Case Law Details
DCIT Vs J. P. Iscon Ltd. (ITAT Ahmedabad)
The brief facts leading to the case is this that the assessee had given inter-corporate deposit to six subsidiaries companies namely Dhanlaxmi Infrastructure Pvt. Ltd., Amit Intertrade Pvt. Ltd., Dhwani Infrastructure Pvt. Ltd., Rich Infrastructure Pvt. Ltd., Gujarat Mall Management Co. Pvt. Ltd. & Palitana Sugars Mills Pvt. Ltd. for business purposes. The lender company was closely held company in which public held no substantial interest. According to Revenue the above loans are deemed dividend as per Section 2(22)(e) and the appellant is required to deduct TDS under Section 194 of the Act. The four directors of the appellant company namely Mr. Pvaveen T. Kotak, Mr. Jayesh T. Kotak, Mr. Jatin M. Gupta & Mr. Amit M. Gupta are the common and beneficial shareholder in the assessee company as well as subsidiary companies. The case of the Revenue is this that the payment by way of loans or advances to the shareholders having, substantial interest in a company to the extent of which the company posses accumulated profits is to be treated as dividend as the resultant effect tax is required to be deducted under Section 194 of the Act for the year under Consideration. The accumulated profit in terms of reserve and surplus is of Rs. 20,65,96,153/- and the assessee company has advanced loan 19,56,37,008/- on which the assessee is required to deduct tax at 20%. The Assessing Officer after considering the substantial common shareholding of Shri Pravin T Kotak, Shri Jayesh T Kotak, Mr. Jatin M Gupta and Mr. Amit M Gupta treated the amount of Rs. 19,56,37,008/- up to the accumulated profit received by the assessee company namely J. P. Iscon Ltd. as deemed dividend under Section 2(22)(e) of the Act which was, in turn, deleted by the Ld. First Appellate Authority holding that the payee company is not the registered shareholder of the appellant company relying upon various judicial pronouncements made by different forums. Hence, the instant appeal filed by the Revenue before us.
It is an undisputed fact that loan has been advanced by the appellant company to six group company which are not shareholder of the appellant company.
On this issue we have further considered the judgment relied upon by the Ld. Counsel appearing for the assessee in the matter of Vidhi Infrastructure Pvt. Ltd. in ITA No. 554/Ahd/2017 & C.O. No. 71/Ahd/2017 passed by the Coordinate Bench in the said Vidhi Infrastructure is one of the companies where the appellant had given inter-corporate deposit. The Coordinate Bench was pleased to hold that such inter-corporate deposit is not deemed dividend.
We have further considered the judgment passed by the Hon’ble SMC Bench in the case of M/s. Precimetal Cast Pvt. Ltd. vs. ITO in ITA No. 3499/Ahd/2015 for A.Y. 2012-13 where it has been held that for the applicability of Section 2(22)(e) it is required that assessee must be a shareholder in the company from whom the loan or advances has been taken and it does not provide that any shareholder of the assessee company who had taken any loan or advances from another company in which such shareholder is also a shareholder having substantial interest.
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