TMI Blog2010 (2) TMI 980X X X X Extracts X X X X X X X X Extracts X X X X ..... of his business. AO has not brought any contrary material on the record rather he presumed every type of amount as deemed dividend. Taking into consideration this approach of the AO vis-a-vis the contention of the assessee and the judgment of Creative Dyeing and Printing Pvt.[ 2009 (9) TMI 43 - DELHI HIGH COURT] we allow the first fold of grievance raised by the assessee and delete the additions. Addition of repair, maintenance and depreciation of vehicles, etc - HELD THAT: - As We merit in the ground raised by the assessee because he failed to submit the complete details in respect of vehicle expenses, car maintenance, etc. AO has made a disallowance at one-tenth of the total expenses. The disallowance has rightly been estimated because possibility of personal use of these facilities cannot be ruled out. More so learned counsel for the assessee at the time of hearing did not advance any specific arguments on these issues. Appeal of assessee partly allowed. - Order The order of the Bench was delivered by Rajpal Yadav (Judicial Member).-The assessee and the Revenue are in cross-appeals against the order of the learned Commissioner of Income-tax (Appeals) dated Jun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to the companies where the assessee has substantial interest. The Assessing Officer in paragraph 22 of the assessment order tabulated the total amount of benefit taken by the assessee from various companies where section 2(22)(e) is applicable. This table reads as under : S. No. Name of company from which benefit accrues Amounts of benefit to a (Rs.) Accumulated profit as on 31.3.2004 (Rs.) 1. Sisbro Promoters Pvt. Ltd. A 10,20,000 + 44,00,000 B 19,00,000 + B 3,78,125 32,98,125 2. Fitwell Fashion Fabrics Pvt. Ltd. A 15,40,000 + 71,76,953.45 B 16,00,000 Rs. 31,40,000 3. M/s. TSM Polymers P. Ltd. A 27,90,125 54,00,000 27,90,125 4. National Capital Region Pvt. Ltd. A 34,75,780 + 51,00,000 B 13,00,000 47,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned first appellate authority deleted this addition also and it has not been challenged by the Revenue in its appeal. The next item is of Rs. 13 lakhs alleged to have been given by M/s. National Capital Region Pvt. Ltd. to Noida Promoters and Developers Pvt. Ltd. as share application money. The Assessing Officer has construed it as deemed dividend. The learned Commissioner of Income-tax (Appeals) has deleted this addition on the ground that M/s. National Capital Region Electronics Pvt. Ltd. had given share application money for the purchase of shares in M/s. Noida Promoters and Developers Pvt. Ltd. According to the learned Commissioner of Income-tax (Appeals) share application money cannot be treated as loan/ advance in the context of section 2(22)(e) of the Act. In support of its finding the learned first appellate authority has relied upon the order of the Income-tax Appellate Tribunal in the case of Ardee Finvest P. Ltd. v. Deputy CIT [2001] 79 ITD 547 (Delhi). The relevant conclusion of the Income-tax Appellate Tribunal in this order has been reproduced by the learned Commissioner of Income-tax (Appeals) in the impugned order. The learned Departmental representative r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hon ble High Court in this case has observed that it is not necessary to advance the loan in the money lending business only for taking such amounts away from the ambit of deemed dividend within the meaning of section 2(22)(e) of the Act. If an assessee has received the amount in the ordinary course of business from the company covered under section 2(22)(e) of the Act then also such amount should not be treated as deemed dividend. On the strength of this decision he pointed out that the assessee is in the business of real estate brokering. He has received the advances from these concerns for making investment in the real estate. The assessee has furnished a copy of the agreement to sell in respect of advances received from M/s. National Capital Region Electronics Pvt. Ltd. Learned counsel for the assessee pointed out that this contention was rejected by the learned Commissioner of Income-tax (Appeals) on the ground that exception is available in the case of loan and advance given by the company where the company itself is engaged in the business of money lending. The companies M/s. Sisbro Promoters Pvt. Ltd., M/s. Fitwell Fashion Fabrics Pvt. Ltd. were not engaged in the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of voting power and the payment is made out of accumulated profits of the company. Learned counsel for the assessee at the time of argument did not dispute, to the extent that the assessee was holding shares of more than 10 percent of the alleged three companies and they are covered within the ambit of section 2(22)(e) as far as fulfilment of other conditions are concerned. His emphasis was that the learned Commissioner of Incometax (Appeals) has erred in construing the exemption clause (ii). The judgment of the hon ble Delhi High Court in the case of CIT v. Creative Dyeing and Printing Pvt. Ltd. [2009] 318 ITR 476 ; 184 Taxman 483 has been delivered after the order of the learned Commissioner of Income-tax (Appeals). Therefore the learned Commissioner of Income-tax (Appeals) has not the benefit of this decision. Otherwise the learned Commissioner of Income-tax (Appeals) might not have concluded that exemption is available only in the case of loans and advance given by the company where the company itself is engaged in the business of money lending. The facts in the case of CIT v. Creative Dyeing and Printing Pvt. Ltd. [2009] 318 ITR 476 (Delhi) ; 184 Taxman 483 before the ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2(22)(e)(ii)], i.e., there is no deemed dividend only if the lending of moneys is by a company which is engaged in the business of money lending. Dilating further the counsel for the assessee contended that since M/s. Pee Empro Exports Pvt. Ltd. is not into the business of lending of money, the payments made by it to the assessee-company would, therefore, be covered by section 2(22)(e)(ii) and consequently payments even for the business transactions would be a deemed dividend. We do not agree. The Tribunal has dealt with this aspect as reproduced in paragraph (9) above. The provision of section 2(22)(e) (ii) is basically in the nature of an explanation. That cannot, however, have bearing on interpretation of the main provision of section 2(22)(e) and once it is held that the business transactions do not fall within section 2(22)(e), we need not go further to section 2(22)(e)(ii). The provision of section 2(22)(e)(ii) gives an example only of one of the situations where the loan/advance will not be treated as a deemed dividend, but that s all. The same cannot be expanded further to take away the basic meaning, intent and purport of the main part of section 2(22)(e). We feel th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the case of Angus Robertson v. George Day [1879] 5 AC 63 by observing it is a legitimate rule of construction to construe words in an Act of Parliament with reference to words found in immediate connection with them and our Supreme Court in the case of Rohit Pulp and Paper Mills Ltd. v. CCE, AIR 1991 SC 754 and State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610. 12. Therefore, we hold that the Tribunal was correct in holding that the amounts advanced for business transaction between the parties, namely, the assessee-company and M/s. Pee Empro Exports Pvt. Ltd. was not such to fall within the definition of deemed dividend under section 2(22)(e). The present appeal is, therefore, dismissed. Thus from the decision of the hon ble jurisdictional High Court it is clear that if alleged loan/ advances taken by an assessee who is otherwise covered under the conditions of section 2(22)(e) for treating such advances as deemed dividend is able to establish that such advances/ loans were not taken as loans rather they were business receipts in the ordinary course of business then those amounts would not fall within the ambit of deemed dividend. In the present case the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Commissioner of Income-tax (Appeals) has worked out roughly Rs. 45,00,000. The Department has accepted the finding of the learned Commissioner of Income-tax (Appeals) with regard to the deletion of additions except a sum of Rs. 13 lakhs disputed by it in its appeal. Taking into consideration this approach of the Assessing Officer vis-a-vis the contention of the assessee and the judgment of the hon ble Delhi High Court in the case of CIT v. Creative Dyeing and Printing Pvt. Ltd. [2009] 318 ITR 476 ; 184 Taxman 483, we allow the first fold of grievance raised by the assessee and delete the additions of Rs. 10,20,000, Rs. 15,40,000 and Rs. 20,70,000. Similarly we uphold the deletion of Rs. 13 lakhs which was received by the company where the assessee is substantially interested from M/s. National Capital Region Electronics Pvt. Ltd. as share application money. As far as the second fold of grievance is concerned we do not find any merit in the ground raised by the assessee because he failed to submit the complete details in respect of vehicle expenses, car maintenance, etc. The learned Assessing Officer has made a disallowance at one-tenth of the total expenses. The disallowance h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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