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Dipesh Lalchand Shah Versus Assistant Commissioner of Income-tax

2016 (4) TMI 655 - ITAT AHMEDABAD

Deemed dividend addition under section 2(22)(e) - Held that:- There has to be some material on the record to demonstrate the factual elements embedded in the arguments of the learned counsel. That's not the case here. In any event, as the Assessing Officer has very well demonstrate on the facts of this case, all the conditions for attracting the taxability under section 2(22)(e) are satisfied on the facts of this case. The assessee has received the monies from a company in which he is the shareh .....

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y demolished by the Assessing Officer, and learned CIT(A) was quite justified in upholding these findings. Whether these advances were to help the assessee in overcoming temporary liquidity crises or not is wholly irrelevant because as long as it is in nature of loans or advances, and other pre-conditions for applicability of Section 2(22)(e) are satisfied, such loans and advances are required to be taxed as deemed dividend.

We uphold very well reasoned stand of the authorities below, .....

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of a common order dated 23rd May 2011 passed by the CIT(A) dealing with an issue common to both of these years, and were heard together. As a matter of convenience, therefore, both of these appeals are being disposed of by way of this consolidated order. 2. Grievances raised by the appellant, in these appeals, are that the learned CIT(A) erred in confirming the addition of ₹ 8,25,000 for the assessment year 2008-09 and of ₹ 60,80,000 for the assessment year 2009-10, in respect of dee .....

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ions Pvt Ltd (VSPL, in short)- a company in which the assessee had 28% equity shareholding. It was also noted that VSPL had, in its reserves and surplus, accumulated profits aggregating to ₹ 2,64,87,745 and ₹ 2,65,07,159- at the relevant points of time relevant to the assessment years 2008-09 and 2009-10 respectively. 4. When assessee was put to notice as to why these amounts not be taxed in the hands of the assessee as deemed dividend under section 2(22)(e) of the Act, it was submit .....

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Pvt Ltd", it repaid the amount in the succeeding year". The assessee further submitted that the provisions of Section 2(22)(e) do not come into play in respect of the advances made during the course of the ordinary business when it is warranted by business expediency. A reference was also made to the decision of this Tribunal, in the case of ITO v. Usha Commercial (P.) Ltd [2009] 30 SOT 37 (URO) (Kol.), in support of the proposition that "when loan is given in the ordinary course .....

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y are in the nature of deposits" and that the deposits are not covered by the definition of deemed dividend under section 2(22)(e). Reliance was placed on the decision of a coordinate bench of this Tribunal, in the case of Seamist Properties (P.) Ltd v. ITO[2005] 1 SOT 142 (Mum), and it was contended that Section 2(22)(e) creates a legal fiction and a deeming provision, and deeming provisions are t be interpreted strictly and cannot be extended beyond its scope. None of these submissions, h .....

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d as 'Vishal Overseas 102 Vishal House', which had sales transactions and payments made against the sale bills etc. It was thus noted that these two types of transactions are separate and distinct. The Assessing Officer further noted that what has been treated as deemed dividend is the aggregate of amounts received in the loan account during the relevant period and the running business account has been left out altogether. The Assessing Officer further noted that even if there was one ac .....

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banking finance company. As for assessee's reliance on Hon'ble Delhi High Court's judgment in the case of Creative Dyeing & Printing (P.) Ltd. (supra), the Assessing Officer noted that since the advances in question were not given in the ordinary course of business, this decision does not come to the rescue of the assessee. As for the advances being in the nature of deposits, the Assessing Officer was of the view that such a situation would arise only when the person placing depo .....

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reserves and surplus, the Assessing Officer made additions of ₹ 8,25,000 and ₹ 69,55,000 under section 2(22)(e) for the assessment years 2008-09 and 2009-10 respectively. 6. Aggrieved by the additions so made by the Assessing Officer, assessee carried the matter in appeal before the CIT(A) but without any success. He upheld the action of the Assessing Officer in principle but restricted the addition for the assessment year 2009-10 to ₹ 60,80,000 as that was the maximum outstand .....

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ons Pvt Ltd, and these advances are required to be treated as in consideration of this assistance. He then takes us through a recent judgment of Hon'ble Karnataka High Court, in the case of Bagmane Constructions Pvt Ltd Vs Commissioner of Income Tax (Tax Appeal No. 473 of 2013), to emphasize the point that "loan or advance given to the shareholders or to a concern, under normal circumstances, would not qualify as dividend if such loan or advance is given to such shareholder as a consequ .....

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nce, in any event, there is nothing on record to even remotely suggest that there was any quid pro quo between the VFPL and the assessee inasmuch as the advances were given as consideration for personal guarantees and collateral securities. Undoubtedly, we are bound by the views expressed by Hon'ble Courts above but then there has be something more than empty words to show that the factual elements embedded in this contentions are correct. Our attention is also invited to the judgment of Hon .....

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despite the above legal plea, the assessee was unable to demonstrate the quid pro quo between the advances and the guarantees and collaterals. Rejecting the arguments of the assessee, the coordinate bench observed, inter alia, as follows: "11. In the facts of the present case, it is not disputed that all the conditions attracting the provisions of S.2(22)(e) exist. It is the case of the assessee that since it has mortgaged its property with the bank to enable the company to avail finance fa .....

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bmitted in the paper-book does not establish the fact that the properties were mortgaged with the bank. The assessees have also not produced any correspondence made either with the bank or with the company towards release of the properties mortgaged, as was the fact in the case of Pradip Kumar Malhotra (supra) before the Hon'ble Calcutta High Court. In the absence of conclusive evidence to prove the fact of mortgage and also the fact that the assessee has not requested the bank for release o .....

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tition by the assessee seeking acceptance of the additional evidence, no cognizance can be taken by us, while adjudicating upon the issue in dispute. Even accepting that letter also does not lead us to any conclusion so far as assessee's claim of mortgaging the property is concerned, as the said letter does not establish the fact that the property in question was actually mortgaged with the bank. That apart, the language of S.2(22)(e) is clear and unambiguous and does not leave any scope for .....

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