Case Note & Summary
The case involves an appeal by the Revenue under Section 260-A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Panaji, dated 14.09.2012. The assessee, M/s. Britto Amusement Pvt. Ltd., filed a return of income declaring Rs.9,88,598/-, which was processed under Section 143(1). During a search at the office of M/s. Goa Golf Club Pvt. Ltd., it was found that M/s. Goa Golf Club Pvt. Ltd. had advanced loans to the assessee. The shareholders of M/s. Goa Golf Club Pvt. Ltd., Dr. William Britto and Mrs. Muriel Britto, held 75% and 25% shares respectively, and they also held shares in the assessee company along with M/s. Goa Golf Club Pvt. Ltd. in the ratio of 26:26:48. Thus, Dr. William Britto and his wife had more than 10% voting rights in M/s. Goa Golf Club Pvt. Ltd. and substantial interest in the assessee company. The Assessing Officer treated the loan amount of Rs.33,55,076/- as deemed dividend under Section 2(22)(e) of the Act, as the accumulated profits of M/s. Goa Golf Club Pvt. Ltd. exceeded that amount. The Commissioner of Income Tax (Appeals) confirmed the addition, noting that the assessee had admitted borrowing funds from M/s. Goa Golf Club Pvt. Ltd. and failed to provide any explanation that the money was received as a normal business transaction. The Tribunal, however, allowed the assessee's appeal, deleting the addition. The High Court found that the Tribunal's order was cryptic and did not consider the provisions of Section 2(22)(e) or the admission of the assessee. The court set aside the Tribunal's order and remanded the matter for fresh consideration, directing the Tribunal to decide the appeal on merits after hearing both parties.
Headnote
A) Income Tax - Deemed Dividend - Section 2(22)(e) of Income Tax Act, 1961 - The issue was whether a loan advanced by a company (M/s. Goa Golf Club Pvt. Ltd.) to another company (assessee) where the shareholders of the lending company had substantial interest in the borrowing company, constitutes deemed dividend. The court held that the Tribunal erred in deleting the addition without considering the provisions of Section 2(22)(e) and the fact that the assessee had admitted borrowing funds. The matter was remanded for fresh consideration. (Paras 2-6)
Issue of Consideration
Whether the amount of Rs.33,55,076/- advanced by M/s. Goa Golf Club Pvt. Ltd. to the assessee M/s. Britto Amusement Pvt. Ltd. constitutes deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.
Final Decision
The High Court allowed the appeal, set aside the Tribunal's order dated 14.09.2012, and remanded the matter to the Tribunal for fresh consideration on merits after hearing both parties.
Law Points
- Deemed dividend under Section 2(22)(e) of Income Tax Act
- 1961
- substantial interest
- shareholder
- loan or advance
- accumulated profits
