The New Delhi bench of ITAT in the case of Mr. Tushar Kothari vs. DCIT held that the provisions of deemed dividend would not attract if assessee was not a shareholder in the payer company.
Instant appeal was preferred by the assessee against the impugned order of CIT (A), New Delhi for the assessment year 2010-11, wherein upheld the addition of Rs. 10 lakh as deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961.
While filing the return of income AO found that M/s Beehive Systems Private Limited had advanced Rs.10 lakh to its Director Tushar Kothari (assessee) who was holding 46% of the shares in the said company.
In reply, assessee told that he was not covered by the provisions of section 2(22) (e) of the Act. However, AO added back the amount and the same was confirmed by the CIT (A).
Further aggrieved assessee carried the matter before the ITAT and challenged the confirmation of addition. Sanjay Sood Advocate of assessee contended that assessee is not a shareholder of M/s Beehive Technologies Private Limited from whom the impugned amount was received as an advance.
On counter-part Advocate for Revenue Amit Jain before the bench including B.P. Jain, (AM) and Sudhanshu Srivastava, (JM) clearly mentioned that transaction was routed through M/s Beehive Technologies Private Limited only to circumvent the provisions of section 2(22)(e).
The tribunal bench after perusing the documents said that the impugned amount has not been given by M/s Beehive Systems Private Limited in which the assessee is a shareholder.
“The fact that the amount had been advanced as the loan from M/s Beehive Technologies Private Limited is undisputed. It is also undisputed that the assessee is not a shareholder in M/s Beehive Technologies Private Limited. The Assessing Officer has also noted that on perusal of bank statement, it was found that Shri Tushar Kothari i.e. the assessee had received payment of Rs. 10 lakh in his HDFC account from M/s Beehive Technologies Private Limited. Thus, it is very much evident that the impugned amount has not been given by M/s Beehive Systems Private Limited in which the assessee is a shareholder.”
Allowing the appeal filed by the assessee, the tribunal relied on the decision of Delhi High Court in the case of CIT (A) vs Ankitech (P) Ltd. the Courts have held that if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend under Section 2(22)(e) of the Act.
