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2015 (11) TMI 1282 - AT - Income TaxDeemed dividend u/s 2(22)(e) - CIT(A) deleted the addition - whether the payment made by the company to the assessee falls under the category of loans and advances - whether the entire amount of payment of ₹ 38,60,000/- given by the company to the assessee or the peak amount appearing in ‘Sandeep Sabharwal advance Account’?- Held that:- The assessee is also one of the Director who has received loan out of ₹ 35,13,939/-. Further ,clause 3(a) of the annexure referred to in paragraph 3 of the audit report filed by the auditor Deepak K. Kejrewal & Co., which is placed at page no. 12 of the paper book, it is one again mentioned that the company has granted interest free loan aggregating to ₹ 35,13,939.26 to two Directors covered in registrar maintaining u/s 301 of the Companies Act, 1956. We find that in Audited Statement of the company for the financial year 2005-06, there is no mention of any security deposit in respect of the property, given by the company to the assessee, who is director and covered by the persons in respect of whom entries are to be made in register maintained u/s 301 of the Companies Act. We also don’t agree with assessee that ₹ 2,27,997 was advance against salary because firstly, there was no such advance given by the company , which can be confirmed from the fact that no such advance was mentioned in Annual statement of the company, secondly, the amount was derived merely after subtraction of ₹ 20,40,000/- claimed by the assessee as security deposit and credit balance of ₹ 4,52,003 out of ₹ 27,18,692 claimed as peak of ‘Sandeep sabharwal Advance Account’. Further, even if amount was advance against salary , transaction between an employee and company cannot acquire character of business transaction. Thus we are of the opinion that the payments advanced appearing in the ‘Sandeep sabharwal Advance Account’ by the company to the assessee are purely in nature of loans or advances to the assessee and same are held to be in the nature of deemed dividend under section 2(22) of the Act. The provisions of section are very much clear in this respect and according to which , any loan and advance subject to fulfillment of conditions laid down in section, shall be treated as deemed dividend. So, once an amount is held as deemed dividend, then incremental loan amount thereafter, will only be added to the deemed dividend. Accordingly , we hold that the peak amount in the Advance Account during the year should be treated as deemed dividend, subject to availability of the accumulated profit as on the date of peak loan or advances to the assessee. Thus we direct the learned Assessing Officer to examine the peak advance amount stated by the assessee and availability of accumulated profit as on the date of peak advance and compute the deemed dividend accordingly - Decided in favour of assessee for statistical purpose.
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