TMI Blog2016 (2) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... we allow the assessee’s claim of adjustment of excise duty U/s 145A on opening stock as on 01/4/1998 at ₹ 16,20,151/-.- Decided in favour of assessee Deemed dividend U/s 2(22)(e) - Held that:- Assessing Officer had not given any finding on transaction but summarily rejected the submission made by the assessee. The ld CIT(A) also considered the title of the account for deciding the issue of deemed dividend U/s 2(22)(e) of the Act. The copy of account filed itself shows that the assessee has number of transactions related to goods purchased and sale, job work charges, paid and received rent and interest. In opening, there was a debit balance in the books of assessee and on closing it was a credit balance. The balance after every transaction changed the position some time it becomes credit and some time debit. Therefore, we hold that transactions made by M/s Chrome International Co. ltd. with assessee are business transactions during the ordinary course of business, which cannot be treated as deemed dividend U/s 2(22)(e) of the Act. - Decided in favour of assessee - ITA Nos. 234 & 235/JP/2014 - - - Dated:- 14-12-2015 - SHRI T.R.MEENA, AM SHRI LALIET KUMAR, JM For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Less: Excise duty on Opening stock (Amount wrongly taken as opening balance of Modvat Account instead of excise duty on Opening stock ₹ 5,33,354/- Income increased by ₹ 6,43,195/- However, there was a mistake in the above working as instead of reducing the amount of excise duty in the opening stock at ₹ 21,53,505/-, the assessee reduced the amount of opening balance in Modvat account at ₹ 5,33,354/-. Had the correct adjustment been made the income would have been reduced by ₹ 9,76,956/- as under:- Adjustment which should have been made Excise duty on closing stock ₹ 11,76,549/- Less: Excise duty on Opening stock ₹ 21,53,505/- Income would have reduced by ₹ 9,76,956/-. The A.O. denied the claim with this observation that neither the closing stock as on 31/3/1998 nor the opening stock as on 31/3/1999 as per the books of account included the element of excise duty. The A.O. observed that the assessee took the value of excise duty on the opening stock as on 01/4/1998 at ₹ 5,33,354/- whereas the value of closing stock as on 31/3/1998 did not include the said value of excise duty of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,53,505 ₹ 5,33,354/-), if he finds the said claim is correct while deciding the issue in view of the decision of Hon ble Delhi High Court in the above mentioned case of CIT Vs. Mahavir Alluminium Ltd. (supra). It is needless to mention over here that while deciding the issue, the assessee will be afforded adequate opportunity of being heard before him. The ground No. 1 is according allowed for statistical purposes. The ld Assessing Officer again completed the set aside proceeding vide order dated 31/12/2010. The ld Assessing Officer held that it is undisputed fact that the assessee did not include the element of excise duty in the books of account. Thus neither the closing stock as on 31/3/1998 nor the opening stock as on 01/4/1998 as per books of account included the element of excise duty. In the A.Y. 1999-2000 for the purpose of making valuation U/s 145A the assessee took the value of excise duty on the opening stock as on 01/4/1998 at ₹ 5,33,354/- whereas the value of closing stock as on 31/3/1998 did not include the said value of excise duty of ₹ 5,33,354/-. This method of valuation of opening stock with excise duty has the effect of reducing the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forward figure of earlier year. Therefore, while giving effect to amended provisions of section 145A, purchases, sales and closing stock has to include any duty payable but the same cannot be applied to opening stock which is nothing but carried forward from last year. Therefore various courts have held that effect of amendment by introducing section 145A will be in the first year since opening stock will be without including of excise duty. Considering all these facts, Assessing Officer is fully justified in interpreting the provisions of Section 145A. However, ITAT directed the A.O. to examine the appellant s claim in the light of decision of Delhi High Court in the case of Mahavir Alluminium Ltd. in which adjustment to opening stock was allowed. Since set aside assessment is to be completed by following the directions of appellate authorities irrespective of the fact whether such direction is justified or not, Assessing Officer was duty bound to follow the direction of ITAT. Accordingly, the claim of adjustment to opening stock made by the appellant was allowable in view of the directions of ITAT and therefore the addition of ₹ 5,33,354/- made by the A.O. is not sus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inum (supra) has held as under:- 15. We are of the opinion that in the present case, there is no question of any double benefit being given to the assessee. Paragraph 23.13 of the guidance note itself makes it clear that whenever any adjustment is made in the valuation of inventory, this will affect both the opening as well as the closing stock. It is also to be noted that if any adjustment is required to be made by a statute, (as for example section 145A of the Act), effect to the same should be given irrespective of any consequences on the computation of income for tax purposes. Section 145A of the Act begins with a non obstante clause, and therefore, to give effect to section 145A of the Act, if there is a change in the closing stock as on March 31, 1999, there must necessarily be a corresponding adjustment made in the opening stock as on April 1, 1998. Therefore, we allow the assessee s claim of adjustment of excise duty U/s 145A on opening stock as on 01/4/1998 at ₹ 16,20,151/-. 7. Now we are going to decide ITA No. 235/JP/2014. In this case, original assessment was completed on 31/12/2007 at ₹ 1,20,43,889/-. The ld Assessing Officer made addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions for short term obtaining/providing the funds for the business needs inter se, such transactions cannot be considered to be transaction of loans or advances as envisaged U/s 2 (22)(e). The ld Assessing Officer held that the assessee had failed to substantiate his claim that the assessee was covered under the provisions of Section 2(22)(e) of the Act. Further the contention that the assessee company is a public limited company and its shares were listed on Bombay Stock Exchange was of no relevance because assessee company is shareholder and not the company was has given loans or advances. The condition of listed company should have been fulfilled by the company who had given loans and advances to its shareholder. In this case M/s Chrome International Company Ltd. is the company who has given loan and that is not a company in which public are substantially interested. Therefore, the loans/advances given by M/s Chrome International Company Ltd. to the assessee company are held as deemed dividend in the hands of the assessee company. The assessee company had enjoyed the loans or advances during the entire year which can be seen from the copy of account of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The decisions relied upon by the appellant are relating to business advances or where current account is maintained between two entities. ln the case of appellant, the title of account itself on page 27 and 28 of paper book clarifies the nature of transactions. These are short-term loan transactions as accepted by the lending company. The books of accounts of the chrome international company Ltd reflected financial transactions with the appellant company as short term loan. Therefore appellant cannot claim that these are not loan transactions. ln view of the clear treatment given by the lender to these transactions, there is no question of treating the transactions differently for the purpose of deciding whether these are loan transactions or not. Considering the detailed analysis given by the AO and transactions treated as short term loan in the books of accounts, the provisions of section (2)(22)(e) is clearly attracted. Accordingly, the addition made by the AO on account of deemed dividend is confirmed. 9. Now the assessee is in appeal before us. The ld AR of the assessee has reiterated the arguments made before the ld CIT(A). He further submitted that as per Section 2(22)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case to case and of their facts. He further relied on the decision in the case of Mtar Technologies (P) Ltd. Vs. ACIT 39 SOT 465 (Trib) (Hyd) (2010) wherein it has been held that law does not prohibit business transaction between the related concerned and therefore payments made in the ordinary course of business cannot be treated as loan and advances. He further relied on the following cases. 1. CIT Vs. Ambassador Travels (P) Ltd. 318 ITR 376 (Del)(HC). 2. CIT Vs. Idhayam Publication Ltd. 285 ITR 221 (Mad)(HC). 3. Muthoot M. George Brothers Vs. ACIT 47 TTJ 434 (Cochin) (Trib). 4. DCIT Vs Lakra Brothers 106 TTJ 250 (Chand.)(Trib). Therefore, he prayed to delete the addition confirmed by the ld CIT(A). 10. At the outset, the ld DR has vehemently supported the order of the ld CIT(A). 11. We have heard the rival contentions of both the parties and perused the material available on the record. The Coordinate Bench had set aside this issue to the Assessing Officer to verify the nature of transaction between the assessee company and M/s Chrome International Co. Ltd. The ld Assessing Officer had not given any finding on transaction but summarily rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X
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