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Income tax Officer Versus M/s. Kishore Kumar Katarukha,

2015 (6) TMI 60 - ITAT MUMBAI

Deemed dividend u/s.2(22)(e) - whether amounts were advanced by the company for its business purposes? - Held that:- It is not clear whether these fixed deposits were really made for business purposes of the company. If the lien on fixed deposit held in the name of the assessee was marked in favour of the bankers, it may clearly demonstrate that the amounts were advanced for company purpose to the assessee. In the absence of such material on record, we are not able to come to a definite conclusi .....

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ectors cannot be the sole basis for coming to any conclusion, more so, in the case of a closely-held company. Therefore, we deem it fit and proper to restore ground to the file of the AO to make fresh assessment.

Benefit of indexation in respect of computation of capital gains arising out of development of property devolved - Held that:- CIT(A) correctly allowed the claim of the assessee placing reliance in the case of DCIT vs. Manjula J. Shah [2009 (10) TMI 646 - ITAT MUMBAI] also co .....

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acquisition under Section 48 of the Act. - Decided against revenue. - ITA NO.6987/Mum/2011 (A.Y.2008-09) - Dated:- 27-3-2015 - Shri D. Manmohan And Shri Sanjay Arora JJ. For the Appellant : Shri V.K. Bora For the Respondent : Shri Amar Gahlot ORDER Per Sanjay Arora, AM: The present appeal is filed by the Revenue. It is directed against the order passed by ld. CIT(A)-36, Mumbai, dated 30/08/2011 for the assessment year 2008-09. The brief facts leading to the present appeal are as follows. 2. T .....

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assessee filed certain details from which the AO noticed receipt of loan from the company in which he has substantial interest, namely M/s. Fashion Exim Pvt. Ltd., a closely held company. The AO on perusal of the ledger account of the assessee with M/s. Fashion Exim Pvt. Ltd., noticed that a sum of ₹ 70,52,240/- was received by the assessee in the form of loan or advance from the said company. On noticing such transaction the AO show caused the assessee as to why the said transaction shou .....

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t as margin money for availing the bills discounting limit. The rate of interest was higher in the case, where the money is invested in. the name of its director Shri Kishore Kumar Kataruka as senior citizen. The company decided to route the fund through Kishore Kumar Kataruka as director, for complying the terms of sanction. There FDR were kept with the bank as margin money. The director Kishore Kumar Kataruka has reimbursed the entire interest earned on FDR to the company. No direct or indirec .....

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sanction, the arrangement was with the said director in the interest of the company and the funds were kept in FDRs to earn more interest. In view of the above, there is no advance is given in terms of section 2(22)(e) of the I.T Act, 1961". 2.1 The above explanation had been rejected by the AO relying on certain judicial precedents quoted vide para 5.3 of the assessment order and brought to tax a sum of ₹ 70,52,240/- as deemed dividend u/s.2(22)(e) of the Act. Further, the AO while c .....

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addition made u/s. 2(22)(e) of the Act by placing reliance on the following decisions:- i) Sunil Sethi vs. Dy. Commissioner of Income-tax (26 SOT 95); and ii) CIT vs. Praveen (220 CTR 639). 3.1 As regards to the benefit of indexation the ld. CIT(A) following the decision of Special Bench of the Tribunal in the case DCIT vs. Manjula Shah (318 ITR 417) (AT) allowed the claim of the assessee . 4. Aggrieved by the above order of the Commissioner of Income tax (Appeals) the Revenue has preferred the .....

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d to him by the closely held company. 2. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has failed to appreciate the judicial pronouncement of the Hon ble Apex Court in the case of CIT Vs. Mukundray K. Shah [290 ITR 433 (SC)]. 3. On the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in directing to allow indexation from 1981 in which the previous owners first held the asset without appreciating the fact that the assessee beca .....

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that the decision of the Special Bench of the ITAT in the case of Munjula J. Shah(318 ITR (AT) 417) has not been accepted by the Department. 5. Ground No.1 and 2 relates to the addition of ₹ 70,52,240/- u/s. 2(22)(e) of the Act. The AO brought this amount to tax by holding that the provisions of section 2(22)(e) should be construed strictly and the fact, that the loan was squared up during the year or subsequently, does not make any difference. Whereas the respondent assessee s submission .....

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; ii) CIT vs. F. Praveen 220CTR 639 (Mad.); iii) ACIT vs. Sunil Chopra (2010) 2 ITR (Trib.) 469; iv) CIT vs. Raj Kumar (2009) 318 ITR 462; v) ACIT vs. Harshad V. Doshi (2011) 49 DTR 181 and vi) CIT vs. Creative Dyeing & Printing (P) Ltd. (2009) (318 ITR 476) 5.1 On the other hand the ld. DR vehemently argued that the material on record does not support the contentions of the assessee and the CIT(A) was not justified in allowing the appeal filed by the assessee . 6. We have heard the rival pa .....

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not clear whether these fixed deposits were really made for business purposes of the company. If the lien on fixed deposit held in the name of the assessee was marked in favour of the bankers, it may clearly demonstrate that the amounts were advanced for company purpose to the assessee. In the absence of such material on record, we are not able to come to a definite conclusion that the company had advanced this money to the assessee only for its own business purposes. Further, a mere perusal of .....

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in the case of a closely-held company. Therefore, we deem it fit and proper to restore ground Nos. 1 and 2 to the file of the AO to make fresh assessment after affording due opportunity to the assessee to furnish material in support of the legal propositions advanced by him. Accordingly, ground No.1 and 2 are disposed off. 7. Ground No.3, 4 and 5 relate to the granting of benefit of indexation in respect of computation of capital gains arising out of development of property devolved upon the as .....

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.Vide para 17 to 18 of the judgment it was held as under:- 17. We see no merit in the above contention. As rightly contended by Mr. Rai, learned counsel for the assessee, the indexed cost of acquisition has to be determined with reference to the cost inflation index for the first year in which the capital asset was 'held by the assessee'. Since the expression 'held by the assessee' is not defined under Section 48 of the Act, that expression has to be understood as defined under .....

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