2021 (9) TMI 647 - ITAT DELHI - Income Tax

Head Note / Extract:
Disallowance u/s 2(22)(e) as deemed dividend - HELD THAT:- Madhur Housing & Development Corporation [2017 (10) TMI 1279 - SUPREME COURT] has upheld the judgment of the Hon’ble Delhi High Court holding that although there was a person having substantial interest in the assessee company and the company which had given loan, the assessee company, not being a shareholder of the company which had given the loan, the loan was not assessable as deemed income in the hands of the assessee. We also note that although this judgment has been also doubted by the Hon’ble Apex Court in the case of National Travel Service Vs. CIT, [2018 (1) TMI 1159 - SUPREME COURT] unless the same is reversed, the same is binding on us. Therefore, we are afraid that the reliance of the Department on the Hon’ble Apex Court’s judgment in the case of National Travel Service vs. CIT, Delhi [2018 (1) TMI 1159 - SUPREME COURT] would not be of much help - we also note that the Ld. CIT(A) in Para 4.5 onwards of the impugned order has also considered the various documents submitted by the assessee to establish that the transaction of advance was pertaining to a business transaction for purchase a property, and, therefore, on this account also the impugned transaction would not fall within the definition of deemed dividend u/s 2(22)(e). In this regard, the categorical findings of the CIT(A) have not been refuted by the Ld. CIT-DR. Therefore, we have no reason to deviate from the finding of the Ld. CIT(A) on this issue and we, accordingly, dismiss Ground No.2 raised by the Department. Bogus purchases - assessee had failed to produce the said party when called upon by the Assessing Officer to do so - HELD THAT:- When the purchases are otherwise documented and the AO has accepted the book results by accepting the books of accounts, non-appearance a party before the Assessing Officer cannot be the sole ground for treating the purchases as bogus. Also, it is undisputed that the said party had running account in the books of account of the assessee company in which regular transactions were being made and the impugned purchase was not an isolated case of purchase. In such circumstances, we are of the considered view that the Ld. CIT(A) has rightly deleted the disallowance and we uphold the same and reject the ground No.3 of the Department’s appeal. Deduction u/s 80IB on sale of scrap - HELD THAT:- It is undisputed that the amount received by the assessee from sale of scrap pertained to scrap generated from the activities carried by the assessee which were part and parcel of the manufacturing process of the industrial undertaking. The Hon’ble Delhi High Court has observed in the case of CIT vs. Sadhu Forging Ltd. [2011 (6) TMI 9 - DELHI HIGH COURT] (“that the receipts from sale of scrap being part and parcel of the activities and being approximate thereto would also be within the ambit of gains derived from industrial undertaking for the purposes of computing deduction u/s 80IB”). Accordingly, respectfully following judgment of the Hon’ble Apex Court as aforesaid, we dismiss Ground No.4 raised by the Department.