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TMI Blog2011 (5) TMI 218X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.20,70,000/- being the loans taken from M/s. Sisbro Promoters Pvt. Ltd., M/s. Fitwell Fashion Fabrics Pvt. Ltd. and M/s. National Capital Region Pvt. Ltd., made by the AO, treating the same as deemed dividend under section 2(22)(e) of the Act? (b) Whether ITAT was correct in law in deleting the addition holding that the money was taken by the assessee in the line of his business and therefore, could not be treated as deemed dividend?" 3. The facts, in brief, leading to filing of the present appeal are like these : The assessee filed his return for the assessment year 2005-06 declaring total income of Rs. 15,33,270.00. The assessee described his income from business as property brokerage and from other sources. During assessment proceedings, the AO noticed that the assessee was deriving income from the business of property broker as commission and had also received advances/loans worth Rs. 1,40,04,030.00 from various companies in which he was holding more than 10% of shares. These companies were : i) M/s Sisbro Promoters (P) Ltd., ii) M/s Fitwell Fashion Fabrics (P) Ltd., iii) M/s T.S.M. Polymers (P) Ltd. and iv) M/s National Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the CIT(A) and did not challenge it before the Tribunal. 5. With regard to amount of Rs. 16,00,000.00 taken by M/s M.S. Softpro Pvt. Ltd. from M/s Fitwell Fashion Fabrics Pvt. Ltd., it was contended by the assessee that these transactions also happened in financial year 2001-02 and the amount of share application received by M/s M.S. Softpro Pvt. Ltd. was of only Rs. 1,60,000.00 and not Rs. 16,00,000/-. The CIT(A) accepted the same and deleted this addition. This was also not challenged by the Revenue before the Tribunal. 6. With regard to amount of Rs. 27,90,125/- taken by assessee from M/s TSM Polymers Pvt. Ltd., it was contended by the assessee that he was not holding shares to the extent of 10% in this company. CIT(A) recorded a finding in this regard that the assessee was having share only to the extent of 5.691% and therefore Section 2(22)(e) was not attracted. This was also not challenged by the Revenue before the Tribunal. With regard to payment of Rs. 13,00,000.00 by M/s National Capital Region Electronics Pvt. Ltd. to Noida Promoters & Developers Pvt. Ltd. as share application money, AO considered it as deemed dividend under Section 2(22)(e). CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of the assessee on the ground that agreement was not registered. Hence it is only projected as a colourable device to avoid the mischief of section 2(22) (e) of the Act. The assessee is claiming these advances as advance for investment in his books of accounts. This aspect has not been disputed by the AO. The Ld. CIT(A) also was of the opinion that argument of business advance for taking way the amount from ambit of deemed dividend can be considered only when advancing company is in the money lending business. The nature of assessee‟s business is such that he is earning income from brokerage of real estate. He alleged that these companies have advanced money for investment in the real estate. This demonstrates that money was taken by the assessee in the line of his business. The AO has not brought any contrary material on the record rather he presumed every type of amount as deemed dividend. He has worked out the total amount as deemed dividend at Rs.1,40,04,030/-. As against this Ld. CIT(A) has worked out roughly Rs.45,00,000/-. The department has accepted the finding of Ld. CIT(A) with regard to the deletion of additions except a sum of Rs.13 lacs disputed by it in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement. Similarly, in respect of Rs. 27,90,125/- shown as loan/advance from M/s TSM Polymers Pvt. Ltd., the assessee had replied to the AO that this was received against sale of property under the terms of the agreement dated 18th September, 2003. With regard to this entry also, the Tribunal made a sweeping observation that the assessee was claiming these as advance for investment in his books of accounts and this aspect was not disputed by the AO. He also observed that the business of the assessee is earning brokerage from the business of real estate and this demonstrated that he had taken the money in the line of his business. The observation of the Tribunal that the AO had not brought any contrary material on record was equally perverse and against the facts recorded by the AO. In this regard also, it may be noted that though the agreement was executed on 18th September, 2003 for the sale of the property, but the property continued to be reflected in the balance sheet of the assessee as on 31st March, 2005. The AO rightly recorded both these aspects to be not covered by the exception to deemed dividend as contemplated under Section 2(22)(e). Consequently, he rightly held thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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