TMI Blog2014 (2) TMI 425X X X X Extracts X X X X X X X X Extracts X X X X ..... that:- There are no details of the parties from whom the Assessee had borrowed funds and the interest paid to him - there is no certificate of Bank certifying the repayment of loan and closure of the bank loan account of Assessee – the Assessee has not submitted any evidence to support that the interest payment was allowed while making assessments in past and in subsequent years – the issue needs to be re-examined at the end of AO – thus, the matter remitted back to the AO for fresh adjudication – Decided partly in favour of Assessee. - I.T.A. No. 2727/AHD/2010 - - - Dated:- 7-2-2014 - Shri G. C. Gupta And Shri Anil Chaturvedi, A.M.,JJ. For the Appellant : Shri Sakar Sharma For the Respondent : Shri J. P. Jhangid, Sr. D.R. ORDER Per Shri Anil Chaturvedi,A.M. 1. This appeal is filed by the Assessee against the order of CIT(A), Gandhinagar dated 30.06.2010. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is an individual having income from salary business and other sources. He filed his original return of income on 01.02.2006 declaring total income at Rs. 8,20,448/-. The return was processed under section 143(3) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions of the assessee was not found acceptable to the A.O. and he accordingly considered the amount of Rs. 21,71,160/- given by B. Patel Infrastructure Pvt. Ltd. to the Assessee as deemed dividend under section 2(22)(e) of the Act. Aggrieved by the order of A.O., Assessee carried the matter before CIT(A). CIT(A) confirmed the action of A.O. by holding as under:- 3.3 The matter has been considered but I am afraid I do not agree with the Authorised Representative. Section 2(22)(e) is a deemed section and therefore needs to be interpreted strictly. The law does not give power for the assessing authority to probe the causes for obtaining advances and being judgmental about the need of the advances. While the company obtained loan from Jammu Kashmir Bank and the appellant standing guarantee for that loan is one transaction, the company giving advances to the assessee is a totally different transaction. There is nothing on record that this advance was given either in lieu of assessee standing guarantee or for utilization in the event of any recall of loan. Therefore, the amount advanced by the company to the assessee had the character of advance only. Even if it was to be assu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reveals that it has various transactions of receipt and payment of money. The dispute in the present case is whether the transactions of receipt and its repayment can be considered to be in the ordinary course of business and therefore whether the amount of loan received by the Assessee is to be considered as deemed dividend as per the provisions of s. 2(22}(e)? 8. The definition of 'deemed dividend' as defined in s. 2(22)(e) creates a fiction providing certain circumstances under which certain kinds of payments made to persons specified therein is to be treated as deemed dividend income. The provision creates a fiction and on satisfaction of the following conditions, the amount is treated as deemed dividend. i. The payer company must be a closely held company. ii. It applies to any sum paid by way of loan or advance during the year to the following persons : (a) A shareholder holding at least 10 per cent of voting power in the payer company. (b) A company in which such shareholder has at least 20 per cent of the voting power. (c) A concern (other than company) in which such shareholder has at least 20 per cent interest: iii.The payer company has accumulated profits o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monies were paid by the company to the appellant. The assessee must be deemed to have received dividends on the dates on which she withdrew the aforesaid amounts of money from the company. The loan or advance taken from the company may have been ultimately repaid or adjusted but that will not alter the fact that the assessee, in the eye of law, had received dividend from the company during the relevant accounting period." 11. In the case of Tarulata Shyam Ors Vs CIT (1971) 82 ITR 485 (Cal), the H'ble H.C. has held that "Loan obtained by assessee from company in which public are not substantially interested is chargeable as deemed dividend to the extent of accumulated profits notwithstanding its repayment before the end of the accounting year." 12. Considering the facts of the present case in the light of the decisions cited above, we are of the view that the amount received by the Assessee will have to be considered as deemed dividend and therefore we find no infirmity in the order of A.O. and CIT(A). Thus this ground of Assessee is dismissed. 13. In the result, this ground of the Assessee is dismissed. 2nd ground is with respect to denial of deduction of interest paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er submitted that there is nothing on record to indicate that the funds borrowed were applied for business purposes and was not used for making repayment of loan. The ld. D.R. on the other hand supported the order of A.O. and CIT(A) and further submitted that Assessee has not proved the substitution of bank loan from private parties. He thus supported the order of A.O. and CIT(A). 17. We have heard the rival submissions and perused the material on record. Before us, the ld. A.R. has submitted that the Assessee had originally taken housing building loan in F.Y. 1999-2000 from Visnagar Nagrik Bank and the said loan was repaid in F.Y. 02-03 by taking loan from outside parties. The said substitution of loan was undertaken by him for the reason that by substituting the loan, he has reduced his interest burden. It was further submitted before us that in earlier years the interest has been allowed and the dispute is only with respect to the year under appeal. Before us, there are no details of the parties from whom the Assessee had borrowed funds and the interest paid to him. Further there is no certificate of Bank certifying the repayment of loan and closure of the bank loan account of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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