ITO Vs Reliance Motor Company Ltd (ITAT Chennai)
The Income Tax Appellate Tribunal (ITAT) Chennai Bench has issued an order partially allowing the Revenue’s appeal for statistical purposes in the case of ITO vs. Reliance Motor Company Ltd. The Tribunal’s decision, pronounced on December 9, 2024, addressed two primary disputes for the Assessment Year 1999-2000: the taxability of a loan as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, and the deduction claimed for Voluntary Retirement Scheme (VRS) compensation payments.
The case originated from an assessment reopened under Section 143(3) read with Section 147 of the Act. The Assessing Officer (AO) had identified two key issues. Firstly, a loan of Rs. 2,24,00,000 received by Reliance Motor Company Ltd. from M/s. MCTM Corporation Pvt. Ltd., a sister concern, was treated as deemed dividend. The AO invoked Section 2(22)(e) on the premise that common shareholders existed between the two entities. The assessee argued that the beneficial shareholding criteria for Section 2(22)(e) were not met, as shareholders holding more than 10% voting power in the lending company did not hold 20% or more shares in the assessee company. The AO, however, disregarded this, particularly questioning the genuineness of shares held by certain Hindu Undivided Families (HUFs) and joint holders due to the assessee’s inability to provide old share application forms.
