TMI Blog2010 (11) TMI 378X X X X Extracts X X X X X X X X Extracts X X X X ..... ack - Held that the aspect has not been examined correctly and the assessee has no objection for setting aside it to the file of the A.O. for examination of the facts - The A.O. is directed to examine the facts afresh after giving due opportunity to the assessee - Appeal of assessee is allowed for statistical purposes. - ITA No. 399/Mum/2010, ITA No. 6617/Mum/2009 - - - Dated:- 4-11-2010 - D. Manmohan, B. Ramakotaiah, JJ. Naresh K. Balodia for the Appellant H.N. Motiwalla for the Respondent ORDER B. Ramakotaiah: These are cross appeals by the Revenue and assessee against the order of the CIT(A) XXII, Mumbai dated 12.11.2009. In ITA No.399/Mum/2010 the Revenue is contesting the issue of addition made under section 2(22)(e) which was deleted by the CIT(A) whereas in ITA No.6617/Mum/2009 the assessee is contesting the issue of addition under section 41(1) confirmed by the CIT(A) where as the A.O. made addition under section 68. ITA No. 399/Mum/2010 2. In this appeal the Revenue has raised five grounds on the issue of addition of Rs.36,11,523/- under section 2(22)(e) of the Act. 3. Briefly stated, during the course of assessment proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Special Bench and accordingly he pressed for reversing the decision of the CIT(A). He also further submitted that the firm cannot be a shareholder in the company and the individual partners are holding the shares of the company and accordingly if the opinion of the Special Bench is to be accepted then there will be no case of considering the amounts advanced to the firm as deemed dividend eventhough the provisions of the IT. Act specifies so. 5. The learned counsel in reply submitted that there is no finding that the firm has invested funds and there is also no finding that the money is advanced for the benefit of the partners. It was his submission that the provisions of section 2(22)(e) can be applied only in the hands of the shareholder partners whether the money was received directly as a substantial shareholder or indirectly through a concern in which the said shareholder has substantial interest. In either of the conditions it is necessary that the person should be a share holder so as to attract provisions of section 2(22)(e). He also submitted that the decision of the Special Bench in the case of Bhaumik Colour Pvt. Ltd. (supra) was considered and approved by the Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 2(22)(e) can only be applied in the hands of the shareholder partners but not in the hands of the assessee firm when the assessee is not a share holder in the said company. 6. This issue is also decided in the case of CIT vs. Universal Medicare P. Ltd. 324 ITR 273 (Bom) wherein the following question has been raised specifically:- "2. Whether, on the facts and in the circumstances of the case, the Tribunal in law, was right in holding that the Assessing Officer has not established that the money was advanced for the benefit of any shareholder and the same has to be taxed in the hands of such shareholder who obtained the benefit and not in the hands of the assessee-company, following the ratio of the decision in the case of Asst. CIT v. Bhaumik Colour P. Ltd. [2009] 313 ITR 9AT) 146 (Mumbai); 27 SOT 270 (SB)?" 7. The facts in the said case was that the amount of Rs.32 lakhs was transferred from the bank account of a company by the name of Capsulation Services Pvt. Ltd. (CSPL) to the account of the assessee, Universal Medicare P. Ltd. maintained in the Chembur branch of the State Bank of India. One Mr. Vikram Tannan was a Director of CSPL, who held over 10% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case has found that as a matter of fact no loan or advance was granted to the assessee, since the amount in question had actually been defalcated and was not reflected in the books of account of the assessee. The fact that there was a defalcation seems to have been accepted since this amount was allowed as a business loss during the course of the assessment year 1996-07. Consequently, according to the Tribunal the first requirement of there being an advance or loan was not fulfilled. In our view, the finding that there was no advance or loan is a pure finding of fact which does not give rise to any substantial question of law. However, even on the second aspect which has weighed with the Tribunal, we are of the view that the construction which has been placed on the provisions of section 2(22)(e) is correct. Section 2(22)(e) defines the ambit of the expression "dividend". All payments by way of dividend have to be taxed in the hands of the recipient of the dividend namely the shareholder. The effect of section 2(22) is to provide an inclusive definition of the expression "dividend". Clause (e) expands the nature of payments which can be classified as a dividend. Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . noticed that the assessee was showing outstanding deposit of Rs.1,82,08,880/- from M/s. Concord Motors Ltd. and enquired about the nature of the deposit. It was submitted that the said company had taken a property on rent at "D" Building, Shiv Sagar Estate, Dr. Annie Besant Marg, Worli, Mumbai from M/s. M.J. International and its group concern and had made a deposit of Rs.5.92 crores as per the agreement dated 07.09.2001. The property is being used by M/s. Concorde Motors Ltd. till F.Y. 2002-03 and after adjustment of rent payable by the company an amount of Rs.1,8s,08,880/- remained as balance and this amount has since then remained with the assessee firm. The A.O. issued a show cause notice dated 23.12.2008 asking why the deposits of Concorde Motor Ltd. was not written back as there is no claim/suit filed by the company for recovery of the deposit. It was submitted by the assessee that the said company vacated the premises prematurely before the expiry date and there were disputes regarding the compensation received and accordingly the amount was shown as outstanding in the year under consideration whereas the same was written back in A.Y. 2007-08 and was offered to tax. The A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... compensation. He fairly admitted that this aspect has not been examined by the A.O. and he has no objection if the matter is restored back to the file of the A.O. for examination of the facts. 14. We have considered the issue and examined the record. As seen from the fact of the case the assessee has shown the outstanding amount of Rs.1,82,80,880/- and as can be seen from the assessment order there was a statement from the company that after adjustment of the rent payable by the company an amount of Rs.1,82,08,880/- remained as balance and this amount has since then remained with the assessee firm. The property was vacated in F.Y. 2002-03. It is not known whether the rent payable yearly has been adjusted after that year and how the amount of Rs.1,82,80,880/- stated to be outstanding during the year. The A.O. has not examined whether this amount was outstanding from the earlier years or yearly rents were adjusted even after the property was vacated prematurely. We, however, agree with the findings of the CIT(A) that the amount cannot be brought to tax as unexplained cash credit under section 68 as the amount was not a credit during the year. However, her action in confirming the ..... 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