ITA No 515 of 2014 My Home Constructions P Ltd Hyderabad

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IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad Before Smt. P. Madhavi Devi, Judicial Member AND Shri B. Ramakotaiah, Accountant Member ITA No.515/Hyd/2014 (Assessment Year: 2007-08) Dy. Commissioner of Income Tax, Circle 16(2) Hyderabad

Vs

For Revenue : For Assessee :

M/s. My Home Constructions Private Ltd Hyderabad PAN: AABCM 4724 D Smt. U. Minichandran, DR Shri D. Satyanarayana

Date of Hearing: Date of Pronouncement:

15.12.2016 25.01.2017 ORDER

Per Smt. P. Madhavi Devi, J.M. This is Revenues appeal for the A.Y 2007-08 against the order of the CIT (A)-V Hyderabad, dated 25.11.2013. The only ground of appeal raised by the Revenue is as under: “1.The learned CIT (A) erred in directing to delete the addition towards deemed dividend, though at the beginning of the year, My Home Power Ltd was not share holding company but received funds in the shape of advance payments towards electricity charges and reimbursement charges. The payments received as advance expenditure is not for expenditure but for subscription of shares, which is within the ambit of section 2(22)(e) of the I.T. Act”.

2.

Brief facts of the case are that the assessee is a

company

engaged

in

residential/commercial

the

business

complexes

and

of is

construction also

into

of

shares

business. There was a search and seizure operation u/s 132 of Page 1 of 4

ITA No 515 of 2014 My Home Constructions P Ltd Hyderabad

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the Act on 7.2.2007 in the group cases of My Home Group of Industries Ltd. The assessee filed its return of income for the A.Y 2007-08

on

31.10.2007

admitting

a

total

income

of

Rs.16,12,44,701. During the assessment proceedings u/s 143(3) of the Act, the taxable income of the assessee was determined at Rs.16,65,25,180.

3.

Subsequently, the assessment was reopened through

issuance of notice u/s 148 of the Act on 30.03.2012 and the assessee was required to file certain information/details. The assessee furnished the required details. On perusal of the same, the AO observed that M/s My Home Constructions Private Ltd (MHCPL), Hyderabad i.e. the assessee herein, is the common shareholder having substantial interest i.e. having more than 20% shareholding in M/s My Home Industries Ltd (46.556%) and M/s My Home Power Ltd (44%) respectively as on 31.03.2007. He observed that M/s MHIL as on 30.03.2007 has sold 54,99,000 shares of MHPL to the assessee herein. Further, on a perusal of the ledger extract of M/s. MHPL in the books of MHIL, he noticed that during financial year 2006-07, MHIL has advanced an amount of Rs.18,00,09,978 to M/s MHPL. Therefore, he observed that since the MHCPL has acquired 54,99,000 shares of M/s. MHIL as on 30.03.2007, it has acquired substantial interest i.e. more than 20% shareholding in M/s MHPL and at the same time, it is holding 46.556% in MHIL. Therefore, he examined the application of the provisions of section 2(22)(e) of the Act to the advance given by M/s MHIL to M/s MHPL as deemed dividend in the hands of the assessee. He, therefore, asked the assessee to explain as to why provisions of section 2(22)(e) of the I.T. Act should not be invoked.

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ITA No 515 of 2014 My Home Constructions P Ltd Hyderabad

WWW.TAXSCAN.IN - Simplifying Tax Laws

4.

The assessee submitted that when the advance was

given to the subsidiary company i.e. MHPL, the assessee was not a shareholder of the company and that the assessee has acquired the shares of the MHPL company only w.e.f. 30.03.2007 i.e. after repayment of substantial part of the loan by the subsidiary company. Therefore, according to it, the provisions of section 2(22)(e) are not applicable. However, the AO was not convinced with the assessee’s contentions and treated the advance given by MHIL to MHPL as deemed dividend in the hands of the assessee and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) who deleted the addition and the assessee is in second appeal before us.

5.

The learned DR supported the order of the AO, while

the learned Counsel for the assessee relied upon the order of the CIT (A).

6.

Having regard to the rival contentions and material on

record, we find that the only issue before us is whether the advance of Rs. 18,00,09,978/- given by M/s. MHIL to M/s. MHPL can be brought to tax in the hands of the assessee as deemed dividend u/s 2(22)(e) of the Act.

We find that the CIT(A) has

clearly bought out in his order that the advance of Rs. 18,00,09,978/- was given to MHPL in the relevant financial year and further that during the same period, an amount to the extent of Rs. 10,59,22,684 was repaid by MHPL to MHIL leaving only the balance of Rs. 7,52,18,894 as on 29-03-2007. It is also seen that the assessee had acquired the shares of MHPL only on 29-032007. Thus it is seen that on the day when the advances were given to MHPL by MHIL, the assessee was the shareholder of MHIL but had no interest whatsoever in MHPL. We find that the Page 3 of 4

ITA No 515 of 2014 My Home Constructions P Ltd Hyderabad

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question as to whether the advancement of the loan ofs. 18,00,09,978/- to M/s My home Power Ltd, as deemed dividend in the hands of the MHIL has come up for consideration before the coordinate bench of this tribunal, wherein it has been held that the provisions of section 2(22)(e) of the Act are not applicable when the payment is made to non share holder. We find that this decision of the Income Tax Appellate Tribunal has also been upheld by the Hon'ble Andhra Pradesh High Court of vide orders dated 13-08-2013.

The facts and circumstances being similar

before us, we find that CIT(A)

has rightly held that the said

amount cannot be brought to tax as deemed dividend in the hands of the assessee. Therefore, we see no reason to interfere with the orders of the CIT(A). Accordingly the Revenue’s appeal is dismissed.

7.

In the result the Revenue’s appeal is dismissed.

Order pronounced in the Open Court on 25th January, 2017. Sd/(B. Ramakotaiah) Accountant Member

Sd/(P. Madhavi Devi) Judicial Member

Hyderabad, dated 25th January, 2017. Vinodan/sps

Copy to: 1 Dy.CIT, Circle 16(2) Room No.611, 6th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad 2 M/s. My Home Constructions Pvt Ltd, 4th Floor, My Home Jupally, Greenlands, Ameerpet, Hyderabad 3 CIT (A)-V Hyderabad 4 CIT – IV, Hyderabad 5 The DR, ITAT Hyderabad 6 Guard File By Order

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