ITO, New Delhi V. M/s. Elite Farms P. Ltd., New Delhi

ITA 3625/DEL/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7475 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 28-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Assessee Lawyers: PRADEEP AGGRAW AL
• Keywords: Deemed dividend; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI U.B.S. BEDI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A.NO.3625/DEL/2010 ASSESSMENT YEAR : 2007-08 ITO VS. ELITE FARMS P. LTD. COY. WARD-11(1), 187, DDA CYCLE MKT. R.NO.321, JHANDEWALAN EXTN. C.R. BUILDING, NEW DELHI. NEW DELHI. AAACE2114N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI R.S. NEGI, SR. DR RESPONDENT BY : SHRI PRADEEP AGGRAW AL, FCA ORDER ORDER ORDER ORDER PER U.B.S. BEDI, J.M. PER U.B.S. BEDI, J.M. PER U.B.S. BEDI, J.M. PER U.B.S. BEDI, J.M. THIS APPEAL OF THE DEPARTMENT IS DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-XIII, NEW DELHI DATED 26.5.2010 RELEVANT TO THE ASSTT. YEAR 2007-08, WHEREBY REVENUE HAS CHALLENGED TH E DELETION OF ADDITION OF ` 72,67,605/- MADE BY THE AO U/S 2(22)( E) OF THE INCOME TAX ACT . 2. FACTS INDICATE THAT ASSESSEE IS A PRIVATE LIMITED COMP ANY REGISTERED UNDER THE COMPANIES ACT, 1956. THE ASSESSEE HA S FILED RETURN OF INCOME IN RESPECT OF ASSTT. YEAR 2007-08 ON 10 TH OCTOBER, 2007 DECLARING A LOSS OF ` 5,914/-. THE ASSESSEE IS REGULA RLY ASSESSED SINCE LONG WITH THE AO, DURING THE YEAR, ASSESSEE COMPAN Y RECEIVED A ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 2 SUM OF ` 2,08,50,000/- FROM M/S. DUGAR GROWTH FUNDS (P ) LTD. FOR INVESTMENT WHICH THE AO HAS ADDED TO THE INCOME OF TH E ASSESSEE IN VIEW OF PROVISION OF SECTION 2(22)(E) OF THE IT ACT, BY OBSERVING THAT AS MISS POOJA JAIN HAD 31.11% OF M/S. DUGAR GROWTH FUND P . LTD. AND HAD 25% SHAREHOLDERS IN M/S. ELITE FARMS P. LTD., THE SUM AD VANCED BY M/S. DUGAR GROWTH FUNDS P LTD. TO THE ASSESSEE ATTRACTS T HE PROVISIONS OF SECTION 2(22)(E) OF THE IT ACT, 1961. T HE ASSESSEE SUBMITTED BEFORE THE AO THAT TRANSACTION WAS CARRIED O UT DURING THE NORMAL COURSE OF THE BUSINESS VIDE ORDER SHEET ENTRY DAT ED 16.11.2009, THE ASSESSEE WAS ASKED TO EXPLAIN AS TO HOW TR ANSACTION WITH M/S. DUGAR GROWTH FUNDS P. LTD. ARE ROUTINE AND DURING THE COURSE OF NORMAL BUSINESS, IT WAS ASKED TO FILE COPY OF A GREEMENT WITH THE PARTY, DETAILS OF INVESTMENTS ARE MADE FOR M/ S. DUGAR GROWTH FUNDS P. LTD. AND WHETHER SUCH INVESTMENT HAS BEEN DONE WITH ANY OTHER PURPOSE. 3. THE AO AFTER CONSIDERING THE REPLIES FILED BY THE ASSESSEE DID NOT FIND ANY MERIT IN THEM FOR THE REASONS GIVEN IN T HE ASSTT. ORDER, THEREBY MAKING ADDITION OF ` 72,67,610/- AGAINST FUN DS OF ` 2,08,50,00/- TRANSFERRED BY DUGAR GROWTH FUNDS P. LT D. 4. ASSESSEE TOOK UP THE MATTER IN APPEAL AGAINST SUCH ADD ITION AND LD. CIT(A) WHILE CONSIDERING AND ACCEPTING THE P LEA OF THE ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 3 ASSESSEE HAS CONCLUDED TO DELETE THE IMPUGNED ADDITION A S PER PARA 4 OF HIS ORDER WHICH READS AS UNDER :- AFTER GOING THROUGH THE ASSESSMENT ORDER AND APPELLANTS SUBMISSION FOLLOWING POINTS ARE NOTICED:- I. SECTION 2(22)(E) IS A DEEMING FICTION WHICH SHOULD NOT BE GIVEN A WIDE MEANING. II. THE REQUIREMENT OF SECTION 2(22)(E) IS THAT PAYMENT SHOULD BE MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDERS. THE LIABILITY OF TAX SHOULD BE ON THE PERSON, ON WHOSE BEHALF OR FOR WHOSE INDIVIDUAL BENEFIT THE AMOUNT IN QUESTION IS PAID BY THE COMPANY. III. THE DEEMED DIVIDEND CAN BE TAXED ONLY IN THE HANDS OF A PERSON WHO IS A REGISTERED SHAREHOLDER OF THE LENDING COMPANY AND NO OTHER PERSON. THE SHAREHOLDER MUST BE REGISTERED AS WELL AS BENEFICIAL SHAREHOLDER. OTHERWISE SECTION 2(22)(E) WILL NOT BE ATTRACTED. IV. IN THE INSTANT CASE, CASE LAW WHICH ARE APPLICABLE ARE AS BELOW :- A. ACIT VS. BHAUMIK COLOR P. LTD. (2009) 2705 T270(MUM. ITAT) B. THE BOMBAY OIL INDUSTRIES LTD. VS. DCIT (APPEAL NO. 2985/M/2005 DATED 22.01.09) C. DCIT VS. NATIONAL TRAVEL SERVICES (2009) 31 SOT 76 (DELHI) D. CIT VS. HOTEL HILLTOP (RAJ. H.C. ORDER DATED 17.3.08) IV. APPELLANT COMPANY, ELITE FARMS P LTD. IS NOT A SHAREHOLDER IN DUGAR GROWTH FUNDS P. LTD. HENCE DEEMED DIVIDEND CANNOT BE TAXED IN THE HANDS OF NON SHAREHOLDER. ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 4 V. DUGAR GROWTH FUNDS P. LTD. HAD ADVANCED THE AMOUNT OUT OF BORROWED FUNDS AND NOT FROM ACCUMULATED PROFIT. IN VIEW OF ABOVE FACTS AND JUDICIAL PRONOUNCEMENT, IT IS QUITE CLEAR THAT APPELLANTS CASE IS NOT COVERED U/S 2(22)(E). THEREFORE THE ADDITION MADE U/S 2(22)(E) IS DELETED AND THE GROUND OF APPEAL IS ALLOWED. 5. AGAINST SUCH ORDER OF LD. CIT(A) DEPARTMENT IS IN A PPEAL AND LD. COUNSEL FOR THE ASSESSEE, AT THE VERY OUTSET, SUBMITTED TH AT SINCE ASSESSEE IS NOT SHARE HOLDER IN THE COMPANY M/S DUGAR GROW TH P. LTD. SO NO ADDITION U/S 2(22)(E) BE MADE IN THE CASE OF THE ASSESSEE AND STRONGLY RELIED UP JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF CIT VS. ANKITECH PVT. LTD. IN ITA NO. 462 OF 2009 DATED 11 TH MAY 2011 ETC. ..AND LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION ON THE BASIS THAT ASSESSEE IS NOT SHAREHOLDER OF THE COMPANY WITH WHICH TRA NSACTION IS INVOLVED. SO APPLYING THE RATIO OF THE DECISION OF D ELHI HIGH COURT ORDER OF LD. CIT(A) IS LIABLE TO BE CONFIRMED AND AP PEAL OF THE DEPARTMENT IS TO BE DISMISSED. IT WAS PRAYED FOR THE DISM ISSAL OF THE APPEAL OF THE REVENUE. 6. LD. DR COULD NOT CONTROVERT THIS FACTUAL ASPECT BU T SUBMITTED THAT SINCE THE PROVISION OF SECTION 2(22)(E) ARE ATTRA CTED IN THE CASE OF THE SHAREHOLDER MISS POOJA JAIN THEREFORE NECESSARY DIRE CTION SHOULD BE PASSED FOR INVOKING THE PROVISIONS OF SECTION 2(22)( E) IN THE CASE OF THE SAID SHAREHOLDER. ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 5 7. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MAT ERIAL ON RECORD AND FIND THAT THE ISSUE RAISED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY DELHI HIGH COURTS DECISION IN THE CASE OF CIT VS. ANKITECH PVT. LTD. AND OTHERS IN ITA NO. 462 OF 2009 WITH ITA NOS. 2087 OF 2010 AND OTHERS VIDE ORDER DATED 11 TH MAY, 2011, WHILE DISCUSSING AND CONSIDERING VARIOUS LIMBS OF 2(22)(E) OF T HE INCOME TAX ACT BY DISCUSSING IN DETAIL SPECIAL BENCH MUMBAI DE CISION IN THE CASE OF ACIT VS. BHAUMIK COLOUR (P) LTD.118 ITD 1 (MU M.), BOMBAY HIGH COURT DECISION, WHICH AFFIRMED SUCH SPECIAL BENCH DECISION IN THE CASE OF CIT VS. UNIVERSAL MEDICARE (P) LTD. 190 TAXMA N 144 (BOMBAY), WHILE CONSIDERING CIT VS. HOTEL HILLTOP 217 CTR (RAJ.)527, KANTILAL MANILAL AND ORS. V. THE CIT 41 ITR 275 (SC) , ANDALEEB SEHGAL VS. UNION OF INDIA (UOI) AND ANR. 173 (2010) DLT 296 , BUILDERS ASSOCIATION OF INDIA AND ORS. VS. UNION OF INDIA (UOI) AND ORS 73 STC 370, COMMISSIONER OF INCOME TAX VS. C.P. SARATHY MUDAL ILAR (1972) 83 ITR 170 (SC) AND REFERRING TO CIRCULAR NO. 495 D ATED 22.9.97 ISSUED BY CBDT AND REPRODUCED IN 168 ITR (STATUES) 91, HAS C ONCLUDED FROM PARA 21 TO 32 WHICH IS REPRODUCED AS UNDER :- 21. WE HAVE SERIOUSLY DELIBERATED ON THE AFORESAID ARGU MENTS ADVANCED BY THE COUNSELS FOR THE REVENUE. 22. INSOFAR AS THE PROVISIONS OF SECTION 2(22)(E) A RE CONCERNED, WE HAVE ALREADY EXTRACTED THIS PROVISION AND TAKEN NOTE OF THE CONDITIONS/REQUISITES WHICH ARE TOBE ESTABLISHE D FOR MAKING PROVISION APPLICABLE. IN COMMISSIONER OF INCOME TAX VS. C.P. SARATHY MUDALIAR (1972) 83 ITR 170, THE ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 6 SUPREME COURT HAD TRACED OUT THE ASSESSEE OF THIS 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 31.5.1987 BY WAY O F ADVANCE OR LOAN. FIRST LIMB A) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENE FICIAL OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) HOLDING NOT LESS THAN TEN PERCENT OF THE V OTING 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 POSSESSE S 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 REITERATED THAT AS PER THIS PROVISION, THE FOLLOWIN G 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 AD VANCE 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 COMPAN IES IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED), WHI CH ARE ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 7 CONTROLLED BY A GROUP OF MEMBERS, EVEN THOUGH THE COMPANY HAS ACCUMULATED PROFITS WOULD NOT DISTRIBUT E SUCH PROFIT AS DIVIDEND BECAUSE IF SO DISTRIBUTED THE DI VIDEND INCOME WOULD BECOME TAXABLE IN THE HANDS OF THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED P ROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS LOAN OR ADVA NCES TO SHAREHOLDERS OR TO CONCERN IN WHICH SUCH SHAREHOLDE RS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BE HALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT, BY THE DEEMING PROVISIONS, SUCH PAYMENT BY T HE COMPANY IS TREATED AS DIVIDEND. THE INTENTION BEHIN D THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDERS. THE DEEMING PROVISIONS A S IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPA NY TO A CONCERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL IN TEREST, IS BASED ON THE PRESUMPTION THAT THE LOANS OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLD ERS OF THE COMPANY 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 DEEMIN G PROVISION, IT IS THE DEFINITION OF DIVIDEND WHICH I S ENLARGED. LEGAL FICTION DOES NOT EXTEND TO SHAREHOLDER. WHE N WE KEEP IN MIND THIS ASPECT, THE CONCLUSION WOULD BE O BVIOUS, VIZ., LOAN OR ADVANCE GIVEN UNDER THE CONDITIONS SP ECIFIED UNDER SECTION 2(22)(E) OF THE ACT WOULD ALSO BE TRE ATED AS DIVIDEND. THE FICTION HAS TO STOP HERE AND IS NOT T O BE EXTENDED FURTHER FOR BROADENING THE CONCEPT OF SHAREHOLDERS BY WAY OF LEGAL FICTION. IT IS A COMMO N CASE THAT ANY COMPANY IS SUPPOSED TO DISTRIBUTE THE PROF ITS IN THE FORM OF DIVIDEND TO ITS SHAREHOLDERS / MEMBERS AND SUCH DIVIDEND CANNOT BE GIVEN TO NON-MEMBERS. THE SECON D CATEGORY SPECIFIED UNDER SECTION 2(22)(2) OF THE AC T, VIZ. A CONCERN (LIKE THE ASSESSEE HEREIN), WHICH IS GIVEN THE LOAN OR ADVANCE IS ADMITTEDLY NOT A SHAREHOLDER / MEMBER OF THE PAYER COMPANY. THEREFORE, UNDER NO CIRCUMSTANCE, IT COULD BE TREATED AS SHAREHOLDER / MEMBER RECEIVING DIVIDE ND. IF THE INTENTION OF THE LEGISLATURE WAS TO TAX SUCH LO AN OR ADVANCE AS DEEMED DIVIDEND AT THE HANDS OF DEEMING SHAREHOLDER, THEN THE LEGISLATURE WOULD HAVE INSER TED DEEMING PROVISION IN RESPECT OF SHAREHOLDER AS WELL , THAT ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 8 HAS NOT HAPPENED. MOST OF THE ARGUMENTS OF THE LEAR NED COUNSELS FOR THE REVENUE WOULD STAND ANSWERED, ONCE WE LOOK INTO THE MATTER FROM THIS PERSPECTIVE. 26. IN A CASE LIKE THIS, THE RECIPIENT WOULD BE A S HAREHOLDER BY WAY OF DEEMING PROVISION. IT IS NOT CORRECT ON THE PART OF THE REVENUE TO ARGUE THAT IF THIS POSITION IS TAKEN, TH EN THE INCOME :IS NOT TAXED AT THE HANDS OF THE RECIPIENT . SUCH AN 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 OR 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 TRANSACTIONS BETWEEN THE PARTIES, SUCH PAYMENT WOULD NOT FALL WI THIN THE DEEMING DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 28. IN SO FAR AS RELIANCE UPON CIRCULAR NO. 495 DAT ED 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 T HE COURTS. ONCE IT IS FOUND THAT SUCH LOAN OR ADVANCE CANNOT BE TREATED AS DEEMED DIVIDEND AT THE HANDS OF SUCH A CONCERN WHICH IS NOT A SHAREHOLDER, AND THAT ACCORD ING TO US IS THE CORRECT LEGAL POSITION, SUCH A CIRCULAR W OULD BE OF NO AVAIL. 29. NO DOUBT, THE LEGAL FICTION/DEEMED PROVISION CR EATED BY THE LEGISLATURE HAS TO BE TAKEN TO LOGICAL CONCLUSION AS HELD IN ANDALEEB SEHGAL (SUPRA). THE REVENUE WANTS THE DEEM ING PROVISION TO BE EXTENDED WHICH IS ILLOGICAL AND ATT EMPT IS TO CREATE A REAL LEGAL FICTION, WHICH IS NOT CREATED B Y THE LEGISLATURE. WE SAY AT THE COST OF REPETITION THAT THE DEFINITION OF SHAREHOLDER IS NOT ENLARGED BY ANY FI CTION. 30. BEFORE WE PART WITH, SOME COMMENTS ARE TO BE NE CESSARILY MADE BY US. AS POINTED OUT ABOVE, IT IS NOT IN DISP UTE THAT THE CONDITIONS STIPULATED IN SECTION 2(22)(E) OF TH E ACT TREATING THE LOAN AND ADVANCE AS DEEMED DIVIDEND AR E ESTABLISHED IN THESE CASES. THEREFORE, IT WOULD ALW AYS 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. ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 9 31. WE MAY ALSO POINT OUT HERE THAT WHEN THESE APPE ALS ALONGWITH OTHER APPEALS WERE HEARD, SOME APPEALS WE RE LISTED AND THE TAX EFFECT OF WHICH WAS LESS THAN RS . 10 LACS AND THOSE WERE DISMISSED ON THAT GROUND. HAD THOSE APPEALS BEEN DECIDED ON MERITS, STILL THE ASSESSEE S WOULD HAVE SUCCEEDED. AT THE SAME TIME, IN THOSE CASES, W E WOULD NOT LIKE THE SHAREHOLDERS TO GO SCOT FREE AND THEREFORE, EVEN IN THOSE CASES, IT WOULD BE PERMISS IBLE FOR THE REVENUE TO TAKE REMEDIAL STEPS BY ROPING IN THE SHAREHOLDER(S) AND TAX THE DEEMED DIVIDEND AT THEIR HANDS. 32. WE, THUS, ANSWER THE QUESTIONS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, AS A RESULT, THESE APPEALS ARE DISMISSED. 8. SINCE THE ASSESSEE IS NOT SHAREHOLDER IN THIS CASE THER EFORE IN VIEW OF THE JURISDICTIONAL HIGH COURTS DECISION ADDIT ION IS NOT CALLED FOR IN THE HANDS OF THE ASSESSEE. THEREFORE ACTION OF LD . CIT(A) DELETING THE IMPUGNED ADDITION IS UPHELD AND APPEAL OF THE REVENUE IS DISMISSED. HOWEVER AO IS EXPECTED AND DIRECTED TO TAKE NECESSARY STEPS SO THAT INCOME COULD NOT ESCAPE ASSESSMENT AS IT IS TO BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS OF THE SAID CONCERNED PERSON. WITH THESE OBSERVATION AND DIRECTION , APPEAL OF THE REVENUE IS DISPOSED OF ACCORDINGLY. ORDER PRONOUNCED IN THE OPEN COURT ON 20.1.2012. SD/- SD/- (SHAMIM YAHYA) ACCOUNTANT MEMBER (U.B.S. BEDI ) JUDICIAL MEMBER DATED : 20.1.2012 VEENA ITA NO. 3625/DEL/10 ASSTT. YEAR 2007-08 10 COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER DEPUTY REGISTRAR, ITAT