TMI Blog2013 (11) TMI 1676X X X X Extracts X X X X X X X X Extracts X X X X ..... tions made by the AO in respect the sums repaid by the recipient concerns to the lender company for the A.Y 2009-10, the decision of the Ld.CIT(A) restricting the additions to the extent of the accumulated profits of the lender concern, the decision of the Ld.CIT(A) that the gross rent estimated by AO @ 7% of cost of the property interest in respect of the property located at Ambey Valley, Lonawala is reasonable and the decision of the Ld.CIT(A) that the assessee is eligible for claim of deduction in respect of interest paid are upheld. Decision of the Ld.CIT(A) resulting in the deletion of the additions made in the hands of the recipient concerns on protective basis, we are of the considered view that the Ld.CIT(A) has correctly relied on the decisions of Special Bench in the case of ACIT Vs. Bhaumik Colour P. Ltd. reported in (2008 (11) TMI 273 - ITAT BOMBAY-E ) wherein it has been held that the intention behind the provision of section 2(22)(e) is to tax dividend in the hands of share-holder. The deeming provisions as it applies to the case of loans or advances by a concern to concern in which its share-holder has substantial interest, is based on the presumption that the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts P. Ltd. 50% ₹ 21,15,00,000/- - 4 M/s. Mantri Lifestyle Developers P. Ltd. 50% Rs.1,35,609/- - 5 M/s. Mantri Properties P. Ltd. 50% - Rs.37,31,757/- 6 M/s. Sunil Mantri Griha Nirman P. Ltd 50% - Rs.58,68,903/- Total Rs.25,63,96,216/- Rs.2,19,08,160/- In the assessment framed u/s 143(3) read with section 153A, the AO after observing the aforementioned shareholding pattern, invoked section 2(22)(e) of the Act and thereby treated the said amounts as deemed dividend in the hands of common share holder, Sunil P. Mantri as he was holding substantial control over the lender concern, M/S Sunil Mantri Reality Ltd. The said additions of the total amounts advanced to various concerns have been made in the hands of Sunil P. Mantri on substantive basis. The amounts received by the respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assesses/recipient concerns arising out of the said four appeals of the revenue relate to the claim of the assessees that the concerns have received deposits from Sunil Mantri Reality Ltd. in the normal course of business and a further claim that refund of loan earlier paid by the assessees does not pertain to the loans received during the year. The adjudication of the issues raised in the 12 bunches of appeals, cross appeals and the cross objections are discussed in the succeeding paragraphs. 5. Firstly, as regards the addition made on substantive basis in the hands of Shri Sunil P. Mantri, it is the contention of the assessee that Sunil Mantri Reality Ltd., has made payments directly to the four group concerns and since no payment either directly or indirectly made to the assessee, there is no individual benefit received by the assessee. Further, Sunil Mantri Reality Ltd. has made payments to the said concerns in the normal course of business wherein provisions of section 2(22)(e) shall not apply. It is also the contention of the assessee that the MOU dated 15th May, 2007 evidences payments of advances towards awarding of preferential contract to lender concern of any n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 15th May, 2007 evidences payments of advances towards awarding of preferential contract to lender concern of any new project that may arise in future by the recipient concerns, in our view, is hypothetical in nature which lacks any evidentiary value as the MoU pertains to future projects, if any which does not quantify any amounts of consideration. Also, it has not been proved that the MoU has resulted in any such project or the parties have acted in furtherance of the MoU. In view of the aforementioned discussions, we are of the considered opinion that the Ld.CIT(A) has rightly decided that the case of Sunil P.Mantri clearly falls u/s 2(22)(e) of the Act. However, we are inclined to accept the alternate arguments of the Ld.AR that the additions are to be restricted only to the extent of the accumulated profits of the lender concern up to March 31st of the previous years relevant to the assessment years under consideration during which the loans/advances have been made to various concerns. Therefore, as regards the additions made in the hands of Sunil P.Mantri for assessment years 2008-09 and 2009-10, we direct the AO to restrict the additions based on the accumulated profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). Having heard both the sides and perused the material on record on this issue, it is pertinent to note that when the assessee claims for a lower ALV, the assessee is duty bound to file municipal valuation to substantiate his claim of lower value, which he has not discharged during the assessment/appellate proceedings. Accordingly, we do not find any merit in the contention of the Ld.AR that the estimation of gross annual value ought to have been made as per the rent fixed by the municipal authority. In view of that matter, we do not find any justifiable reason to interfere with the decision of the Ld.CIT(A) that the gross rent estimated by AO @ 7% of cost of the property is reasonable. The fact that the assessee has paid interest on borrowed capital is also not disputed. Therefore, we do not find any infirmity in the decision of the Ld.CIT(A) that the assessee is eligible for claim of deduction in respect of interest paid. 5.1.5 Resultantly, (i) the additions confirmed by the Ld.CIT(A) u/s 2(22)(e) in the hands of Sunil P. Mantri on the substantive basis for the assessment years 2008-09 2009-10, subject to our direction that the additions made for the said assessment years i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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