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2015 (5) TMI 972 - ITAT CHENNAI

2015 (5) TMI 972 - ITAT CHENNAI - TMI - Addition under Section 2(22)(e) for deemed dividend - Held that:- the payment of money by inflating the purchase cannot be construed as loan or advance. In the case of loan or advance, the recipient has the obligation to repay the amount. In the case of inflating the purchase amount, at the best, we can say that the recipient has to appropriate the amount. Therefore, it cannot be construed as loan or advance within the meaning of Section 2(22)(e) of the Ac .....

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Addition under Section 69 - Held that:- Assessing Officer came to a conclusion that the assessee admitted on 17.09.2009 that he made unaccounted sum of ₹ 46,20,000/- for purchase of a property at Athipattu Village, Ambattur. A copy of the sworn statement recorded from the assessee is available at page 1 of the paper-book. This sworn statement does not show any admission made by the assessee for investment of unaccounted amount of ₹ 46,20,000/-. It is not known whether any other .....

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ssing Officer to find out the details of the borrowed funds and its nexus for making investments in immovable property. - IT APPEAL NO. 1266 (MDS.) OF 2013 - Dated:- 29-5-2015 - N.R.S. GANESAN, JUDICIAL MEMBER AND A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER For The Appellant : Pathlavath Peerya, CIT For The Respondent : M. Narayanan , Retd. Addl. CIT ORDER This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals)-I, Chennai, dated 11.03.2013 and pertains to .....

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ises and paid the same to Pandian Enterprises. According to the Ld. D.R., Pandian Enterprises is a proprietary concern of one Shri Ramesh Pandian, who is none other than the brother-in-law of the assessee. The money paid to Pandian Enterprises was actually taken back by the assessee. Therefore, according to the Ld. D.R., the accumulated profit of M/s Aachi Masala Foods Private Limited was paid to the assessee by giving credit in the books in the name of Nazareth Enterprises as if it was paid to .....

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tative, the assessee made payment to Nazareth Food Pvt. Ltd. However, on the instruction of Nazareth Food Pvt. Ltd., an amount of ₹ 10,81,20,000/- was transferred to the account of Pandian Enterprises. This transfer of amount is only towards purchase of spices from Nazareth Foods Pvt. Ltd. According to the Ld. representative, the assessee has no bank transaction with M/s Pandian Enterprises. Therefore, according to the Ld. representative, it is not a case of deemed dividend under Section 2 .....

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r, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, .....

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e capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, [and before the 1st day of April, 1965] ;] (ii) any advance or loan made to a shareholder [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously .....

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1.-The expression "accumulated profits", wherever it occurs in this clause, shall not include capital gains arising before the 1st day of April, 1946, or after the 31st day of March, 1948, and before the 1st day of April, 1956. Explanation 2.-The expression "accumulated profits" in sub-clauses (a), (b), (d) and (e), shall include all profits of the company up to the date of distribution or payment referred to in those sub-clauses, and in sub-clause (c) shall include all prof .....

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s a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company ; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern ;]' From the above it is obvious that for the purpose of treating an amount as deemed dividend, the following conditions should be fulfilled:- (i) The assessee .....

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amount in the account of Nazareth Foods Pvt. Ltd. The question arises for consideration is merely because the purchase was inflated and paid to the other company, such payment can be treated as loan or advance? This Tribunal is of the considered opinion that the payment of money by inflating the purchase cannot be construed as loan or advance. In the case of loan or advance, the recipient has the obligation to repay the amount. In the case of inflating the purchase amount, at the best, we can sa .....

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At any stretch of imagination, such inflated purchase cannot be treated as loan or advance. Therefore, this Tribunal is of the considered opinion that here is no infirmity in the order of the CIT(Appeals) and the same is confirmed. 6. The next ground of appeal is with regard to addition of ₹ 1,21,20,000/- under Section 69 of the Act. 7. Sh. Pathlavath Peerya, the Ld. D.R. submitted that on 17.09.2009, while recording the statement of the assessee, he claimed that an unaccounted amount of .....

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ssing anything further. According to the Ld. D.R., in the absence of any material to show that the investment was made from the borrowed funds, CIT(Appeals) is not justified in allowing the claim. 8. On the contrary, Shri M. Narayanan, the Ld. representative for the assessee, submitted that the Assessing Officer completed the assessment hurriedly. The CIT(Appeals), after viewing the statement filed by the assessee, found that the entire investments were made from the borrowed funds. Therefore, h .....

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