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2020 (2) TMI 616 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - Amount received by the assessee as Inter-Corporate Deposit - HELD THAT:- It is essential for the amount given as “Inter Corporate Deposits”, there should be voluntariness emanating from the lender to give the amount to the assessee and not from assessee. In this case, there being common Managing Director, amount was being transferred as and when there was requirement of fund by the assessee from the account of M/s. Dhariya Infrastructure Development Pvt. Ltd. and thereafter returned back by the assessee to the lender. Hence the element of voluntariness is missing in the conduct of parties. The amount was in the nature of loan/advances only. Merely by mentioning in the ledger account, it was “Inter Corporate Deposit”, the nature and colour of transaction would not changed to “Inter Corporate Deposit”, as it continues to be loan/advances. Hence required to be taxed for the purposes of deemed dividend. We may rely upon the Jurisdictional High Court in the Durga Prasad Mandelia v. Registrar of Companies [1985 (9) TMI 282 - HIGH COURT OF BOMBAY] has noticed the distinction between deposits and loans in the context of section 370 of the Companies Act. We may also rely upon the coordinate Bench decision in the matter of KIIC Investment Company [2019 (1) TMI 391 - ITAT MUMBAI] , wherein the Bench had allowed the claim, as the intention can be gathered from the agreement, board resolution and other circumstances. However in the present case nothing is available to infer the intention of parties to give ICD. Thus, Ground Nos. 2 to 4 raised in appeal by the Revenue are required to be allowed Unexplained investment - Exclusion of amount being cash component of investment in flat at Surat - telescopic benefit to the assessee as the assessee made voluntary disclosures based on incriminating material detected during the survey action - statement of the assessee was recorded during the course of survey and the Managing Director of the assessee company had submitted that the assessee has earned an income from contract work which were not disclosed in the financial statement of the assessee - HELD THAT:- We see there is inherent contradiction in the case of the Revenue. Firstly, if the amount invested by the Director of the Company for purchasing of flat is held to be unexplained cash investment then it cannot be taxed in the hands of the assessee company because flat was purchased in the name of Director of the company and amount was invested by the Director. Whether the amount spent by the Director in cash for purchasing flat in his own name can be added in the hands of Assessee Company? - The answer to this question is “No”. As the amount was used by the Director and the said amount was invested individually. In the present case the assessee had agreed for the addition of undisclosed income for the earlier years and has sought for telescoping for the amount - In our view, telescoping is permissible to be granted to the assessee as the flat was purchased in the name of the Director. Ownership of the asset(flat) belonged to the individual not the assessee company. Needful is required to be done by the assessee by brining the ownership of the property back to the assessee in the balance sheet to the proportion of contribution made by the assessee company in purchasing flat. In the light of above, Grounds No.5 to 7 raised in appeal by the Revenue are dismissed.
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