Month: April

The petitioner, an Indian company, was engaged in the business of manufacture and sale of passenger cars. It was a subsidiary company of Japanese company. It purchased raw material, spare parts, capital goods etc. from Honda Japan and cars were manufactured in India under the technical collaboration agreements and paid royalty. On reference, the TPO passed an order u/s. 92CA(3), but no variation was proposed to the returned income of the petitioner. However, the Assessing Officer passed the impugned draft assessment order u/s. 144C and made disallowance u/s. 40(a)(i) in respect of payments made by the petitioner to non-resident associated enterprise for non-deduction of TDS u/s. 195.

The Delhi High Court allowed the writ petition filed by the assessee and held as under:

“i) A reading of section 144C(1) shows that the Assessing Officer, in the first instance, is to forward a draft of the proposed order of assessment to the ‘eligible assessee’, if he proposes to make any variation in the income or loss return which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an ‘eligible assessee’ which means that for the section to apply a person has to be an ‘eligible assessee’.

ii) Section 144C(15)(b) defines an ‘eligible assessee’ to mean (i) any person in whose case the variation referred to in s/s. (1) arises as a consequence of the order of the Transfer Pricing Officer passed u/s. 92CA(3); and (ii) any foreign company.

iii) In section 144C(15)(b), the term ‘eligible assessee’ is followed by an expression ‘means’ only and there are two categories referred therein. The use of the word ‘means’ indicates that the definition of ‘eligible assessee’ for the purposes of section 144C(15)(b) is a hard and fast definition and can only be applicable in the above two categories.

iv) First of all, the petitioner is not a foreign company and the Transfer Pricing Officer has not proposed any variation to the return filed by the petitioner. The Assessing Officer cannot propose an order of assessment that is at variance in the income or loss return. The Transfer Pricing Officer has accepted the return filed by the petitioner. Neither of the two conditions being satisfied in the case of the petitioner, the petitioner for the purposes of section 144C(15) (b) is not an eligible assessee. Since the petitioner is not an eligible assessee in terms of section 144C(15) (b), no draft order can be passed in the case of the petitioner u/s. 144C(1).

v) In view of the above, it is clear that the petitioner, not being an ‘eligible assessee’ in terms of section 144C(15)(b), the Assessing Officer was not competent to pass the draft assessment order u/s. 144C(1). The draft assessment order dated 31-3-2015 is accordingly quashed.”

The assessee was engaged in the business of providing telecommunication services and selling service products across the country. The assessee was served notices/summons u/s. 201(1)/(1A) in December, 2014 in connection with TDS proceedings concerning assessment years 2008-09 and 2009-10. The assessee contended that section 201(3) inserted vide Finance (No. 2) Act, 2009 with effect from 1-4-2010 provided period of limitation of two years from the end of financial year in which TDS statement is filed and four years from the end of financial year where the statement had not been filed. Since the assessee regularly filed TDS statements, period for passing order u/s. 201(3) for relevant assessment years expired on 31-3-2011/2012. Hence the assessee submitted that the notices issued in December, 2014 were time-barred. However, the Assessing Officer rejected the arguments of the assessee and held that the notices were valid and within the time-period relying upon the amended section 201(3) vide the Finance Act, 2014 which prescribed a common period of limitation i.e. seven years from the end of financial year in which payment was made.

The assessee filed a writ petition before the Gujarat High Court and contended that amendment to section 201(3) by Finance Act, 2014 was expressly made prospective with effect from 1-10-2014 and therefore the impugned notices/summons for financial years 2007-08 and 2008- 09 were erroneously issued by revenue. The assessee submitted that the proceedings had already become time barred in view of the provisions of section 201(3) prior to amendment in section 201(3) by the Finance Act 2014.

The Gujarat High Court allowed the writ petitions and held as under:

“i) It is required to be noted that in the instant cases, limitation for passing orders as per the provisions prevailing at the relevant time and even as provided u/s. 201(3)(i) as amended by Finance Act of 2012 had already expired on 31-3-2011 and 31-3-2012, respectively.

ii) Considering the fact that while amending section 201 by Finance Act, 2014, it has been specifically mentioned that the same shall be applicable with effect from 1-10- 2014 and even considering the fact that proceedings for financial years 2007-08 and 2008-09 had become time barred and/or for the aforesaid financial years, limitation u/s. 201(3)(i) had already expired on 31-3- 2011 and 31-3-2012, respectively, much prior to the amendment in section 201 as amended by Finance Act, 2014 and therefore, as such a right has been accrued in favour of the assessee.

iii) Considering the fact that wherever legislature wanted to give retrospective effect so specifically provided while amending section 201(3) (ii) as was amended by Finance Act, 2012 with retrospective effect from 1-4-2010, it is to be held that section 201(3), as amended by Finance Act No. 2 of 2014 shall not be applicable retrospectively and therefore, no order u/s. 201(1) can be passed for which limitation had already expired prior to amended section 201(3) as amended by the Finance Act No. 2 of 2014.

iv) Under the circumstances, the impugned notices/ summonses cannot be sustained and the same deserve to be quashed and set aside and writ of prohibition, as prayed for, deserves to be granted.”

A notice u/s. 148 dated 27th March 2015 was addressed by the ITO to one Mr. Inder Pal Singh Walia, seeking to reopen the assessment for A. Y. 2008-09. The notice was returned unserved to the Department with the postal authorities endorsing on it the remarks “Addressee expired”. Mr. Inder Pal Singh Walia had expired on 14th March 2015. In other words, the notice dated 27th March 2015 had been addressed to a dead person. The ITO then wrote letter to the petitioner the legal representative on 15/06/2015 proposing to continue the reassessment proceedings. On 6th July 2015, the Petitioner wrote to the ITO pointing out that his father Shri Inder Pal Singh Walia had expired on 14th March 2015 and that the proceedings initiated u/s. 148 of the Act were barred by limitation. Additionally, it was stated that he was unaware of the financial affairs or transactions carried on by his late father. On 18th July 2015, the ITO took the stand that since the intimation of the death of Shri Inder Pal Singh Walia on 14th March 2015 was not received by her office “therefore the notice was not issued on a dead person”.

The Delhi High Court allowed the writ petition filed by the petitioner and held as under:

“If department intended to proceed u/s. 147, it could have been done so prior to period of limitation by issuing a notice to legal representative of deceased assessee and beyond that date it could not have proceeded in matter even by issuing notice to Legal Representatives of assessee. Therefore, subsequent proceedings u/s. 147 against petitioner were wholly misconceived and were to be quashed.”

The respondent-assessee had for the subject assessment year inter alia disclosed an amount of Rs.7.12 crore as deemed short-term capital gain u/s. 50. This deemed short-term capital gain arose on account of the sale of depreciable assets. This deemed short-term capital gain was set-off against brought forward long-term capital losses and unabsorbed depreciation.

The Assessing Officer held that in view of section 74, such set-off on short-term capital gain against the longterm capital gain was not permitted. Thus, disallowed the set-off of brought forward long-term capital losses and unabsorbed depreciation against the deemed shortterm capital gain of Rs.7.12 crore. The Commissioner (Appeals) and the Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) The deeming fiction u/s. 50 is restricted only to the mode of computation of capital gains contained in sections 48 and 49. It does not change the character of the capital gain from that of being a long-term capital gain into a short-term capital gain for purpose other than section 50. Thus, the respondentassessee was entitled to claim set-off as the amount of Rs. 7.12 crores arising out of sale of depreciable assets which are admittedly on sale of assets held for a period to which long-term capital gain apply. Thus, for purposes of section 74, the deemed short-term capital gain continues to be long-term capital gain.

ii) Moreover, it appears that the revenue has accepted the decision of the Tribunal in Komac Investments & Finance (P.) Ltd. vs. ITO [2011] 132 ITD 290/13 taxmann.com. 185 (Mum.) as no appeal was apparently being filed from that order.”

The assessee was a charitable institution registered u/s. 12AA. In the course of assessment, the Assessing Officer denied exemption u/s. 11, read with section 10(23C) and also made an addition of income on account of disallowance of depreciation. The Commissioner (Appeals) as well as the Tribunal allowed assessee’s claim for depreciation.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

“i) It is to be noticed that while in the year of acquiring the capital asset, what is allowed as exemption is the income out of which such acquisition of asset is made and when depreciation deduction is allowed in the subsequent years, it is for the losses or expenses representing the wear and tear of such capital asset incurred if, not allowed then there is no way to preserve the corpus of the trust for deriving its income. As such, the arguments advanced by the revenue apprehending double deduction is totally misconceived.

ii) Section 11(6) was inserted with effect from 1-4-2015 by Finance Act No. 2/2014. The plain language of the amendment establishes the intent of the legislature in denying the depreciation deduction in computing the income of charitable trust is to be effective from 1-4- 2015. This view is further supported by the Notes on Clauses in Finance [No. 2] Bill 2014, memo explaining provisions and circulars issued by the Central Board of Direct Taxes in this regard. “The said amendment shall take effect from 1-4-2015 and will accordingly apply in relation to the assessment year 2015-16 and subsequent assessment years”.

iii) In view of above, it is held that the Tribunal is correct in holding that depreciation is allowable u/s. 11 and there is no double claim of capital expenditure as held by the Assessing Officer.”

The partners of assessee-firm, constituted a private limited company. The company was admitted as partner in the assessee-firm. Later on, the natural partners executed a release deed giving up all their rights in assesseefirm, in favour of the company. As a consequence, the company became absolute owner of the assessee-firm. The natural partners were allotted shares in the company for relinquishing their rights in the assessee-firm. The Assessing Officer held that there was a transfer of assets by way of distribution of capital assets on dissolution of the assessee-firm. He accordingly computed capital gain and made a demand. The Tribunal upheld order of the Assessing Officer holding that it was a dissolution of the firm and not conversion of the firm into a company since the relationship inter se between the partners had come to an end, the moment they released their shares in favour of the company.

On appeal by the assessee, the Madras High Court reversed the decision of the Tribunal and held as under:

“i) F or attracting section 45(4), the following conditions are to be satisfied:

(a) profits and gains should arise;
(b) from the transfer of a capital asset;
(c) by way of distribution of capital assets;
(d) on the dissolution of a firm or other association of persons or body of individuals not being a company or a co-operative society and
(e) or otherwise.

ii) Unless these conditions are satisfied, section 45(4) would not get attracted. Every distribution of capital assets may not lead to the attraction of section 45(4) unless it happens on the dissolution of a firm or other entity. Similarly, every distribution of capital assets on the dissolution of a firm may not attract section 45(4) unless it was a case of transfer of a capital asset by way of such distribution.

iii) The expression ‘transfer’ is defined in section 2(47) to mean several things. A sale, exchange or relinquishment of the asset or the extinguishment of any rights therein are all covered by the expression ‘transfer’.

iv) In the case on hand, the partners have taken equity shares in the private limited company that was inducted as the partner. Therefore, whatever rights that they had in the capital assets of the firm by way of being its partners, continue to exist in the form of equity shares that they held in the private limited company. In other words, one form of ownership that they had as partners of the partnership firm, got converted into another form. Hence, this is not a case where there was either a transfer of a capital asset or the distribution of a capital asset. This aspect has been completely lost sight of by all the authorities.

v) Therefore, the questions of law are answered in favour of the assessee/appellant. The tax case appeal is allowed.”

In the A. Y. 2005-06, the assesee had advanced moneys to its sister concern of which the assessee was owning 89% of equity capital. The Assessing Officer disallowed the interest paid by the assessee on the loans taken from banks observing that if the assessee did not advance money to its sister concern without charging interest, it would be left with sufficient funds to return the bank loan and the assessee would not have to pay interest to the bank. The Assessing Officer further held that the advance made to the assessee’s sister concern was not for business purposes, since the assessee had no business dealings with the sister concern. The Tribunal upheld the disallowance on the ground that the assessee failed to establish that the money advanced by the assessee to the sister concern was used as a measure of commercial expediency.

On appeal by the assessee, the Punjab and Haryana High Court reversed the decision of the Tribunal and held as under:

“i) Whether the amount was debited to the account of the sister concern in respect of the payment made or the amount was actually paid to the sister concern and used by it for the purpose of business, was immaterial. Either way, the amount was used for the business of the sister concern. It was not even suggested that the advance was used by the sister concern for the purpose other than for the purpose of its business.

ii) In the memorandum of appeal, the assessee expressly stated that it had advanced the amount to its sister concern as a measure of commercial expediency for the purpose of business. This assertion was never denied. The assessee owned 89% of the equity capital of the sister concern. When a holding company invested money for the purpose of the business of its subsidiary, it must necessarily be held to be an expense on account of commercial expediency. A financial benefit of any nature derived by the subsidiary on account of the amount advanced to it by the holding company would not merely indirectly but directly benefit its holding company.

iii) There would be direct benefit on account of the advance made by the assessee to its sister company, if it improved the financial health of the sister company and made it a viable enterprise. But it was not necessary that the advance results in a positive tangible benefit. Thus the assesee was entitled to the deduction u/s. 36(1)(iii) of the Act.”

For the A. Y. 2008-09, The Assessing Officer disallowed payment made in respect of software without deduction of tax at source u/s. 40(a)(i) and (ia), holding that the payments were in the nature of royalty. The Commissioner (Appeals) accepted the assessee’s contention that it was a value added reseller and the payments made by it for the purchase of software were not royalty but on account of purchases and that the assessee was not obliged to deduct tax at source on such payments. The addition/ disallowance was deleted. The Tribunal concurred with the decision of the CIT(A).

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The agreement indicated that the assessee was appointed for the purposes of reselling the software and payments made were on account of purchases made by the assessee. Payments made by a reseller for the purchase of software for sale in the Indian market could not be considered royalty.

ii) It was not disputed that in the preceding year, the Assessing Officer had accepted the transaction to be of purchase of software. The assessee was not liable to deduct tax at source. Deletion of addition was proper.”

In an appeal before the Tribunal filed by the Assessee, the assessee raised the additional ground for the first time that since the requisite notice u/s. 143(2) was not issued before completing assessment u/s. 147 the assessment u/s. 147 has to be held to be invalid. The Tribunal allowed the ground and decided in favour of the assessee.

On appeal filed by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The legal position appears to be fairly well settled that section 292BB talks of the drawing of the presumption of service of notice on an assessee and is basically a rule of evidence. The failure of the Assessing Officer, in reassessment proceedings, to issue notice u/s. 143(2), prior to finalising the reassessment order, cannot be condoned by referring to section 292BB. Consequently the Court does not find merit in the objection of the Revenue that the assessee was precluded from raising the point concerning the nonissuance of notice u/s. 143(2) in the present case in view of the provisions of section 292BB.

ii) As regards the objection of the Revenue to the Tribunal permitting the assessee to raise the point concerning the non-issuance of notice u/s. 143(2) for the first time in the appeal before the Tribunal, the Court is of the considered view that in view of the settled legal position that the requirement of issuance of such notice u/s. 143(2) is a jurisdictional one, it does go to the root of the matter as far as the validity of the reassessment proceedings u/s. 147/148 is concerned. It raises a question of law as far as present cases are concerned since it is not in dispute that prior to finalisation of the reassessment orders, notice u/s. 143(2) was not issued by the Assessing Officer to the assessee. With there being no fresh evidence or disputed facts sought to be on record, and the issue being purely one of law, the Tribunal was not in error in permitting the assessee to raise such a point before it.”

Considering the scope of section 43B the Karnataka High cOurt held as under:

“The employees’ contribution made to the provident fund and employees’ State insurance by the assessee on or before the due date for filing the return u/s. 139(1) of the Income-tax Act, 1961, would be eligible for the benefit conferred u/s. 43B(b).”

In the course of assessment, the Assessing Officer made addition to assessee’s income in respect of amount received on redemption of Stock Appreciation Rights received under ESOP as a perquisite u/s. 17(2)(iii). The Tribunal held that stock options were capital assets and gain therefrom was liable to capital gain tax.

On appeal by the Revenue the Gujarat High Court held as under:

“i) In the case of CIT vs. Infosys Technologies Ltd. [2008] 297 ITR 167/166 Taxman 204, it is held by the Supreme Court that the revenue had erred in treating amount being difference in market value of shares on the date of exercise of option and total amount ‘paid’ by employees consequent upon exercise of the said options as perquisite value as during the lock-in period there was no cash inflow to employees to foresee future market value of shares and the benefit if any which arose on date when option stood exercised was only a notional benefit whose value was unascertainable.

ii) In view of the above, the Tribunal was correct in treating the amount received on redemption of Stock Appreciation Rights as capital gain as against treated as perquisite u/s. 17(2)(iii) and in treating the amount received on exercising the option of Employee’s Stock Option Plan (EOSP) as long term capital gains instead of treating the same as short term capital gains.

iii) However, the Tribunal was not justified in holding that capital gain arose to the assessee on redemption of Stock Appreciation Rights which were having no cost of acquisition. Tax Appeals stand disposed of accordingly”

In September
2002, search proceedings were initiated in the case of YS and were
concluded in November 2002. A statement of KB was recorded. No
incriminating materials were found. On 12th September, 2002, a survey
was conducted in the business premises of the Assessee and incriminating
materials were identified and were impounded. Such material contained
the extract of a savings bank account in the name of B. His statement
was recorded on 12th September, 2002. The bank account contained heavy
deposits and withdrawals. After going through the statement, the
Assessing Officer came to the conclusion that this bank account
contained transactions related to assessee and it contained deposits in
respect of unaccounted sales and withdrawals. Therefore, he estimated
the undisclosed income on the basis of the deposits made in the bank
account and applied a certain rate of profit and computed the
undisclosed income. Therefore, a block assessment order was passed. The
Tribunal held that the income computed in the hands of the assessee as
undisclosed income could not have been taxed under the block assessment
and the income had to be considered for regular assessment.

On appeal by the Revenue, the Karnataka High Court upheld the decision of the Tribunal and held as under:

“On
the basis of the incriminating material found in the course of survey
mainly because the material was put to the assessee and his statement
was recorded subsequent to the search, the material could not be held to
be relatable to the assessee. Therefore, the Appellate Authorities were
justified in holding that the material found in the course of survey
can become the subject matter of regular assessment and it could not
become the subject matter of block assessment.”

For the A. Y. 2008-09 the assessment was made u/s. 143(3) of the Income-tax Act, 1961 on 31/12/2010. Subsequently, search took place in the premises of the assessee and proceedings u/s. 153A of the Act were initiated. In the mean while CIT initiated proceedings u/s. 263 of the Act, on the ground that the order dated 31/12/2010 passed u/s. 143(3) of the Act was erroneous and prejudicial to the interest of the Revenue. The assessee’s objection was rejected and an order u/s. 263 was passed directing the assessing authority to enhance the total income as directed. The Tribunal dismissed the assessee’s appeal.

On appeal by the assessee, the Karnataka High Court reversed the decision of the Tribunal and held as under:

“i) Once the proceedings are initiated u/s. 153A the assessing authority can take note of the income disclosed in the earlier return, any undisclosed income found during search or/and also any other income which is not disclosed in the earlier return or which is not unearthed during the search, in order to find out what is the “total income” of each year and then pass the assessment order.

ii) Therefore, the CIT by virtue of the power u/s. 263 gets no jurisdiction to initiate proceedings under the said provisions.”

The assessee was an agency undertaking the activity of conducting services for the benefit of foreign companies or agencies. After conducting a survey on the assigned subject, the reports were submitted to the foreign agencies. For the A. Y. 1994-95, the assessee claimed deduction u/s. 80-O in respect of the remuneration received from the foreign enterprise for such services. The Assessing Officer denied the deduction on the ground that the survey report was submitted in India and thereby section 80-O was not attracted. The Tribunal allowed the assessee’s claim..

On appeal by the Revenue, the Telangana and Andhra Pradesh High Court upheld the decision of the Tribunal and held as under:

“i) It was not the case of the Revenue that the report of survey submitted by the assessee was utilised within India, though it was received by the foreign agency within India. It is only when it was established that the survey report submitted to the foreign agency was, in fact, used or given effect to, in India, that the assessee becomes ineligible for deduction.

ii) The mere fact that the submission of the report was within India, did not take away the matter from the purview of section 80-O. If that was to be accepted, the very purpose of providing the Explanation becomes redundant.

iii) Thus, the assessee was entitled to deduction u/s. 80-O.”

Petitioner bank was a tenant of the premises owned by one S. As a part of the tax recovery of S, garnishee notice u/s. 226(3) of the Income-tax Act, 1961 was issued and rent was recovered by the TRO from the petitioner bank. The petitioner was regularly paying the rent to the landlord, and after the premises was taken over by the IT Department by issuing notice u/s. 226(3) of the Act has been paying rent to TRO. TRO unilaterally sought to enhance the rent payable by the petitioner manifold and to recover the same from the account of the petitioner maintained by the RBI.

The Patna High Court allowed the writ petition filed by the petitioner challenging the action and held as under:

“i) TRO has no jurisdiction to unilaterally enhance the rent being paid by the assesses. The contention of the Department that the TRO has been compelled to take action in the matter by applying the provisions of section 23(1)(a) has no force. Provisions of section 23(1)(a) relate to the determination of income from house property for the purpose of filing returns and assessment thereof and the same has no relevance at all so far as the fixation of rent payable by a tenant to the landlord is concerned. Any such fixation of fair rent or higher rent can only be either on the basis of agreement between the parties or by the competent authorities under the Rent Control Act and not unilaterally by the TRO or any other officer of the Income Tax Department.

ii) Any amount which may have been recovered from the account of the petitioner is to be refunded to the petitioner forthwith.”

The assessee was engaged in the business of running of multiplex cinema halls and shopping malls. It had been the beneficiary of a scheme promulgated by the State Government wherein it had been granted exemption from entertainment tax payment. It claimed deduction to the extent of entertainment tax collected in the corresponding financial years terming the amounts as capital receipts. The Assessing Officer disallowed the said claims. The Tribunal allowed the deduction claimed by the assessee.

On appeal by the Revenue, the Delhi High Court upheld the decision of the Tribunal and held as under:

“i) The UP Scheme under which the assessee claims exemption to the extent of entertainment tax subsidy, claiming it to be capital receipt, is clearly designed to promote the investors in the cinema industry encouraging establishment of new multiplexes. A subsidy of such nature cannot possibly be granted by the Government directly. Entertainment tax is leviable on the admission tickets to cinema halls only after the facility becomes operational. Since the source of the subsidy is the public at large which is to be attracted as viewers to the cinema halls, the funds to support such an incentive cannot be generated until and unless the cinema halls become functional.

ii) The State Government had offered 100 per cent tax exemptions for the first three years reduced to 75 per cent in the remaining two years. Thus, the amount of subsidy earned would depend on the extent of viewership the cinema hall is able to attract. After all, the collections of entertainment tax would correspond to the number of admission tickets sold. Since the maximum amount of subsidy made available is subject to the ceiling equivalent to the amount invested by the assessee in the construction of the multiplex as also the actual cost incurred in arranging the requisite equipment installed therein, it naturally follows that the purpose is to assist the entrepreneur in meeting the expenditure incurred on such accounts. Given the uncertainties of a business of this nature, it is also possible that a multiplex owner may  not be able to muster enough viewership to recover all his investments in the five year period.

iii) Seen in the above light, it was unreasonable on the part of the Assessing Officer to decline the claim of the assessee about the subsidy being capital receipt. Such a subsidy by its very nature, was bound to come in the hands of the assessee after the cinema hall had become functional and definitely not before the commencement of production. Since the purpose was to offset the expenditure incurred in setting up of the project, such receipt (subject, of course, to the cap of amount and period under the scheme) could not have been treated as assistance for the purposes of trade.

iv) The facts that the subsidy granted through deemed deposit of entertainment tax collected does not require it to be linked to any particular fixed asset or that is accorded ‘year after year’ do not make any difference. The scheme makes it clear that the grant would stand exhausted the moment entertainment tax has been collected (and retained) by the multiplex owner meeting the entire cost of construction (apparatus, interiors etc. included), even if it were ‘before completion of five years’.

v) For the foregoing reasons, the Tribunal in the impugned orders has taken a correct view of law on the basis of available facts to conclude that the assessee is entitled, in terms of the UP Scheme, to treat the amounts collected towards entertainment tax as capital.

vi) The question of law raised in these appeals is, thus, answered in the negative against the revenue.”

The assessee was a 50 % shareholder of ‘L’. ‘L’ had advanced money to one ‘N’ company who in turn advanced money to assessee. The Assessing Officer brought to tax the amount of loan received by the assessee from ‘N’ as deemed dividend u/s. 2(22)(e). On appeal, the Commissioner (Appeals) held that the loan given by ‘N’ to the assessee was not the payment made by it to its shareholder and thus, section 2(22)(e) had no application. The Commissioner (Appeals) deleted the addition. The Tribunal upheld the order of the Commissioner (Appeals).

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) In the present facts, it is an admitted position that assessee is not a shareholder of ‘N’ from whom he has received loan. Therefore, no fault can be found with the decision of the Tribunal in having followed the decision of the High Court in CIT vs. Universal Medicare (P.) Ltd. [2010] 324 ITR 263/190 Taxman 144 (Bom.). This view has been further reiterated by another division bench of this court in CIT vs. Impact Containers (P.) Ltd. [2014] 367 ITR 346/225 Taxman 322/48 taxmann.com 294 (Bom.)

ii) The issue raised by the revenue stands concluded by the order of this court, no sustainable question of law arises. Accordingly, appeal is dismissed.”