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2012 (12) TMI 842 - ITAT MUMBAIDeemed dividend u/s 2(22)(e) - reopening of assessment after expiry of four years - assessee had not furnished share holding pattern in respect of ITL Industries Ltd. for assessment year 2002-03 - Held that:- The assessee had let out the properties to M/s. ITL Industries Ltd. in the FY 2000-01 on deposit of Rs.95,68,938/- and monthly rent of Rs.1.5 lacs & vide letter dated 15.3.2001 had requested ITL Industries to increase deposit to Rs.2.00 crores and not to pay any rent during financial year 2001-02. It is clear from records that the assessee was in need of substantial funds for setting up of new project for which assessee was looking for funds from other parties as per its own submission. Money received from ITL Industries Ltd. is obviously of the nature of loans/advances and not deposit and, therefore, amount can not be considered as deposit merely on the ground that the same has been described as deposit in the balance sheet or in correspondence with ITL Industries Ltd. which is a group concern of the assessee. The argument of assessee rejected that he had received deposit and not loan/advances and hold that the assessee had received loan/advances during the year which are covered by the provisions of section 2(22)(e). The exception from the provisions of section 2(22)(e) is available if the money is advanced in the normal course of business of the company advancing the money. There is no provision for exemption on the ground that the money received has been used by the shareholder in its business. In the present case, there is no material to show that ITL Industries Ltd. advanced the money in the normal course of its business. As decided in CIT vs. V. Damodaran [1979 (10) TMI 5 - SUPREME COURT] & M.B. Stock Holding Pvt. Ltd. vs. ACIT [2001 (12) TMI 190 - ITAT AHMEDABAD-B] that business profit of the company accrued only at the end of the year and, therefore, current year business profit are not to be included in the accumulated profit relying on cases as submiited by assessee as no contrary decision of any High Court or Apex Court has been brought to notice by the DR section 2(22)(e) has to be applied only to loan/advances received during the year which was Rs.1,04,31,062/-. The opening balance of Rs.95,68,938/- was in fact not loan/advance but deposit given in connection with letting out of the properties in financial year 2000-01 and therefore, in the earlier year, no addition was required to be made under section 2(22)(e). Therefore, the accumulated profit of Rs.97,91,884/- till 31.3.2001 could not be adjusted against the said deposit in assessment year 2001-02 & will be available for addition u/s 2(22)(e) in respect of loan/advances of Rs.1,04,31,062/- received during the assessment year 2002-03. The argument of the assessee that out of the accumulated profit of Rs.97,91,884/-, sum of Rs.95,68,938/- has to be adjusted against deemed dividend in assessment year 2001-02 cannot be accepted as the said amount was deposit and provisions of section 2(22)(e) could not be applied in assessment year 2001-02. Therefore, in assessment year 2002-03 addition has to be made up to accumulated profit till 31.3.2001 which was Rs.97,91,884/- appeal of the assessee partly allowed.
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