TMI Blog2015 (8) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... .2011 in the case of M/s.Aster Private Limited, only after completing the scrutiny assessment in the case of the assessee on 12.11.2009, and since the said assessment was reopened by him on the basis of such information coming to his possession subsequently, we are unable to agree with the contention of the learned counsel for the assessee that the reopening of assessment made by the Assessing Officer was based merely on change of opinion. - Decided against assessee. Deemed dividend under S.2(22)(e) - Held that:- A perusal of the relevant portion of the assessee’s written submissions filed before the learned CIT(A) clearly shows that the business connection between the M/s. Aster P. Ltd. and M/s. Aster Infrastructure P. Ltd. was clearly established by the assessee on the basis of analysis made of the relevant transactions between the said two companies and the nature of business transactions and dealings between the said two companies was also explained by the assessee by pointing out that M/s. Aster P. Ltd. was supplying towers and antennas, which were regularly purchased by M/s. Aster Infrastructure P. Ltd. for the purpose of its business of providing infrastructure services t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned CIT(A) on account of ‘deemed dividend’ by treating the said transactions as in the nature of loans and advances is not sustainable. Thus we delete the addition made under S.2(22)(e) - Decided in favour of assessee. - ITA No.701/Hyd/2014 - - - Dated:- 12-8-2015 - SHRI P.M.JAGTAP AND SHRI SAKTIJIT DEY, JJ. For The Appellant : Shri S.Rama Rao For The Respondent : Shri Ramakrishna Bandi ORDER Per P.M. Jagtap, Accountant Member : This appeal filed by the assessee is directed against the order of the learned Commissioner of Income-tax(Appeals) II, Hyderabad dated 27.1.2014. 2. The relevant facts of the case giving rise to this appeal are as follows: The assessee is an individual, who is promoter and Director of M/s. Aster Pvt. Ltd.. The return of income for the year under consideration was originally filed by her on 30.10.2010 declaring total income of ₹ 16,47,133. In the said return, loss of ₹ 5,77,562 was shown by the assessee from her proprietary business of providing staff services to M/s. Aster Pvt. Ltd. claimed to be carried on in the name of M/s. Aster Industries the same was set off against other income. In the assessment orig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans and advances given by M/s. Aster P. Ltd. to M/s. Aster Infrastructure P. Ltd. Accordingly the addition was proposed to be made by him on account of the said amounts, treating it as deemed dividend under S.2(22)(e) in the case of M/s.Aster Infrastructure Private Limited. The said company however objected to the said addition by contending that it was not a share holder of M/s.Aster Private Limited. Keeping in view this stand taken by M/s.Aster Infrastructure Private Limited and having regard to the fact that the assessee in her individual capacity was a common shareholder of both the companies, namely M/s.Aster Infrastructure Private Limited and M/s.Aster Private Limited, the Assessing Officer added the amount of ₹ 5,38,42,692 advanced by M/s.Aster Private Limited to M/s.Aster Infrastructure Private Limited in the hands of M/s.Aster Infrastructure Private Limited under S.2(22)(e) on substantive basis, treating it as deemed dividend and also proposed to add the said amount in the hands of the assessee in her individual capacity, being share-holder of both the companies, on protective basis. 5. The assessee strongly objected to the addition proposed by the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to light on account of survey only. c) The Assessing Officer's allegation is solely based on the statements of the Director or based on the mere assumption that the assessee had not done any business. d) Having admitted the income under scrutiny assessment, reopening of the same amounts to change of opinion. Reliance is placed on: a) Vijaykumar M. Hirakhanwala (HUF) vs. ITO(2006) 287 ITR 443(Bom.) b) Shree Rajasathan Syntex Ltd. vs. ACIT (2005) 93 ITD 78(Jod-Trib) c) Gujarat Power Corporation Ltd. vs. DCIT (2011) 238 CTR 91 e) That the business of M/s.Aster Industries Ltd., very much existed, it provided staff services to M/s.Aster Pvt. Ltd. Some fabrication work was also carried on which is evident from the Profit Loss Account. f) During original scrutiny proceedings, the Assessing Officer completed the assessment accepting the income returned after verifying the books of accounts and other information called for. g) The concern was engaged in fabrication work and also providing staff services. The loss incurred is not exclusively on account of providing staff services. Hence it is not correct to attribute entire loss to supply of staff services t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of her case that the addition under S.2(22)(e) on account of deemed dividend could not have been made even in her case on merit. The said submissions, as summarized by the learned CIT(A) in her impugned order were as under- a) That the appellant company and M/s.Aster Pvt.Ltd. and M/s.Aster Infrastructure Pvt. Ltd., are sister concerns belong to Aster Group. b) That the transactions between M/s.Aster Pvt. Ltd. and M/s. Aster Infrastructure Pvt. Ltd., are the regular business transactions. The payments made/received between the two companies were in connection with erecting cell towers, site maintenance, labour payments, material cost, etc. 'c) As and when one concern is in need of urgent funds, the other concern is accommodating the funds as both the units are in the similar business. There is on-going account with various debits and credits between the two companies involving transfer of funds. Since transactions are business transactions, the same cannot be considered as deemed dividend. Reliance is placed on the decisions of: - S.A.Builders vs. CIT (2007) 288 ITR 1 (SC). - International Land Development Pvt. Ltd. vs ITO (ITAT Delhi) ITA No.3390 339 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dividend in the hands of shareholder, the appellant. Therefore, the addition of deemed dividend of ₹ 5,60,67,387/- made by the Assessing Officer is confirmed. Therefore, these Grounds of Appeal are dismissed. Aggrieved by the order of the learned CIT(A), assessee has preferred this appeal before the Tribunal. 10. In ground no.1 of her appeal, the assessee has raised a preliminary issue relating to validity of the assessment made by the Assessing Officer under S.143(3) read with S.147,while the common issue raised in grounds No.2 to 4 relates to the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of amounts allegedly advanced by M/s. Aster Private Limited to M/s.Aster Infrastructure Private Limited, treating the same as deemed dividend under S.2(22)(e) of the Act. 11. As regards the preliminary issue raised in ground No.1, the learned counsel for the assessee has reiterated before us the contention made before the learned CIT(A) that the claim of the assessee for loss of ₹ 5,77,562 incurred in the proprietary concern M/s. Aster Industries having been allowed by the Assessing Officer after examining all the relevant aspects in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urview of S.2(22)(e) . He submitted that the nature of the said transactions was explained by the assessee in the written submissions filed before the learned CIT(A), but the same was completely overlooked/ignored by the learned CIT(A), while confirming the addition made by the Assessing Officer on account of deemed dividend under S.2(22)(e) . He invited our attention to the relevant portion of the written submissions filed before the learned CIT(A) (copy placed at pages 168 to 176 of the paper-book) and pointed out that the nature of the transactions between M/s.Aster Private Limited and M/s.Aster Infrastructure Private Limited was clearly explained by the assessee by giving complete analysis. He contended that M/s.Aster Infrastructure Private Limited is an infrastructure service provider to the telecom operators and its operations include installation of towers/antennas on the various sites to be leased to the operators. He submitted that such towers and antennas are regularly purchased by M/s.Aster Infrastructure Private Limited from M/s.Aster Private Limited and even the services of the M/s.Aster Private Limited are availed by M/s.Aster Infrastructure Private Limited for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee also submitted that there were similar transactions entered into between M/s.Aster Infrastructure Private Limited and M/s.Aster Private Limited even during the earlier years, but no addition was made on account of deemed dividend under S.2(22)(e) in the earlier years, either in the hands of M/s.Aster Infrastructure Private Limited or even in the hands of assessee. 15. The Learned Departmental Representative on the other hand, strongly supported the impugned order of the learned CIT(A), confirming the addition made by the Assessing Officer the total income of the assessee on account of the amounts advanced by the M/s.Aster Private Limited to M/s.Aster Infrastructure Private Limited, wherein the assessee is a common shareholder, treating the same as deemed dividend under S.2(22)(e). He contended that the assessee s claim that the relevant transactions between M/s.Aster Private Limited and M/s.Aster Infrastructure Private Limited are in the nature of business transactions is not supported by any documentary evidence, such as bills, vouchers, etc. and the same, therefore, has not been accepted by the Assessing Officer as well as by the learned CIT(A). He contended t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above before going on to analyse the transactions between the appellant and ATPL it is of relevance here to bring out the business connection between the two companies. As stated earlier also the company, ATPL and M/s Aster Pvt.Ltd(APL) are both sister concerns belonging to the 'Aster Group of Companies'. The company AIPL is primarily engaged in the business of offering sites with' complete passive infrastructure to the various Mobile Communication operators. In the process the company acquires the sites of open land/ terrace and after providing the basic infrastructural facility comprising of the installation of the towers, providing room where equipment is installed etc, the same is provided on lease basis to the said telecom operators. APL is engaged in providing various services to telecom operators being amongst others, the commissioning, installation/erection, integration, operation and maintenance of the towers/antennas required by the various operators. APL is also engaged in the manufacturing of the said towers. AIPL, being an infrastructure service provider to the telecom operators its basic operation includes the installation of the towers/ a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y not to lend money or advance. if that is the fact, the benefit to the beneficial shareholder was never evident and this is proved beyond doubt during and post survey operations. The fact that the funds advanced for investment is also from the shares allotted to the company, for your verification we are herewith enclosing the share holding pattern of the company. 18. A perusal of the relevant portion of the assessee s written submissions filed before the learned CIT(A) clearly shows that the business connection between the M/s. Aster P. Ltd. and M/s. Aster Infrastructure P. Ltd. was clearly established by the assessee on the basis of analysis made of the relevant transactions between the said two companies and the nature of business transactions and dealings between the said two companies was also explained by the assessee by pointing out that M/s. Aster P. Ltd. was supplying towers and antennas, which were regularly purchased by M/s. Aster Infrastructure P. Ltd. for the purpose of its business of providing infrastructure services to telecom operators. M/s. Aster P. Ltd. was also providing related services to M/s. Aster Infrastructure P. Ltd. such as installation of towers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the assessee, there were similar type of transactions entered into between these two companies even in the earlier years, but there were no additions made by the Assessing Officer on account of deemed dividend under S.2(22)(e) either in the case of M/s. Aster Infrastructure P. Ltd. or even in the case of the assessee. After having carefully perused the relevant ledger account as well as the explanation offered by the assessee before the learned CIT(A) as well as before us, we are inclined to accept the stand of the assessee that the relevant transactions between M/s. Aster Infrastructure P. Ltd. and M/s. Aster P. Ltd. were in the nature of regular business transactions and not the transactions involving giving of loans or advances, as envisaged under S.2(22)(e). 21. In her impugned order, the learned CIT(A) has observed that even if the relevant transactions are in the nature of business transactions, the provisions of S.2(22)(e) are still attracted. As rightly contended by the learned counsel for the assessee, this conclusion drawn by the learned CIT(A) is contrary to the various judicial pronouncements including the judgment of the Hon'ble Delhi High Court c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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