TMI Blog2022 (7) TMI 1221X X X X Extracts X X X X X X X X Extracts X X X X ..... s not a gratuitous loan but the transaction was entered to protect the advance money of Rs. 90 lacs from being forfeited and that the business expediency for entering the transaction has been proved by the assessee. As in the case of Pradip Kumar Malhotra [ 2011 (8) TMI 16 - CALCUTTA HIGH COURT] has held that if loan or advance is given to a shareholder as a consequence of any further consideration which is beneficial to the company, in such a case such loan or advance cannot be said to be deemed dividend within the meaning of the Act. It has further held that gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of Section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. We are of the view that the CIT(A) was not justified in upholding the addition made by AO by invoking the provisions of s. 2(22)(e) - Decided in favour of assessee. - ITA No.1268/Del/2018 - - - Dated:- 26-7-2022 - Sh. Anil Chaturvedi, Accountant Member And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Akhilesh Kumar, Adv. And Shri Pushkar Pandey, Adv. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(22)(e) of the Act. In view of the aforesaid submissions of Ld AR, ground No 1 is dismissed as not pressed and we thus proceed with deciding ground no 2 to 4 5. During the course of assessment proceedings, AO noticed that assessee had purchased a property for Rs.3,60,00,000/- for the purpose of expansion of Ganesh Hospital Pvt. Ltd. of which the assessee was a promoter. AO noted that assessee had made aggregate payment of Rs.73,70,000/- to Shri Chander Prakash Bagai for purchase of adjacent old residential house in her own name but the payment was made through the bank account of Ganesh Hospital Pvt. Ltd. Before AO, assessee submitted that the hospital wanted to purchase adjacent residential house for its own use but due to the area being residential, assessee was forced to purchase the house in her own name, but since the property was for the purpose of the company, the payment was made through Ganesh Hospital Pvt. Ltd. It was thus contended that the transaction does not attract the provisions of s. 2(22)(e) of the Act. The submissions of the assessee were not found acceptable to AO. AO noted that assessee did not furnish any proof to support the claim that they had tried to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uy property in the name of assessee/director. Thereafter loan of Rs.2.7 crore was obtained from Axis Bank which in turn was used to make the payment to the seller of the property and the sale deed was got registered. Learned AR thereafter submitted that the non purchasing of the property in the name of the director would have resulted into forfeiture of the advance payments made for purchase of the property resulting into huge loss and therefore it cannot be said that the transaction was for the benefit of the assessee. He submitted that it was the case of the business expediency and therefore the transaction therefore cannot be considered to be a transaction falling within the ambit of the word loan or advance as contemplated in section 2(22)(e) of the Act. He placing reliance on the decision of Hon ble Delhi High Court in the case of CIT vs. Rajkumar (2009) 318 ITR 462 submitted that Hon ble High Court has held that trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provision of section 2(22)(e) of the Act. He thereafter submitted that loans or advances given for the business expediency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the public is substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) by way of advance or loan to a share holder, being a person who is the beneficial owner of the shares, holding not less than 10% voting power shall be deemed as dividend in the hands of the share holder. Section 2(22)(e) creates a fiction providing certain circumstances under which certain kinds of payments made to the persons specified therein are to be treated as deemed dividend income. As per the provision, the following conditions are to be satisfied:- 1. The payer company must be a closely held company. 2. It applies to any sum paid by way of loan or advance during the year to the following persons:- (a) A shareholder holding at least 10% of voting power in the payer company. (b) A company in which such shareholder has at least 20% of the voting power. (c) A concern (other than company) in which such shareholder has at least 20% of interest. 3. The payment of loan or advance is not in the course of ordinary business activity. 14. Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra (2011) 338 ITR 538, while dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the company in which he is a shareholder, without any business expediency. 16. In the present case, it is the contention of the assessee that the company had agreed to buy the adjacent old residential house for Rs.3.60 crores for the purpose of the expansion of its hospital and for which an advance payment of Rs.90 lacs was made to the vendor. Thereafter, as the company could not get the required loan from the banks in its name for making the balance payment of the consideration and there was every likelihood of the advance of Rs. 90 lacs that was given to the seller for the purchase of property being forfeited, loan was obtained in individual name of the assessee and the property was purchased. The property that has been purchased is also reflected in the books of account of the hospital. Before us, Revenue has not placed any material on record to demonstrate that the impugned transaction was a smoke screen to cover a benefit obtained by the assessee from the company in which the assessee is a shareholder. Further, Revenue has also not placed any contrary material on record to the controvert the submissions of the Ld AR. In such a situation and in the light of the judicial de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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