Case Law Details
ACIT Vs Kiran Ship Breaking Company (ITAT Ahmedabad)
ITAT Ahmedabad held that addition of amount received as advances as deemed dividend in terms of section 2(22)(e) of the Income Tax Act unsustainable as assessee firm is neither registered shareholder nor beneficial shareholder. Concluded that deemed dividend is taxable only in the hands of the shareholder.
Facts- AO had noted that the assessee had received various sums during the year from one Shree Electromelts Ltd. (“SEL”) both from its steel and coke division; that one of the directors of SEL, Shri Ram Krishan Jain, held more than 10% share in the company and 50% partnership in the assessee-firm. AO, therefore held that the firm had substantial interest in the company and amount of advance outstanding at the end of the year from two divisions, amounting to Rs. 1,89,08,942/- from coke division and 39,44,984/- from steel division, were treated as deemed dividend in terms of section 2(22)(e) of the Act, liable to be taxed in the hands of the assessee firm.
CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Jurisdictional High Court in the case of CIT Vs. Daisy Packers P.Ltd., and the Hon’ble Delhi High Court in the case of CIT Vs. AnkitechP.Ltd. has held that deemed dividend is taxable only in the hands of the shareholder.
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