MATESHWARI BUS OPERATION PRIVATE LIMITED,AHEMDABAD V. INCOME TAX OFFICER, TDS WARD 2, AHEMDABAD

ITA 1073/AHD/2025

AI Insights

The case involves Mateshwari Bus Operations Private Limited (the appellant) appealing against the order of the Income Tax Officer, TDS, Ward-2, Ahmedabad, which treated an inter-corporate loan of Rs.20,00,000 to Tak Bus Operations Pvt. Ltd. as 'deemed dividend' under Section 2(22)(e) of the Income-tax Act, 1961. The Assessing Officer had held the assessee to be in default for not deducting tax at source under Section 194 of the Act. The CIT(A) upheld this decision, leading to the appeal before the Tribunal. The Tribunal, referencing judgments such as CIT v. Daisy Packers Pvt. Ltd. and DCIT v. Cama Hotel Pvt. Ltd., concluded that the provisions of Section 2(22)(e) did not apply as the recipient was not a shareholder, and thus, the assessee was not required to deduct tax on the loan amount.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781364 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 14-05-2025
• Other Referred Cases: CIT v. Daisy Packers Pvt. Ltd., DCIT v. Cama Hotel Pvt. Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATEEK SHARMA
• Assessee Lawyers: AMIT MUNDHRA
• Keywords: Deemed dividend; Commercial expediency; TDS
• Section: 2(22)(e); 201(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER ITA No.1073/Ahd/2025 (Assessment Year: 2015-16) Mateshwari Bus Operations Private Limited, U-7, Swastik House, Near Old High Court, Navrangpura, Ahmedabad-380009. [PAN :AHMM13678 A] Vs. The Income Tax Officer, TDS, Ward-2, Ahmedabad. (Appellant) .. (Respondent) Appellant by : Shri Amit Mundhra, AR Respondent by: Shri Prateek Sharma, Sr. DR Date of Hearing 05.08.2025 Date of Pronouncement 29.09.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- Delay Condoned This appeal has been filed by the Assessee against the order dated 21.02.2025 passed by the Ld. ADDL/JCIT(A)-7, Mumbai (‘Ld. CIT(A)’ in short), under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short), relating to the Assessment Year 2015-16. 2. The assessee has raised the following grounds of appeal: “That on the facts and in the circumstances of the case and in law, the learned Assessing Officer has grossly erred in treating the bona fide inter- corporate loan of Rs.20,00,000/- advanced by the assessee to M/s Tak Bus Operations Pvt. Ltd. as \"deemed dividend\" under section 2(22)(e) of the Income-tax Act, 1961, and in holding the assessee to be an assessee in default under section 201(1)/201(1A) for not deducting tax at source under section 194 of the Act. The learned Assessing Officer failed to appreciate that the transaction was a commercial loan, fully disclosed and subsequently repaid by the recipient, the assessee was not the beneficial owner of shares in the recipient company, no benefit accrued to any shareholder individually and the conditions of section 2(22)(e) were not satisfied either in letter or in spirit. The impugned order is therefore bad in law, based on presumptions, and liable to be quashed in its entirety.” Printed from counselvise.com ITA No.1073/Ahd/2025 Maheshwari Bus Operation Pvt. Ltd. Vs. ITO Asst. Year 2015-16 - 2– 3. The brief facts of the case are that assessee is a private limited company engaged in the business of operating and maintaining city buses under a contractual arrangement with Jaipur City Transport Services Ltd. (JCTSL), a government body. During the course of assessment, the Assessing Officer observed that the assessee had advanced a sum of Rs.20,00,000 to M/s. Tak Bus Operations Pvt. Ltd. (TBOPL), a related concern. The relationship was established based on the fact that the directors, Shri Yashwant Tak and Shri Gopichand Tak, hold more than 10% of the shareholding in both companies. Thus, the Assessing Officer held that this transaction falls within the ambit of 'dividend' as defined under Section 2(22)(e) of the Income-tax Act, since lending money is not part of the assessee's ordinary course of business. Accordingly, the said advance was treated as deemed dividend under the said section. It was further held that the assessee failed to deduct tax at source as required under Section 194 of the Act on this deemed dividend. Consequently, the Assessing Officer determined that the tax was deductible on Rs.20,00,000/-, and computed the liability u/s 201(1) and 201(1A) at Rs.3,92,000/-. 4. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A) who dismissed the appeal of the assessee vide an ex-parte order dated 21.02.2025. 5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal. 6. Before us, the Ld. AR submitted that, during the year under consideration, the assessee extended a loan of Rs.20,00,000/- to TBOPL, a group concern. The Ld. AR submitted that the advance was made purely out of commercial expediency to meet the temporary working capital requirements of TBOPL. The Ld. AR also submitted that the loan was advanced to enable TBOPL to meet urgent obligations under the Ahmedabad Municipal Transport Service (AMTS) contract, including procurement of 100 buses within a strict delivery schedule, Printed from counselvise.com ITA No.1073/Ahd/2025 Maheshwari Bus Operation Pvt. Ltd. Vs. ITO Asst. Year 2015-16 - 3– failing which heavy penalties were stipulated. The Ld. AR submitted that TBOPL lacked independent financial standing at the time and was unable to raise margin money required for securing vehicle loans. The Ld. AR submitted that in order to facilitate the release of funds from banks for the purchase of buses, MBOPL arranged for this margin money in the form of a short-term loan. The Ld. AR submitted that the said loan was purely temporary in nature, devoid of any intention to distribute accumulated profits, and was fully repaid within the same financial year. The Ld. DR supported the order of the Ld. CIT(A). 7. We have heard the rival contentions and perused the material available on record. We find that the TBOPL is not a registered shareholder of the assessee-company; therefore, the primary condition of Section 2(22)(e) is not satisfied. Reliance is being placed on the judgements in the case of CIT v. Daisy Packers Pvt. Ltd. [(2015) 53 taxmann.com 361 (Guj)] and DCIT v. Cama Hotel Pvt. Ltd. [(2015) 53 taxmann.com 270 (ITAT Ahmedabad)], wherein it was hold that deemed dividend provisions apply only when the recipient is a shareholder. Further, the TDS on dividend is applicable only when payment is made to a shareholder and it is not possible to fasten the liability of tax deduction in the case of deemed dividend. Hence, keeping in view the fact that it is a commercial lending, we hold that neither the provisions of Section 2(22)(e) nor section 201(1) of the Act are attracted in the present case. 8. In the result, appeal of the assessee is allowed. The order is pronounced in the open Court on 29.09.2025 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 29.09.2025 btk Printed from counselvise.com ITA No.1073/Ahd/2025 Maheshwari Bus Operation Pvt. Ltd. Vs. ITO Asst. Year 2015-16 - 4– आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation ..words processed by Hon’ble VP on his PC on 25.09.2025 2. Date on which the typed draft is placed before the Dictating Member .25.09.2025 3. Other Member …25.09.2025 4. Date on which the approved draft comes to the Sr.P.S./P.S ….26.09.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement ...29.09.25 6. Date on which the fair order comes back to the Sr.P.S./P.S ….29.09.25 7. Date on which the file goes to the Bench Clerk ….29.09.25 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order 10. Date of Dispatch of the Order…………………………………… Printed from counselvise.com "