CIT Vs. MCC MARKETING (P) LTD

JUDGEMENT

(1.) The Revenue has sought to raise the following questions as substantial questions of law in this appeal filed u/S.260A of the Income Tax Act, 1961 ( Act for short ) against the order of the Income Tax Appellate Tribunal ( Tribunal ) dated 13 th August 2010 in ITA No.1430/Del/2010:

(2.) The assesse-respondent is a private limited company and the assessment year involved is 2006-07. In the assessment made u/S.143(3) of the Act, the Assessing Officer had made an addition of Rs.37,66,432/- by invoking Sec.2(22)(e) of the Act for the following reason, that the above sum was received by the assessee as unsecured loan from another sister-concern by the name MCC Imaging Pvt. Ltd. ( MIPL ) and that one Ajay Mehta was the major common shareholder in both MIPL and the assessee company. He was found to be holding 90% shares and 50% shares respectively in the assessee and MIPL. On these facts he invoked the aforesaid statutory provision and brought the amount to tax in the assessee company s hands.

(3.) On appeal, the CIT(A) held that since the assessee-company did not hold any shares in MIPL, the provisions of Sec.2(22)(e) are not attracted, following the order of the Special Bench of the Tribunal, Mumbai in the case of ACIT v Bhaumik Colours Pvt. Ltd,2009 27 SOT 270 wherein it was held that an addition for deemed dividend u/S.2(22)(e) can be made only in the hands of the shareholder of the company from whom he had received a loan or advance and, where the recipient of the loan or advance is not a shareholder in the company, no addition can be made in his hands by invoking the said section.