JCIT (OSD), Circle-1(1)(2), Ahmedabad V. Cygnet Enterprises Pvt. Ltd., Ahmedabad

ITA 304/AHD/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6949 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 07-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Deemed dividend; Tax effect; TDS
• Section: 143(3); 2(22)(e); 143(2); 64; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (CONDUCTED THROUGH VIRTUAL COURT) BEFORE: SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER THE JCIT(OSD), CIRCLE-1(1)(2), AHMEDABAD (APPELLANT) VS CYGNET ENTERPRISES PVT. LTD. 3/B, MANIKYAM OPP. SAMUDRA ANNEX OFF C.G. ROAD, NAVRANGPURA, AHMEDABAD PAN :AADCC1450E (RESPONDENT) REVENUE BY: SHRI L.P. JAIN, SR. D.R. ASSESSEE BY: SHRI SANJAY R. SHAH, A .R. DATE OF HEARING : 28-07-2021 DATE OF PRONOUNCEMENT : 16-08-20 21 /ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- THIS REVENUES APPEAL FOR A.Y. 2014-15, ARISES FROM ORDER OF THE CIT(A)-1, AHMEDABAD DATED 30-11-2017, IN PROCEEDIN GS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT. 2. THE SOLITARY GROUND OF APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-1 AHMEDABAD IN DELETING THE DIS ALLOWANCE OF RS. 2,70,50,000/- MADE BY THE ASSESSING OFFICER U/S. 2( 22)(E) OF THE ACT. ITA NO. 304/AHD/2018 ASSESSMENT YEAR 2014-15 I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 2 3. THE FACT IN BRIEF IS THAT RETURN OF INCOME DEC LARING INCOME OF RS. 43,73,669/- WAS FILED ON 16 TH OCTOBER, 2014. THE CASE WAS SUBJECT TO SCRUTINY ASSESSMENT AND NOTICE U/S. 143(2) OF THE A CT WAS ISSUED ON 1 ST SEP, 2015. 3.1 DURING THE COURSE OF ASSESSMENT ON VERIFICATIO N OF THE DETAIL FILED BY THE ASSESSEE, THE ASSESSING OFFICER NOTICED THAT AS SESSEE HAS RECEIVED UNSECURED LOAN AMOUNTING TO RS. 2,70,50,000/- FORM M/S. CYGNET INFOTECH PVT. LTD. DURING THE YEAR UNDER CONSIDERATION. TH E ASSESSING OFFICER FURTHER NOTICED THAT IN THE ASSESSEE COMPANY FROM WHOM IT H AS OBTAINED UNSECURED LOAN THERE WERE TWO COMMON DIRECTORS NAMELY NIRAJ HUTHEESING AND SMT. CHATURA HUTHEESING THE DETAIL OF SHARE HOLDING OF THESE TWO PERSONS IN BOTH THE COMPANIES ARE AS UNDER:- NAME OF DIRECTOR/ SHAREHOLDER SHAREHOLDING & VOTING RIGHTS IN ASSESSEE CO. I.E. M/S CYGNET ENTERPRISE PVT. LTD. SHAREHOLDING & VOTING RIGHTS IN M/S CYGNET INFOTECH PVT. LTD. SHRI NIRAJ HUTHEESING 45% 72% SMT. CHATURA HUTHEESING 45% 1% THE ASSESSING OFFICER OBSERVED THAT SHRI NIRAJ HUT HEESING WAS HAVING SHARE HOLDING MORE THAN 10% OF THE VOTING POWER IN THE LENDER COMPANY AND ALSO HAVING SUBSTANTIAL INTEREST IN THE ASSESSEE CO MPANY, THEREFORE, ASSESSEE WAS ASKED TO EXPLAIN WHY THE AMOUNT OF LOAN OF RS. 2,66,42,000/- SHOULD NOT BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. THE ASSESSEE HAS GIVEN THE DETAILED SUBMISSION WHICH WAS REPRODUCED BY THE ASSESSING I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 3 OFFICER AT PAGE NO. 3 TO 10 OF THE ASSESSMENT ORDER . THE ASSESSEE HAS BRIEFLY EXPLAINED THAT CYGNET INFOTECH PVT. LTD. WAS A GROU P COMPANY ENGAGED IN THE BUSINESS OF INFORMATION TECHNOLOGY SERVICES AND ALSO INTO LENDING OF FUNDS TO GROUP COMPANIES. THAT COMPANY WAS HAVING SERVICE LIQUIDITY FUNDS WHICH WERE ADVANCED TO GROUP CONCERNS AT A SP ECIFIED RATE OF INTEREST HIGHER THAN LENDING RATES PREVAILING IN THE MARKET. DURING F.Y. 2013-14 THE ASSESSEE HAD RECEIVED RS. 2,70,50,000/- FROM TIME T O TIME AND IT HAS REPAID RS. 3,64,48,707/- AND THE ACCOUNT WAS SQUARED UP BY MAKING THE FULL REPAYMENT TO CIPL BY THE ASSESSEE BY 27 TH MARCH, 2015. 3.2 THE ASSESSEE HAS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER THAT IN ORDER TO ADJUDICATE THE PROVISION OF SECTIO N 2(22)(E) THE PERSON SHOULD BE A SHAREHOLDER AND HE SHOULD BENEFICIALLY OWN AT LEAST 10% OF THE EQUITY CAPITAL. A SHAREHOLDER MEANS A PERSON IN WHOSE NAM E THE SHARES STAND IN THE SHARE REGISTER OF THE COMPANY. IF A PERSON IS MERE BENEFICIARY OWNER OF SHARES WITHOUT BEING THE REGISTERED SHAREHOLDER, TH IS CLAUSE WOULD NOT APPLY TO HIM. 3.3 THE ASSESSEE HAS ALSO SUBMITTED THAT THE PROVIS ION OF THE SECTION WOULD ALSO NOT APPLY PROVIDED THE LOAN IS MADE BY T HE COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS AND MONEY LENDING I S A SUBSTANTIAL PART OF THE COMPANYS BUSINESS. THE ASSESSEE HAS ALSO REFERRED VARIOUS JUDICIAL PRONOUNCEMENTS MENTIONED AT PAGE NO. 10 OF THE ASSE SSMENT ORDER INCLUDING CASE OF CIT VS. ANKITECH (P.) TECHN PVT. LTD. (2011 ), 199 TAXMANN.COM 341 WHEREIN THE HONBLE HIGH COURT HELD THAT THE AMOUNT OF LOAN CANNOT BE TAXED IN THE HANDS OF THE PERSON WHO IS NOT THE SHA RE HOLDER. THE ASSESSEE I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 4 HAS ALSO SUBMITTED BEFORE THE ASSESSING OFFICER THA T HONBLE GUJARAT HIGH COURT IN THE CASE OF DAISY PACKERS PVT. LTD. AFTER RELYING UPON THE RULING OF HONBLE DELHI HIGH COURT IN THE ABOVE REFERRED CASE HELD THAT WHERE ASSESSEE HAD RECEIVED A DEPOSIT BUT IT DID NOT OWN ANY SHARE OF THE SAID COMPANY, THE SAID DEPOSIT WAS AN INTER CORPORATE DE POSIT AND COULD NOT BE TREATED AS DEEMED DIVIDEND. HOWEVER, THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE. HE WAS O F THE VIEW THAT ANY PAYMENT IN THE NATURE OF AN ADVANCE OR LOAN BY A CL OSELY HELD COMPANY IN WHICH A SHAREHOLDER HOLD MORE THAN 10% OF VOTING PO WER TO ANY CONCERN IN WHICH SUCH SHAREHOLDER HAS A SUBSTANTIAL INTEREST I S DEEMED AS DIVIDEND. THE ASSESSING OFFICER HAS STATED THAT SHRI NEERAJ H UTHEESING INDIVIDUALLY HAD SHARE HOLDING NOT LESS THAN 10% OF THE VOTING P OWER IN THE LENDER AND ALSO HAD SUBSTANTIAL INTEREST IN THE RECEIVING CONC ERN BY VIRTUE OF HAVING SHARES HOLDING MORE THAN 20% OF VOTING POWER SINCE HE HELD 45% AND 72% IN THE BORROWING COMPANY AND THE LENDING CONCERN RE SPECTIVELY. HE WAS OF THE VIEW THAT PAYMENT MADE BY CYGNET INFOTECH PVT. LTD. TO THE ASSESSEE COMPANY IN THE FORM OF UNSECURED LOAN IS CLEARLY IN THE NATURE OF DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS ASSESSED THE AMOUNT OF UNSECURED LOAN OF RS. 2,70,5 0,000/- AS DEEMED DIVIDEND U/S. 2(22)(E) IN THE HANDS OF THE ASSESSEE AND ADDED TO ITS TOTAL INCOME. 4. AGGRIEVED ASSESSEE HAS FILED APPEAL BEFORE THE L D. CIT(A). THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE. THE RELEVANT PART OF THE DECISION OF LD. CIT(A) IS REPRODUCED AS UNDER:- 2.7. I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION MADE BY THE LEARNED A.RS. IT IS OBSERVED THAT IT IS FACT THAT S HRI NIRAJ HUTHEESING AND SMT. CHATURA HUTHEESING I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 5 WERE HAVING SUBSTANTIAL SHARES HOLDING IN BOTH THE COMPANIES I.E. GIVER COMPANY AS WELL AS THE RECIPIENT COMPANY. THE EXPRESS PROVISIONS OF SECTIO N 2(22)(E) SHOW THAT THERE ARE THREE LIMBS OF THE SAID SECTION I.E. (I) THE PAYMENT BY A COMPANY BY WAY OF ADVANCE OR L OAN SHOULD HAVE BEEN MADE TO A SHAREHOLDER WHO IS A BENEFICIAL OWNER OF THE SHARES AND SUBSTAN TIAL INTEREST. (II) OR THE PAYMENT SHOULD BE MADE TO ANY CONCERN I N WHICH SUCH SHARE HOLDER IS A MEMBER OR PARTNER AND IN THAT CONCERN, HE SHOULD HAVE A SUBST ANTIAL INTEREST; & (III) OR THE COMPANY MAKES PAYMENT, OR ON ITS BEHAL F PAYMENT IS MADE FOR INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. HOWEVER IN THIS REGARD, IT IS IMPORTANT TO NOTE THA T THE HON'BLE SUPREME COURT OF INDIA HAS ADMITTED SPECIAL LEAVE PETITIONS AGAINST THE DE CISION OF VARIOUS COURTS AND OTHER APPELLATE AUTHORITIES IN FAVOUR OF THE REVENUE, SETTING ASIDE SUCH DECISIONS AND ACKNOWLEDGING THE VALIDITY OF THE INTERPRETATION ADOPTED BY REVENUE. THE A.O. HAS OBSERVED THAT SLP IN THE CASES OF CIT VS. N.S.N. JEWELLERS (P) LTD. [2015] 64 TAXMANN.COM 327 (SC) AND CIT VS. NAMDHARI SEEDS [20'I5{ 56 TAXMANN.COM 19 (SC).THE APPELLANT HAS SUBMITTED THA T DEPARTMENTAL APPEAL IN CASE OF N.S.N. JEWELLERS (P.) LTD IS DISMISSED BY HON'BLE APEX COU RT AS TAX EFFECT VMS LESS THAN RS.25 LACS. THUS, HON'BLE APEX COURT HAS NOT DECIDED THE UNDERLYING I SSUE ARISED U/S. 2(22)(E) OF THE ACT. IN THE CASE OF CIT VS. NAMDHARI SEEDS [2015] 56 TAXMANN.COM 19 (SC) THE SLP IS PENDING. THEREFORE, THE RATIO OF JURISDICTIONAL GUJARAT L-LIGH COURT IN THE CASE OF CIT V/S DAISY PACKERS (P) LTD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, RELYING ON THE DECISION OF THE DIVISION BENCH OF THE HIGH COURT IN CIT V. ANKITECH (P.) LTD. (2012) 340 ITR 14 (DEL ) HOLDS THE GROUND. HON. SUPREME COURT VIDE ITS ORDER DATED 5 TH OCTOBER, 2017 (IN CIVIL APPEAL NO. 3961 OF 2013) HA S UPHELD THE JUDGMENT OF HON. DELHI HIGH COURT IN THE MATTER OF COMMISSIONER OF INCOME TAX V. ANKITECH PVT. LTD. IN IT APPEAL NO. 462 OF 2009. 2.8. THE VIEW TAKEN BY THE I.T.A.T. MUMBAI SPECIAL BENCH IN THE CASE OF AC IT MUMBAI VS. BHAUMIK COLOUR (P) LTD HAS BEEN APPROVED BY THE HON 'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PRIVATE LIMITED (2010) 324 I TR 263 (BOM.) THE GUJARAT HIGH COURT IN THE CASE OF CIT V/S DAISY PACKERS (P) LTD DECIDED THE I SSUE IN FAVOUR OF THE ASSESSEE, RELYING ON THE DECISION OF THE DIVISION BENCH OF THE HIGH COURT IN CIT V. ANKITECH (P.) LTD. (2012) 340 ITR 14 (DEL) WHEREIN IT WAS HELD THAT IF THE ASSESSEE-COMP ANY DOES NOT HOLD A SHARE IN OTHER COMPANY FROM WHICH IT HAD RECEIVED DEPOSIT THEN IT CANNOT B E TREATED TO BE A DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT FROM THE READING OF THE PROVISIONS OF SECTION 2(22)(E), IT IS SEEN THAT THE PROVISION IS INTENDED TO TAX THE DIVIDEND IN TH E HANDS OF A SHAREHOLDER AND THE DEEMING PROVISION AS IT APPLIES TO THE CASE OF LOAN OR ADVA NCE BY A COMPANY TO A CONCERN IN WHICH IS SHAREHOLDER AND HAS SUBSTANTIAL INTEREST, IS BASED ON THE PRESUMPTION THAT THE LOAN OR ADVANCE WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLD ER OF THE COMPANY GIVING LOAN OR ADVANCE. VARIOUS COURT DECISIONS E.G. ASSTT. CIT V/S. BHAUMI K COLOUR (P.) LTD. [2009] 118 ITD 1 (MUM.) (SB) & JURISDICTIONAL HIGH COURT DECISION IN THE CA SE OF CIT V/S DAISY PACKERS (P.) LTD [2G13] 40 TAXMANN.COM 480 (GUJARAT), AND HON'BLE SUPREME COUR T HAS IN THE CASE OF CIT V/S. MADHUR HOUSING AND DEVELOPMENT CO. SUPPORT THIS VIEW THAT THE DEEMED DIVIDEND U/S 2(22)(E) CAN ONLY BE ASSESSED IN THE HANDS OF THE PERSON WHO IS A SHA REHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN THE SHAREHOLDER. HON. SUPREME COURT VIDE ITS ORDER DATED 5 TH OCTOBER, 2017 (IN CIVIL APPEAL NO.3961 OF 2013) HAS UPHELD THE JUDGMENT OF HON. DELHI HIGH COURT IN THE MATTER OF COMMISSIONER OF INCOME TAX V . ANKITECH PVT. LTD. IN IT APPEAL NO. 462 OF 2009. THE MOOT FACTS IN THE ANKITECH CASE AND THE F ACTS OF ASSESSEE ARE THE SAME BECAUSE IN THE SAID CASE, M/S. ANKITECH HAD RECEIVED MONEY FROM IT S GROUP COMPANY JGPL (SHAREHOLDERS HOLDING MORE THAN 10% IN JGPL ALSO HAD SUBSTANTIAL INTEREST IN ANKITECH PVT. LTD.). IN THE SAID CASE, ANKITECH (RECEIVER OF MONEY) WAS NOT THE SHAREHOLDE R OF JGPL (PAYER OF MONEY). IN THE CASE OF THE APPELLANT THE RECEIVER COMPANY CEPL (CYGNET ENTERPR ISES PVT. LTD.) IS NOT SHAREHOLDER IN THE GIVER COMPANY CIPL(CYGNET INFOTECH PVT. LTD.) WHICH IS A PRE REQUISITE TO TREAT ANY LOAN PAYMENT BETWEEN ASSOCIATE COMPANIES AS DEEMED DIVIDEND U/S. 2(22)(E) IN THE HANDS OF THE RECEIVING COMPANY. IN VIEW OF THE ABOVE FACTS AND ON THE BASI S OF THE ABOVE REFERRED DECISIONS (SUPRA), THE ADDITION MADE BY THE ASSESSING OFFICER U/S.2(22)(E) IS HELD TO BE NOT JUSTIFIED AND THE SAME IS DELETED. THE ADDITIONS MADE BY THE A.O AS DEEMED DI VIDEND U/S 2(22)(E) OF IT ACT FOR RS. I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 6 2,70,50,000/~ IN THE HANDS OF THE APPELLANT COMPANY IS DIRECTED TO BE DELETED. THE GROUND OF THE APPELLANT IS ALLOWED. 5. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFOR E US, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF ASSESSING OFFICER. ON THE OTHER HAND, THE LD. AUTHORIZED REPRESENTATIV E SUBMITTED PAPER BOOK COMPRISING DETAIL OF INFORMATION AND COPY OF DOCUME NT FURNISHED BEFORE THE LOWER AUTHORITIES. THE LD. COUNSEL HAS ALSO REFERR ED VARIOUS DECISIONS OF CO- ORDINATE BENCH OF THE ITAT AHMEDABAD I.E. CIT VS. M /S. CAMA HOSTEL LTD. IN APPEAL NO. 430/AHD/2016, ACIT VS. M/S. KRISHNA C OIL CUTTERS PVT. LD. APPEAL NO. 1492/AHD/2014, M/S. PRECIMETAL CAST PVT. LTD. VS. ITO APPEAL NO. 3499/AHD/2015, SAAMAG DEVELOPERS PVT. LTD. VS. ACIT 90 TAXMANN.COM 20, DCIT VS. SHRI JATEEN MADANLAL GUPTA ITA NO. 1932/AHD/2017 AND THE DECISION OF HONBLE BOMBAY HI GH COURT CIT VS. M/S SUNJEWELS INTERNATIONAL LTD ITA NO. 576 OF 2016 AND DCIT VS M/S. PERFECT ENGINEERING ASSOCIATES PVT. LTD. ITA NO. 50 19/BOM/2017 AND THE DECISION OF HONBLE GUJARAT HIGH COURT CIT (TDS VS. SCHUTZ DISHMAN BIO TECH PVT. LTD TAX APPEAL NOS. 958 AND 959 OF 2015 A ND CONTENDED THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASS ESSEE AS PER THE ABOVE REFERRED DECISIONS OF TRIBUNAL AND HIGH COURTS. TH E LD. DEPARTMENTAL REPRESENTATIVE COULD NOT DISPROVE CONTRARY TO THE S UBMISSION OF THE ASSESSEE THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AS PER THE VARIOUS DECISIONS AS REFERRED ABOVE. 6. HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. DURING THE COURSE OF ASSESSMENT ON VERIFICATION, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS OBTAINED UNSECURED LOAN FROM M/S. CYGN ET INFOTECH PVT. LTD. I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 7 AND IN BOTH THE COMPANIES THERE WAS COMMON DIRECTOR S HAVING SHARE HOLDING NOT LESS THAN 10% OF THE VOTING POWER. WITHOUT RE ITERATING THE FACTS AS CITED ABOVE IN THIS ORDER, THE ASSESSING OFFICER WAS OF THE VIEW THAT ANY PAYMENT IN THE NATURE OF AN ADVANCE OR LOAN BY A CLOSELY HE LD COMPANY IN WHICH A SHARE HOLDER HOLDS MORE THAN 10% OF VOTING TO ANY C ONCERN IN WHICH SUCH SHARE HOLDER HAS A SUBSTANTIAL INTEREST IS DEEMED A S DIVIDEND, THEREFORE, AMOUNT OF UNSECURED LOAN GIVEN BY CYGNET INFOTECH P VT. LTD. TO THE ASSESSEE COMPANY WAS TREATED AS DEEDED DIVIDEND U/S. 2(22)(E ) OF THE ACT ON ACCOUNT OF A COMMON SHARE HOLDER HOLDING MORE THAN 10% OF VOTING POWER IN THESE CONCERNS. WITH THE ASSISTANCE OF LD. REPRESENTATIV ES , WE HAVE GONE THROUGH THE JUDICIAL PRONOUNCEMENTS OF THE CO-ORDINATE BENC HES OF ITAT ON THE SIMILAR ISSUE. IN THE CASE OF PRECIMETAL CAST PVT. LTD. VS. ITO, THE RELEVANT PART OF THE DECISION OF THE CO-ORDINATE BENCH OF TH E ITAT IS AS UNDER:- 7. HEARD BOTH THE SIDES AND PERUSED THE MATERI AL ON RECORD. THE ASSESSING OFFICER NOTICED THAT ASSESSEE COMPANY HAS OBTAINED UNSECURED LOAN FROM GAURAV SE CURITIES PVT. LTD. WHEREIN ONE OF THE MAIN SHAREHOLDERS OF THE ASSESSEE COMPANY SHRI UMESH BHA TIYA WAS HOLDING SUBSTANTIAL SHARES IN GAURAV SECURITIES PVT. LTD. LOOKING TO THE ABOVE FACTS, T HE ASSESSING OFFICER HAS MADE AN ADDITION TO THE E XTENT OF RS. 13,21,198/- BEING ACCUMULATED PROFIT OF GAURAV SECURITY PVT. LTD. FOR THE REASON THAT SECTION 2(22 )(E) PROHIBITS ADVANCING MONEY AMONG ENTITIES HAVING COM MON SHAREHOLDERS WITH SUBSTANTIAL INTEREST IN THE C ASE OF CLOSELY HELD COMPANY HAVING ACCUMULATED PROFIT. AFTER PERUSAL OF THE JUDICIAL PRONOUNCEMENTS IT IS NOTICED THAT IDENTICAL ISSUE ON COMMON FACTS HAVE B EEN ADJUDICATED BY THE CO-ORDINATE BENCH OF THE ITA T AHMEDABAD IN THE CASE OF ACIT VS. LEELA SHIP RECYLI NG PVT. LTD. VIDE ITA NO. 1658/AHD/2012 DATED 12 TH MARCH, 2020 AND BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF PR. CIT VS. MAHAVIR INDUCTO PVT. LTD. DATED 12-01-2017. WITH THE ASSISTANCE OF LD. REPRESENTAT IVES, WE HAVE GONE THROUGH THE AFORESAID TWO JUDICI AL PRONOUNCEMENTS, IT IS NOTICED THAT IN THE CASE OF A CIT VS. LEELA SHIP RECYCLING PVT. LTD. SUPRA THE C O- ORDINATE BENCH OF THE ITAT HAS ADJUDICATED THE IDEN TICAL ISSUE ON SAME FACTS AS UNDER:- 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE AND THE APPLICABLE LEGAL POSITION. 5. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE I SSUE IN APPEAL IS NOW COVERED BY HON'BLE JURISDICTIONAL HIGH COURT'S JUDGMENT IN THE CASE OF CIT VS MAHAVIR INDUCTOMELT PVT LTD (TA NO. 890 OF 2011; JUDGMENT DATED 13 TH JANUARY 2017) WHEREIN THEIR LORDSHIPS HAVE EXTENSI VELY REPRODUCED FROM HON'BLE DELHI HIGH COURT'S JUDGMENT IN THE CASE OF ANITECH PVT LTD (SUPRA), AND CONCURRED WITH THE SAME. THUS, IN A CASE IN WHICH A N AMOUNT IS RECEIVED FROM A PERSON OTHER THAN THE SHAREHOLDER, AS IS THE ADMITTED POSITION IN THI S CASE, THE PROVISIONS OF SECTION 2(22)(E) CANNOT INDEED BE INVOKED. THE CIT(A) WAS THUS JUSTIFIED IN GRANTING THE IMPUGNED RELIEF IN RESPECT OF THE ADDITION UNDER SECTION 2(22)(E). WE, THEREFORE, APP ROVE THE CONCLUSION ARRIVED AT BY THE LEARNED CIT(A) IN THIS REGARD, AND DECLINE TO INTERFERE IN THE MATTER ON THAT COUNT. WE HAVE ALSO THROUGH THE DECISION OF HONBLE GUJARA T HIGH COURT IN THE CASE OF PR. CIT VS. MAHAVIR IND UCTO PVT. LTD. SUPRA WHEREIN THE IDENTICAL ISSUE ON SAME FACTS WAS DECIDED IN FAVOUR OF THE ASSESSEE AFTER FOLLOWING THE DECISION OF BOMBAY HIGH COURT IN THE CASE OF CI T VS. IMPACT CONTAINERS PVT. LTD. AND OTHERS VIDE IT I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 8 APPEAL NO. 114 OF 2012 AND THE DECISION OF DELHI HI GH COURT IN THE CASE OF CIT VS. ANKITECH PVT. LTD. LTD. REPORTED IN 340 ITR 14 DELHI. THE RELEVANT PART OF THE DECISION IS REPRODUCED AS UNDER:- 50. IDENTICAL QUESTION CAME TO BE CONSID ERED BY THE DIVISION BENCH OF THIS COURT IN TAX APPEAL NO. 253 OF 2015. AFTER CONSIDERING THE DECISION OF THE B OMBAY HIGH COURT IN THE CASE OF CIT VS. IMPACT CON TAINERS PRIVATE LIMITED & ORS RENDERED IN ITA NO. 114 OF 2012 AND THE DECISION OF THE DELHI HIGH COURT IN THECASE OF CIT VS. ANKITECH PVT LTD RE PORTED IN 340 ITR 14 (DEL) AND ON INTERPRETING SECT ION 2(22)(E), IN PARA 4 HAS OBSERVED AND HELD AS UNDER: 4.SHRI BHATT, LEARNED COUNSEL APPEARING ON BEHALF OF THE REVENUE HAS AS SUCH TRIED TO JUSTIFY THE DECISION OF THE DELHI C OURT IN THE CASE OF ANKITECH PVT. LTD. (SUPRA) AND HAS VEHEMENTLY SUBMITTED THAT THE DELHI HIGH COURT HAS NOT CONSIDERED THE THIRD CATEGORY I.E. SHAREHOL DER IN THE ASSESSEE COMPANY HOLDING NOT LESS THAN 10% OF THE VOTING PO WER IN THE COMPANY FROM WHOM THE LOAN OR ADVANCE IS TAKEN. HOWEVER, ON CONSIDERING SECTION 2(22)(E) OF THE ACT, WE ARE NOT AT ALL IMPRESSED WITH THE AFORESAID. IF THE CONTENTION ON BEHALF OF THE REVENUE IS ACCEPTED, IN THAT CASE, IT WILL BE CREATING THE THI RD CATEGORY / CLASS, WHICH IS NOT PERMISS IBLE. WHAT IS PROVIDED UNDER SECTION 2(22) (E) OF THE ACT SEEMS TO BE THAT THE ASSESSEE HC-NIC PAGE 4 OF 5 CREATED ON SAT AUG 12 04:34:00 IST 2017 O/TAXAP/891/2016 JUDGM ENT COMPANY MUST BE A SHAREHOLDER IN THE COMPANY FROM WHOM THE LOAN OR ADVANCE HAS BEEN TAKEN AND SH OULD BE HOLDING NOT LESS THAN 10% OF THE VOTING POWER. IT DOES NOT PROVIDE THAT ANY S HAREHOLDER IN THE ASSESSEE- COMPANY WHO HAD TAKEN ANY LOAN OR ADVANCE FROM ANOTHER COMPANY IN WHICH SUCH SHAREHOLDER IS ALSO A SHAREHOLDER HAVING SUBS TANTIAL INTEREST, SECTION 2(22)(E) OF THE ACT MAY BE APPLICABLE. 5.1. CONSIDERING THE AFORESAID DECISION OF THE DIVISION BENCH OF THIS COURT AND THE FACTS NARRATED HEREIN ABOVE, MORE PARTICULARLY,CONSIDERING THE FACT THAT THE ASSESSEE WAS NOT SHARE HOLDER OF MAHAVIR ROLLING MILLS P VT LTD TO WHOM LOAN WAS GIVEN, IT CANNOT BE SAID TH AT THE LEARNED TRIBUNAL HAS COMMITTED ANY ERROR IN DELETING THE ADDITION MADE BY THE ASSESSING OFF ICER ON DEEMED DIVIDEND. IN VIEW OF THE FINDINGS AS SUPRA HONBLE JU RISDICTIONAL HIGH COURT WHEREIN IT IS HELD THAT FOR THE APPLICABILITY OF SECTION 2(22)(E), IT IS REQUIRED T HAT THE ASSESSEE COMPANY MUST BE A SHAREHOLDER IN T HE COMPANY FROM WHOM THE LOAN OR ADVANCE HAS BEEN TAKE N AND IT DOES NOT PROVIDE THAT ANY SHAREHOLDER IN T HE ASSESSEE COMPANY WHO HAD TAKEN ANY LOAN OR ADVANCE FROM ANOTHER COMPANY IN WHICH SUCH SHAREHOLDER IS ALSO A SHAREHOLDER HAVING SUBSTANTIAL INTEREST. SI NCE THE FACTS OF THE CASE OF THE ASSESSEE ARE SQUAR ELY COVERED BY THE AFORESAID DECISIONS OF HONBLE HIGH COURT AND CO-ORDINATE BENCH OF THE ITAT, THE IMPUGN ED ADDITION IS DELETED. ACCORDINGLY, THIS GROUND OF TH E ASSESSE IS ALLOWED. SINCE THE ASSESSEE COMPANY WAS NOT REGISTE RED SHARE HOLDER IN THE COMPANY FROM WHOM THE LOAN WAS OBTAINED THEREFORE A FTER TAKING CONSIDERATION THE DECISION OF HONBLE HIGH COURT OF GUJARAT AND BOMBAY HIGH COURT AND RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE ITAT AHMEDABAD NO ADDITION CAN BE MADE AS DE EMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY MERELY BECAUSE THERE WAS A COMMON SHAREHOLDER IN THE PAYEE COMPANY AND THE ASSESSEE C OMPANY. THEREFORE, WE I.T.A NO. 304/AHD/2018 A.Y. 2014-15 PAGE NO JCIT(OSD) VS. CYGNET ENTERPRISES PVT. LTD. 9 DO NOT FIND ANY ERROR IN THE DECISION OF THE LD. CI T(A). ACCORDINGLY, THE APPEAL OF THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16-08-2021 SD/- SD/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 16/08/2021 / COPY OF ORDER FORWARDED TO:- 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,