TMI Blog2007 (9) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... Panchsheel Properties Pvt. Ltd. of a sum of Rs. 1,80,000. In the salary certificate issued by the company a sum of Rs. 2,40,000 was stated to be paid to the assessee as remuneration. Tax was also deducted at source on such sum of Rs. 2,40,000. When the assessee was asked to explain the discrepancy, the assessee submitted that the balance sum of Rs. 60,000 is towards reimbursement of conveyance expenses. The sum of Rs. 60,000 is not chargeable to tax and hence not offered. The Assessing Officer found that the contention is not correct. In one of the letter dated 15-12-2003, the assessee has submitted that the cars are owned by various companies and all the maintenance and running expenses are borne by the company. The Assessing Officer concluded that when the expenses of running and maintenance of cars are borne by the company, there is no question of reimbursement of conveyance expenses. The notes on drawing do not say about incurring expenses of conveyance. 3.2 Before ld. Commissioner of Income-tax (Appeals) it was contended and a revised certificated was issued by the company wherein Rs. 1,80,000 is shown as Director s remuneration and Rs. 60,000 as reimbursement of conveyanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of employment. The patterns of withdrawal do not show that the conveyance expenses were incurred by the assessee. The amount cannot be allowed under section 37(1), as deduction under section 37(1) can be granted only when the income is chargeable under section 28 of the Act. In computing income the head Salaries only those deductions as narrated in section 16 can be allowed. Thus, ld. Commissioner of Income-tax (Appeals) was in error while allowing deduction of Rs. 60,000 under section 37(1) of the Act. Thus, the disallowance of Rs. 60,000 is to be upheld. 5. The next ground on appeal by the revenue is against the deletion of addition of Rs. 50,000 on account of house-tax, which was claimed as deduction on accrual basis but was actually paid by the person, who purchased the said house. 5.1 Under the head Income from house property the assessee claimed payment of Rs. 3,50,000 as deduction on account of property tax against rent from property being portion of 35-B, Pusa Road, New Delhi. The assessee declared rental income of Rs. 4,84,500. The amount of Rs. 3 lakhs was found paid by the assessee and hence allowed as such. However, another sum of Rs. 50,000 was paid by S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer holding that the loans raised were not proved to have been utilized for acquiring/constructing the house property. 7.1 The deduction of Rs. 94,500 is claimed on account of interest on loans. The assessee submitted details of interest payable to the persons who happened to be relatives of the assessee. However, the details regarding amount of loan taken, date of loan, rate of interest, confirmation from creditors etc. was not filed. The assessee was therefore asked to furnish necessary evidence in this regard. The show-cause notice was also issued as to why the amount be not disallowed in the absence of any proof for the same and nexus regarding utilization of borrowed funds for acquisition of the property. The assessee filed income computation statement of Smt. Kamlesh Kumari and Mrs. Neeraja Ghura to whom interest have been paid. The Assessing Officer held that deduction under section 24(1)( vi ) can be allowed provided, the interest is payable on the amount borrowed and which is utilized for acquiring/constructing/repairing the property, the income from which is assessable under section 23 of the Act. Since the assessee has not produced material to sugge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Nikhil Sharma son of Shri Sat Prakash contended and his statement was recorded on oath. In his statement Shri Nikhil Sharma admitted that prior to the death of his father on 12-7-2007 he used to work with him for a period of over 4 years. Shri Sat Prakash was stated to be drawing salary from M/s. Prakash Kumar and Darshan Kaur one of the sister concern of the assessee. On the genuineness of the bill Shri Nikhil Sharma submitted that the payment of Rs. 1,70,000 has not been received till date. He also admitted that the signature mentioned in the bill is not of his father. The Statement of Nikhil Sharma was put up to the assessee. The assessee was unable to prove to the contrary. The Assessing Officer therefore did not allow cost of property to the extent of Rs. 1,70,000 as claimed by the assessee. 9.2 Ld. Commissioner of Income-tax (Appeals) held that since the assessee had produced the vouchers for expenditure, the Assessing Officer should have allowed the same. On the basis of statement of Shri Nikhil Sharma the amount cannot be disallowed as he was not aware of the business transaction of his father. He accordingly deleted the addition made in this regard. 9.3 Ld. De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts own expenses whereas the assessee is only having th share of the same. This also proves the approach of the assessee in claiming bogus expenses and consequently reduces his tax liability. We therefore restore the disallowance of Rs. 1,70,000 which was claimed while computing capital gain on sale of property. 11. Next ground of appeal by the revenue is against deletion of addition of Rs. 11 lakhs made by the Assessing Officer as deemed dividend under section 2( 22 )( e ) of the Act. In the appeal by the assessee, the assessee also challenged the sustenance of addition of Rs. 4,55,250 as deemed dividend under section 2( 22 )( e ) in respect of loans received from following companies : ( a ) Taneja Builders Pvt. Ltd. (TBPL) Rs. 75,750 ( b ) Panchsheel Properties Pvt. Ltd. (PPPL) Rs. 19,500 ( c ) Tera Construction Pvt. Ltd. (TCPL) Rs. 3,60,000 Rs. 4,55,250 11.1 In the personal balance sheet of the assessee, it showed certain amount of loan taken from M/s. Taneja Builders Pvt. Ltd. and M/s. Tera Construction Pvt. Ltd. The assessee submitted that he is having substantial shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adopt only the closing balance in the account of assessee as deemed dividend as against the original amount advanced of Rs. 14,60,000. 11.3 Ld. Counsel for the assessee submitted that while computing accum-ulated balances in the hands of three companies the Assessing Officer took into consideration the balances at the end of the accounting year , i.e., as on 31-3-2001 (after adding current profit etc.). The opening balances, as on 1-4-2000 are, however, much less. Before the learned Commissioner of Income-tax (Appeals), the assessee contended that he had made temporary withdrawal, now and then, for the purposes of incurring expenditure on behalf of the companies only and no part of it was used for his personal benefit at any stage. It was claimed that the amounts are neither Loan nor advance but are in the nature of imprest only. It was also claimed that the companies had no accumulated balances capable of being distributed as all their funds were invested in real estate. The learned Commissioner of Income-tax (Appeals) still held that provision of section 2( 22 )( e ) are applicable and confirmed the additions on the basis of closing debit balances. Amount taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding that the reply of the assessee does not hold any good looking to the account of the appellant in the books of account maintained by the assessee. Thus factual finding given by Commissioner of Income-tax (Appeals) has not been challenged by the assessee by producing necessary material before us. An assertion that the amount advanced by the company was for the purpose of its business, therefore, cannot be accepted in the absence of any corroborative material. The primary onus for such assertion rests on the assessee in the absence of any material it is not possible for us to give a finding that the amount advanced by the company was for the purpose of its business and not amounting to loans or advances. Thus the amount was rightly treated as loans and advances within the meaning of section 2( 22 )( e ). It is also not in dispute that the assessee is holding substantial shares in the said companies. Thus the amount of loans and advances to such shareholder to the extent the company is possessing accumulated profits can be assessed as income by way of deemed dividend as per section 2( 22 )( e ) of the Act. For the sake of proper understanding, provision of section 2( 22 )( e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mercial sense and not an assessable or taxable profits liable to tax as income computed under the 1922 Act. But in the present case the Assessing Officer has merely taken the accumulated profits as appearing under the head Reserves and surplus as per the accounts of those companies only and not the taxable profits. There is no provision that only the cash balance available to the company on the date of payment is to be treated as deemed dividend. Thus the contention of the assessee that the amounts were invested in real estates and hence to be reduced from the accumulated profits is misplaced. Further contention raised by the assessee is that accumulated profits means the balance on the last date of the previous accounting year and cannot include current profits in which advance is made is also ill founded. Though reliance is placed on the decision of Hon ble Supreme Court in the case of V. Damodaran ( supra ), that case was with reference to section 2( 6A )( e ) of Indian Income-tax Act, 1922. However the clause accumulated profit was not defined under the 1922 Act as is now defined in Explanation 2 below section 2( 22 ). Hon ble Supreme Court also noted the amendment in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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