2(22)(e) of the Act despite the fact that the assessee is not a

shareholder in the lender company. It is made clear that the Assessing

Officer shall be at liberty to add the aforesaid loans as :- 4 -: I.T.A.No890/Mds/2014.

deemed dividends in the hands of the above said shareholders as per

law. The assessee's ground succeeds.

6. The assessee's appeal is allowed.

Order pronounced on Friday, the 27th of February, 2015, at Chennai.

Sd/- Sd/- (ए. मोहन अलंकामणी) (एस. एस. गोदारा) (A.MOHAN ALANKAMONY) (S.S. GODARA) लेखा सद य/ ACCOUNTANT MEMBER या यक सद य/ JUDICIAL MEMBER

चे$नई/Chennai. %दनांक/Dated:27.02.2015. KV

आदे श क त(ल)प अ*े)षत/Copy to: 1. अपीलाथ /Appellant 2. यथ / Respondent 3. आयकर आयु,त (अपील)/CIT(A) 4. आयकर आयु,त/CIT 5. )वभागीय त न/ध/DR 6. गाड फाईल/GF.