ACIT Vs Herbert Brown Pharmaceuticals & Research Laboratories (ITAT Mumbai)
The learned Departmental Representative relied upon the order of the Assessing Officer and submitted that though the recipient of loan or advance by the company is not a shareholder but is a concern in which shareholders are having substantial interest. He submitted that the learned Commissioner (Appeals) has incorrectly interpreted the provisions of section 2(22)(e) even though at least one shareholder holding 30% share in the company and 45% share in the assessee’s firm. While concluding, the learned Departmental Representative further submitted that the learned Commissioner (Appeals) failed to appreciate the judgment of the Hon’ble Supreme Court in Gopal & Sons (HUF) v/s CIT, [2017] 391 ITR 001 (SC), wherein the Hon’ble Court by dismissing the assessee’s appeal held that even if HUF is not a registered shareholder in lending company, once payment is received by HUF and Karta, who is shareholder in lending company, has substantial interest in HUF, payment made to HUF shall constitute deemed dividend in HUF’s hand as per Explanation 3 to section 2(22)(e) of the Act.
Considering the submissions the learned Departmental Representative and on a perusal of the material on record in the light of the decisions relied upon, we find that the issue on applicability of provisions of section 2(22)(e) of the Act is squarely covered in favour of the assessee by the decision of the Co–ordinate Bench of the Tribunal in assessee’s own case in preceding assessment year 2019– 10, 2010–11, 2011–12, 2012–13 and 2013–14 wherein the Bench in Revenue’s appeal declined to interfere with the order of the first appellate authority and upheld the same. Consequently, we do not find any infirmity in the order passed by the learned Commissioner (Appeals) by allowing the claim of the assessee.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The aforesaid appeal has been filed by the Revenue challenging the order dated 20th February 2019, passed by the learned Commissioner (Appeals)–1, Mumbai, pertaining to the assessment year 2010–11.
2. The issue arising out of the grounds of appeal raised by the Revenue is, whether or not the learned Commissioner (Appeals) was justified in deleting the addition of ` 2,89,21,986, made by the Assessing Officer in the hands of the assessee firm under section 2(22)(e) of the Income Tax Act, 1961 (for short “the Act”).
3. Brief facts are, the assessee firm is engaged in the business of manufacturing and trading of chemicals and drugs and intermediates. For the year under consideration, the assessee filed its return of income on 29th September 2015 declaring total income of ` 26,55,170. The Assessing Officer from the material available before him observed that the assessee has borrowed loans from private limited companies wherein common shareholders held over 10% of the voting rights. The amount of loans taken by the assessee, details of common shareholders and their share holding ratios, details of the reserves and surplus available with those companies are given below:–
