DCIT, Circle -1(1), Hyderabad V. M/s ACE Tyres Limited, R.R.Dist

ITA 1488/HYD/2014

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1899 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 13-10-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 18-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KONDA RAMESH
• Assessee Lawyers: P SATAYANARAYANA MURTHY
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. P.MADHAVI DEVI, JUDICIAL ME MBER ITA NO.1488/HYD/2014 : ASSESSMENT YEAR 2011-12 DY. COMMISSIONER OF INCOME- TAX CIRCLE 1(1), HYDERABAD V/S. M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT (PAN AADCA 2210 N) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KONDA RAMESH DR RESPONDENT BY : SHRI P.SATAYANARAYANA MURTHY DATE OF HEARING 13 . 1 0 . 201 5 DATE OF PRONOUNCEMENT 14.10.2015 O R D E R PER P.M.JAGTAP, ACCOUNTANT MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX(APP EALS) II, HYDERABAD DATED 15.7.2014, WHEREBY SHE DELETED THE ADDITION OF RS.7.50 CRORES MADE BY THE ASSESSING OFFICER ON ACC OUNT OF INTER- CORPORATE DEPOSITS (ICDS) RECEIVED BY THE ASSESSEE FROM M/S. EXCEL RUBBER LIMITED TREATING THE SAME AS DEEMED DIVIDEND UNDER S.2(22)(E) OF THE ACT. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURE OF AUTOMOTIV E TYRES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY IT ON 29.9.2011 DECLARING TOTAL INCOME OF RS.5,97,78,552. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD RECEIVED ICD OF RS.7.5 CRORES FROM M/S. EXCEL RUBBER PVT. LTD. BEING A CLOSELY HELD COMPANY. ACCORDING TO THE ASSESSING OFFICER, THE SAID COMPANY HAVING ACCUMULATED PROFIT, THE AMOUNT OF IC D RECEIVED BY ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 2 THE ASSESSEE FROM THE SAID COMPANY WAS LIABLE TO BE ADDED TO ITS TOTAL INCOME AS DEEMED DIVIDEND UNDER S.2(22)(E). IN THIS REGARD, THE SUBMISSIONS MADE BY THE ASSESSEE THAT THE TRANS ACTION INVOLVING RECEIPT OF ICD BEING REGULAR BUSINESS TR ANSACTION AND IT BEING NOT A SHARE HOLDER IN M/S. EXCEL RUBBER PVT. LTD., THE AMOUNT OF ICD WAS NOT LIABLE TO BE TREATED AS DEEME D DIVIDEND IN ITS HANDS, WAS NOT ACCEPTED BY THE ASSESSING OFFICE R AND RELYING ON THE ASSESSMENT ORDER PASSED BY HIM IN ASSESSEES OW N CASE FOR ASSESSMENT YEAR 2006-07 TREATING A SIMILAR AMOUNT O F ICD RECEIVED FROM M/S. EXCEL RUBBER P. LTD. AS DEEMED DIVIDEND, HE ADDED THE AMOUNT OF RS.7.50 CORES TO THE TOTAL INCOME OF THE ASSESSEE AS DEEMED DIVIDEND UNDER S.2(22)(E). 3. THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND UNDER S.2(22)(E) WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LEARNED CIT (A), AND FOLLOWING THE DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 DELETING THE SIMIL AR ADDITION MADE BY THE ASSESSING OFFICER UNDER S.2(22)(E), THE LEARNED CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ICD RECEIVED BY THE ASSESSEE FROM M/S EXCEL RUBBER PVT. LTD., TREATING THE SAME AS DEEMED DIVIDEND UNDER S.2(22)( E). AGGRIEVED BY THE ORDER OF THE LEARNED CIT(A) , THE REVENUE HA S PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. THE L EARNED REPRESENTATIVES OF BOTH THE SIDES HAVE AGREED THAT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE REVENUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07, RENDERED VIDE ITS ORDER DATED 30.9.2013 IN ITA NO.1721/HYD/2012. A COPY OF THE S AID ORDER IS ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 3 PLACED ON RECORD BEFORE US AND A PERUSAL OF THE SAM E SHOWS THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN F AVOUR OF THE ASSESSEE FOR THE FOLLOWING REASONS GIVEN IN PARAGRA PH NOS.8 TO 11 OF ITS ORDER DATED 30.9.2013- 8. WE HAVE HEARD SUBMISSIONS OF THE PARTIES AND PE RUSED THE MATERIALS ON RECORD AS WELL AS THE ORDERS PASSE D BY THE REVENUE AUTHORITIES. WE HAVE ALSO CAREFULLY EXAMINE D VARIOUS JUDICIAL PRECEDENTS PLACED BEFORE US. SO FAR AS ICD S OF RS. 2,91,50,000/- IS CONCERNED WE FULLY AGREE WITH THE CONCLUSION OF THE CIT(A) THAT IT CANNOT BE CONSIDER ED TO BE IN THE NATURE OF LOANS AND ADVANCES SO AS TO TREAT IT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. EVEN ASSUMING THA T THE ICDS ARE LOANS AND ADVANCES, STILL IT CANNOT BE TRE ATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT BECAUSE OF THE FOLLOWING REASONS. IT IS AN UNDISPUTED FACT THAT T HE ASSESSEE IS NOT A SHAREHOLDER IN M/S EXEL RUBBER PVT. LTD. F ROM WHICH ADVANCE HAS BEEN RECEIVED. A PLAIN READING OF PROVI SIONS CONTAINED U/S 2(22)(E) OF THE ACT MAKES IT CLEAR TH AT ANY LOAN OR ADVANCE MADE TO A SHAREHOLDER BY A COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED W OULD BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF SUCH SHAREHOLDERS. SINCE, THE ASSESSEE IS NOT A SHAREHOL DER IN M/S EXEL RUBBER PVT. LTD., THE LOAN AND ADVANCE RECEIVE D BY THE ASSESSEE CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE. THE HON'BL E DELHI HIGH COURT IN CASE OF CIT VS. ANKITECH P. LTD. (SUP RA) WHILE CONSIDERING IDENTICAL ISSUE APPROVED THE DECISION O F THE ITAT, MUMBAI SPECIAL BENCH IN CASE OF BHAUMIC COLOURS (P) LTD., 313 ITR (AT) 146 AND HELD AS UNDER: '22. INSOFAR AS THE PROVISIONS OF SECTION 2(22)(E) ARE CONCERNED, WE HAVE ALREADY EXTRACTED THIS PROVISION AND TAKEN NOTE OF THE CONDITIONS/REQUISITES WHICH ARE T O BE ESTABLISHED FOR MAKING PROVISION APPLICABLE. IN COM MISSIONER OF INCOME TAX VS. C.P. SARATHY MUDALIAR[1972] 83 IT R 170, THE SUPREME COURT HAD TRACED OUT THE ASSESSEE OF TH IS PROVISION IN THE FOLLOWING MANNER: ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTEREST, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF TH E COMPANY OR OTHERWISE) MADE AFTER 31.05.19987 BY WAY OF ADVANCE OR LOAN. FIRST LIMB A) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OF SHARES (NOT BEING SHARES ENTITLED TO A ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 4 FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RI GHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TE N PERCENT OF THE VOTING POWER, SECOND LIMB B) OR TO MY CONCERN IN WHICH, SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTI AL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS T HE SAID CONCERN) THIRD LIMB C) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OR ANY SUCH SHAREHOLDER , TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. 23. IT IS RIGHTLY POINTED OUT BY THE BOMBAY HIGH CO URT IN UNIVERSAL MEDICARE (P) LTD.(SUPRA)THAT SECTION 2(22 )(E) OF THE ACT IS NOT ARTISTICALLY WORDED. BE AS IT MAY, W E MAY REITERATE THAT AS PER THIS PROVISION, THE FOLLOWING CONDITIONS ARE TO BE SATISFIED: (1) THE PAYER COMPANY MUST BE A CLOSELY HELD COMPANY. (2) IT APPLIES TO ANY SUM PAID BY WAY OF LOAN OR ADVANCE DURING THE YEAR TO THE FOLLOWING PERSONS: (A) A SHAREHOLDER HOLDING AT LEAST 10 OF VOTING POWER IN THE PAYER COMPANY. (B) A COMPANY IN WHICH SUCH SHAREHOLDER HAS AT LEAST 20% OF THE VOTING POWER. (C) A CONCERN (OTHER THAN COMPANY) IN WHICH SUCH SHAREHOLDER HAS AT LEAST 20% INTEREST. (3) THE PAYER COMPANY HAS ACCUMULATED PROFITS ON TH E DATE OF ANY SUCH PAYMENT AND THE PAYMENT IS OUT OF ACCUMULATED PROFITS. (4) THE PAYMENT OF LOAN OR ADVANCE IS NOT IN COURSE OF ORDINARY BUSINESS ACTIVITIES. 24. THE INTENTION BEHIND ENACTING PROVISIONS OF SEC TION 2(22)(E) IS THAT CLOSELY HELD COMPANIES (I.E. COMPA NIES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED), WHI CH ARE CONTROLLED BY A GROUP OF MEMBERS, EVEN THOUGH THE C OMPANY HAS ACCUMULATED PROFITS WOULD NOT DISTRIBUTE SUCH P ROFIT AS ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 5 DIVIDEND BECAUSE IF SO DISTRIBUTED THE DIVIDEND INC OME WOULD BECOME TAXABLE IN THE HANDS OF THE SHAREHOLDERS. IN STEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND, COMPA NIES DISTRIBUTE THEM AS LOAN OR ADVANCES TO SHAREHOLDERS OR TO CONCERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVID UAL BENEFIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT, BY T HE DEEMING PROVISIONS, SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. THE INTENTION BEHIND THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT IS TO TAX DIVIDEND IN T HE HANDS OF SHAREHOLDERS. THE DEEMING PROVISIONS AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST, IS BASED ON THE PRESUMPTION THAT THE LOANS OR ADVANCES WOULD UL TIMATELY BE MADE AVAILABLE TO THE SHAREHOLDERS OF THE COMPAN Y GIVING THE LOAN OR ADVANCE. 25. FURTHER, IT IS AN ADMITTED CASE THAT UNDER NORM AL CIRCUMSTANCES, SUCH A LOAN OR ADVANCE GIVEN TO THE SHAREHOLDERS OR TO A CONCERN, WOULD NOT QUALIFY AS DIVIDEND. IT HAS BEEN MADE SO BY LEGAL FICTION CREATED UNDER SECTION 2(22)(E) OF THE ACT. WE HAVE TO KEEP IN MIND THAT T HIS LEGAL PROVISION RELATES TO 'DIVIDEND'. THUS, BY A DEEMING PROVISION, IT IS THE DEFINITION OF DIVIDEND WHICH IS ENLARGED. LEGAL FICTION DOES NOT EXTEND TO 'SHAREHOLDER'. WHEN WE KEEP IN M IND THIS ASPECT, THE CONCLUSION WOULD BE OBVIOUS, VIZ., LOAN OR ADVANCE GIVEN UNDER THE CONDITIONS SPECIFIED UNDER SECTION 2(22)(E) OF THE ACT WOULD ALSO BE TREATED AS DIVIDE ND. THE FICTION HAS TO STOP HERE AND IS NOT TO BE EXTENDED FURTHER FOR BROADENING THE CONCEPT OF SHAREHOLDERS BY WAY OF LE GAL FICTION. IT IS A COMMON CASE THAT ANY COMPANY IS SU PPOSED TO DISTRIBUTE THE PROFITS IN THE FORM OF DIVIDEND TO I TS SHAREHOLDERS/MEMBERS AND SUCH DIVIDEND CANNOT BE GI VEN TO NON-MEMBERS. THE SECOND CATEGORY SPECIFIED UNDER SE CTION 2(22)(E) OF THE ACT, VIZ., A CONCERN (LIKE THE ASSE SSEE HEREIN), WHICH IS GIVEN THE LOAN OR ADVANCE IS ADMI TTEDLY NOT A SHAREHOLDER/MEMBER OF THE PAYER COMPANY. THEREFOR E, UNDER NO CIRCUMSTANCE, IT COULD BE TREATED AS SHAREHOLDER/MEMBER RECEIVING DIVIDEND. IF THE INTEN TION OF THE LEGISLATURE WAS TO TAX SUCH LOAN OR ADVANCE AS DEEMED DIVIDEND AT THE HANDS OF 'DEEMING SHAREHOLDER', THE N THE LEGISLATURE WOULD HAVE INSERTED DEEMING PROVISION I N RESPECT OF SHAREHOLDER AS WELL, THAT HAS NOT HAPPENED. MOST OF THE ARGUMENTS OF THE LEARNED COUNSELS FOR THE REVENUE W OULD STAND ANSWERED, ONCE WE LOOK INTO THE MATTER FROM T HIS PERSPECTIVE. 26. IN A CASE LIKE THIS, THE RECIPIENT WOULD BE A S HAREHOLDER BY WAY OF DEEMING PROVISION. IT IS NOT CORRECT ON T HE PART OF THE REVENUE TO ARGUE THAT IF THIS POSITION IS TAKEN , THEN THE INCOME 'IS NOT TAXED AT THE HANDS OF THE RECIPIENT' . SUCH AN ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 6 ARGUMENT BASED ON THE SCHEME OF THE ACT AS PROJECTE D BY THE LEARNED COUNSELS FOR THE REVENUE ON THE BASIS O F SECTIONS 4, 5, 8, 14 AND 56 OF THE ACT WOULD BE OF NO AVAIL. SIMPLE ANSWER TO THIS ARGUMENT IS THAT SUCH LOAN OR ADVANCE, IN THE FIRST PLACE, IS NOT AN INCOME. SUCH A LOAN O R ADVANCE HAS TO BE RETURNED BY THE RECIPIENT TO THE COMPANY, WHICH HAS GIVEN THE LOAN OR ADVANCE. 27. PRECISELY, FOR THIS VERY REASON, THE COURTS HAV E HELD THAT IF THE AMOUNTS ADVANCED ARE FOR BUSINESS TRANSACTIO NS BETWEEN THE PARTIES, SUCH PAYMENT WOULD NOT FALL WI THIN THE DEEMING DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 28. INSOFAR AS RELIANCE UPON CIRCULAR NO. 495 DATED 22.09.1997 ISSUED BY CENTRAL BOARD OF DIRECT TAXES IS CONCERNED, WE ARE INCLINED TO AGREE WITH THE OBSERV ATIONS OF THE MUMBAI BENCH DECISION IN BHAUMIK COLOUR (P) LTD . (SUPRA)THAT SUCH OBSERVATIONS ARE NOT BINDING ON TH E COURTS. ONCE IT IS FOUND THAT SUCH LOAN OR ADVANCE CANNOT B E TREATED AS DEEMED DIVIDEND AT THE HANDS OF SUCH A CONCERN W HICH IS NOT A SHAREHOLDER, AND THAT ACCORDING TO US IS THE CORRECT LEGAL POSITION, SUCH A CIRCULAR WOULD BE OF NO AVAI L. 29. NO DOUBT, THE LEGAL FICTION/DEEMED PROVISION CR EATED BY THE LEGISLATURE HAS TO BE TAKEN TO 'MAGIGICAL CONCL USION' AS HELD IN ANDALEEB SEHGAL (SUPRA). THE REVENUE WANTS THE DEEMING PROVISION TO BE EXTENDED WHICH IS ILLOGICAL AND ATTEMPT IS TO CREATE A REAL LEGAL FICTION, WHICH IS NOT CREATED BY THE LEGISLATURE. WE SAY AT THE COST OF REPETITIO N THAT THE DEFINITION OF SHAREHOLDER IS NOT ENLARGED BY ANY FI CTION. 30. BEFORE WE PART WITH, SOME COMMENTS ARE TO BE NECESSARILY MADE BY US. AS POINTED OUT ABOVE, IT IS NOT IN DISPUTE THAT THE CONDITIONS STIPULATED IN SECTION 2 (22)(E) OF THE ACT TREATING THE LOAN AND ADVANCE AS DEEMED DIV IDEND ARE ESTABLISHED IN THESE CASES. THEREFORE, IT WOULD ALWAYS BE OPEN TO THE REVENUE TO TAKE CORRECTIVE MEASURE BY T REATING THIS DIVIDEND INCOME AT THE HANDS OF THE SHAREHOLDE RS AND TAX THEM ACCORDINGLY. AS OTHERWISE, IT WOULD AMOUNT TO ESCAPEMENT OF INCOME AT THE HANDS OF THOSE SHAREHOL DERS.' 9. THE SAME VIEW HAS ALSO BEEN EXPRESSED BY THE HON 'BLE DELHI HIGH COURT AGAIN IN CASE OF CIT VS. NAVYUG PR OMOTERS P. LTD. (203 TAXMAN 618) AND HON'BLE BOMBAY HIGH CO URT IN CASE OF CIT VS. UNIVERSAL MEDICARE (P) LTD., (324 I TR 263). 10. THE ITAT, HYDERABAD BENCH IN CASE OF MARC MANUFACTURERS PVT. LTD. VS. ACIT IN ITA NO. 555/HYD /2008 DT. 31/08/2009 WHILE CONSIDERING IDENTICAL ISSUE OF ADVANCEMENT OF LOAN TO ONE COMPANY, WHICH IS NOT A SHAREHOLDER OF THE LENDER COMPANY FOLLOWING THE DEC ISION OF ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 7 ITAT MUMBAI SPECIAL BENCH IN CASE OF BHAUMIK COLOUR P. LTD. (SUPRA) AND OTHER DECISIONS HELD AS UNDER: '5. IT CAN BE SEEN FROM THE CIRCULAR THAT THE PROVI SIONS OF AMENDED SECTION 2(22)(E) ARE TO BE APPLIED ONLY TO THE PAYMENTS MADE TO THE SHAREHOLDERS AND NOT TO ANY OT HER PERSON OR CONCERN OTHER THAN THE SHAREHOLDERS. THE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. H.K. MI TTAL REPORTED IN 219 ITR 420 HELD THAT THE CHIEF INGREDI ENT OF DIVIDEND AS DEFINED IN SUB CLAUSE (E) OF CLAUSE (22 ) OF SECTION 2 OF THE I T ACT IS THAT THE RECIPIENT SHOULD A SHA REHOLDER ON THE DAY THE LOAN WAS ADVANCED. IF THAT FACT IS NOT ESTABLISHED, THERE CANNOT BE A DEEMED DIVIDEND. THE REFORE, THE PROVISIONS OF SEC. 2(22)(E) CANNOT BE APPLIED T O MARC AS IT IS NOT A SHAREHOLDER IN MTAR TECHNOLOGIES PVT. L TD. (HEREINAFTER CALLED AS MTAR). IN THIS REGARD, THE A SSESSEE RELIES ON THE DECLSLON OF THE ITAT MUMBAI BENCH 'G' IN THE CASE OF SEAMIST PROPERTIES PVT. LTD. VS. ITO REPORT ED IN (2005) 1 SOT PAGE 142. THE ASSESSEE FURTHER SUBMITS THAT THE PROVISIONS OF SEC. 2(22)( E) MENTION AS UNDER: 'ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF A NY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS O F THE COMPANY OR OTHERWISE) (MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIX ED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN P ER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHIC H SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN T HIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYM ENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUA L BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE- EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS' 6. THE INTENTION OF THE LEGISLATURE IS CLARIFIED IN CIRCULAR ISSUED BY THE CBIT AS AT THE TIME OF AMENDMENT OF CLAUSE ( E) OF SUB SECTION (22) OF SEC. 2 IS FURTHER FORTIFIED BY THE FACT THAT FOR DEDUCTION OF TAX AT SOURCE. SEC. 194 PROVIDE TH AT SUCH DEDUCTION OF TAX HAS TO BE MADE IN THE CASE OF THE PAYMENTS OF THE NATURE MENTIONED IN CLAUSES (A), (B), (C), ( D) AND (E) OF SUB SECTION (22) OF SECTION 2 ONLY IN A CASE WHE RE SUCH PAYMENTS WERE MADE TO A SHAREHOLDER. SECTION 199 AL SO INDICATES THAT ADJUSTMENT OF TOS WOULD BE PROVIDED IN THE ASSESSMENT OF SHAREHOLDER ONLY. THE VERY FACT THAT THE PROVISION FOR DEDUCTION OF TAX AT SOURCE AND ADJUST MENT OF TAX IS ONLY IN RESPECT OF THE PAYMENTS TO THE' SHAR EHOLDER ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 8 WOULD CLEARLY INDICATE THAT EVEN AFTER THE AMENDMEN T, THE EFFECT OF CLAUSE (E) OF SUB SECTION (22) OF SEC. 2 WOULD APPLY ONLY WHEN THE PAYMENT IS MADE TO SHAREHOLDER. WHERE VER, THE TAX IS TO BE DEDUCTED AT SOURCE FROM A DIVIDEND OR DEEMED DIVIDEND AND THE CONSEQUENTIAL EFFECT OF GIV ING EFFECT TO SUCH DEDUCTION OF TAX AT SOURCE, ETC., REFERENCE WAS MADE ONLY TO THE PAYMENTS TO THE SHAREHOLDER. THIS WOULD INDICATE CLEARLY THAT CLAUSE (E) WOULD APPLY ONLY IN CASE OF PAYMENTS TO THE SHAREHOLDER AND NOT TO OTHERS.' 11. IN THE APPEAL BEFORE US ADMITTEDLY THE ASSESSEE IS NOT A SHAREHOLDER OF THE LENDER COMPANY. HENCE, CONSIDERE D IN THE LIGHT OF THE RATIO LAID DOWN IN THE JUDICIAL PRECED ENTS REFERRED TO ABOVE THE ICDS OF RS. 2,91,50,000/- AND THE ADVA NCES TO THE ASSESSEE AMOUNTING TO RS. 1,44,86,549/- CANNOT BE TREATED AS DEEMED DIVIDEND AT THE HANDS OF THE ASSE SSEE. THEREFORE, THERE IS ABSOLUTELY NO REASON TO INTERFE RE WITH THE ORDER PASSED BY THE CIT(A) WHICH IS ACCORDINGLY UPH ELD. 5. IT IS OBSERVED THAT THE ABOVE DECISION RENDERE D FOR ASSESSMENT YEAR 2006-07 HAS BEEN SUBSEQUENTLY FOLLO WED BY THE TRIBUNAL TO DELETE A SIMILAR ADDITION MADE BY THE ASSESSING OFFICER TO THE TOTAL INCOME OF THE ASSESSEE IN ASSESSMENT Y EAR 2010-11 BY TREATING THE AMOUNT OF ICD RECEIVED FROM M/S. EXCEL RUBBER LTD AS DEEMED DIVIDEND UNDER S.2(22)(E) VIDE ITS ORDER DAT ED 17.2.2014 PASSED IN ITA NO.1370/HYD/2013. RESPECTFULLY FOLLOW ING THE DECISION RENDERED BY THE COORDINATE BENCH OF THIS T RIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2006-0 7 AND 2010- 11, WE UPHOLD THE IMPUGNED ORDER OF THE LEARNED CIT (A), DELETING THE ADDITION MADE BY THE ASSESSING OFFICER UNDER S. 2(22)(E) BY TREATING THE AMOUNT OF ICD RECEIVED BY THE ASSESSEE FORM M/S. EXCEL RUBBER PVT. LTD. AS DEEMED DIVIDEND. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE COURT ON 14.10. 2015 SD/- SD/- (P.MADHAVI DEVI) (P.M.JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER DT/- 14 TH OCTOBER, 2015 ITA NO.1488/ HYD/2014 M/S. ACE TYRES LIMITED, BACHUPALLY, RANGA REDDY DISTRICT 9 COPY FORWARDED TO: 1. M/S. ACE TYRES LIMITED, 315 AMEENAPUR, BACHUPALLY, RANGA REDDY DISTRICT 2. 3. DY. COMMISSIONER OF INCOME-TAX CIRCLE 1(1), HYDERAB AD COMMISSIONER OF INCOME-TAX(APPEALS) II, HYDERABAD 4. COMMISSIONER OF INCOME-TAX I, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S