Case Law Details
Apeejay Surrendra Management Services Pvt Ltd Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that deemed dividend under section 2(22)(e) of the Income Tax Act can be added in the hands of beneficial shareholder who is having controlling interest (substantial interest).
Facts- Assessee is engaged in the business of Brand Owning and Consultancy. During the year under consideration, assessee Apeejay Surrendra Management Services Pvt. Ltd. received a sum of Rs.5,50,11,501/- as loans/advances from another group company called as Apeejay Private Ltd. Assessee is not a registered shareholder of APL who is a lender company. However, there is a common shareholder namely, Kathua Steel Works Pvt. Ltd. who holds substantial interest in both the assessee and the lender company.
AO treated the amount of loans/advances received by the assessee from APL as deemed dividend u/s. 2(22)(e) of the Act since there was a common shareholding by KSWPL having substantial interest in both APL and ASMSPL. CIT(A) confirmed the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that the beneficial ownership is with KSWPL under whose substantial control, loan from APL is granted to the concern i.e. ASMSPL, assessee. ASMSPL i.e. the assessee cannot influence the decision making of company KSWPL. Similarly, APL cannot influence the decision making process of KSWPL. In both the companies, the controlling interest (substantial interest) is held by KSWPL. It is in fact KSWPL who is in a position to influence the decision making process of the two companies. Therefore, the deeming fiction of section 2(22)(e) can be applied only in the hands of KSWPL who is the beneficial owner of shares in both, the lender and the receiving companies.
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