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2016 (9) TMI 12 - ITAT VISAKHAPATNAM

2016 (9) TMI 12 - ITAT VISAKHAPATNAM - TMI - Deemed dividend as per section 2(22)(e) - Held that:- It is clear that as on the date of loan advanced to the assessee by the M/s. Chaitanya Packagings (P) Ltd. it has to be seen whether there is accumulated profit in the hands of the creditor company or not. In the present case as on 1.4.2007, M/s. Chaitayna Packings Pvt. Ltd. is having accumulated profit of ₹ 48,03,137/-. Not only that, the creditor company in its ledger folio account it is cl .....

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s. Chaitanya Packagings (P) Ltd. is having an amount of ₹ 48,03,137/- and out of which loan advanced to the assessee of ₹ 25,24,796/-. It is clearly a deemed dividend in the light of section 2(22)(e) of the Act. So far as various case laws relied by the Ld. Counsel for the assessee is concerned, we have gone through each and every case and we find that the facts involved in those case laws are entirely different from the case in hand. In view of the above, we find no infirmity in the .....

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e is engaged in running a digital studio in the name & style of Tulasi Digital Studios and manufacturing of files in the name of M/s. Tulasi Filing Systems , as a proprietor. The assessee is also receiving remuneration from M/s. Chaitanya Packagings (P) Ltd. and filed a return of income by declaring total income of ₹ 6,30,576/-. The return filed by the assessee was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as the Act ) thereafter notice u/s 143(2) of the Act .....

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any, as appearing in its books with an outstanding credit balance of ₹ 11,87,483.98 as on 31.3.2008. The A.O. has further observed that during the course of the assessment proceedings, the details of the shareholding pattern of the creditor company M/s. Chaitanya Packagings (P) Ltd., were called for and placed on record. On examination of records of the creditor company M/s. Chaitanya Packagings (P) Ltd., it is noticed that the assessee is having 25,500 shares in the creditor company out o .....

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Ltd. is to be treated as deemed dividend in the hands of the assessee Shri Yogish Chandra Tulasi since the assessee is the proprietor of M/s. Tulasi Digital Studios. It is further observed that on verification of the ledger folio account in respect of creditor company, it was found that the assessee as the proprietor of M/s. Tulasi Digital Studios, borrowed money as an advance from M/s. Chaitanya Packagings (P) Ltd. during the financial year 2007-08. It is further observed that the accumulated p .....

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s. Chaitanya Packagings (P) Ltd. to a third party on behalf of the assessee, duly debited by the lending concern in the account of the assessee as an advance given. Thus, on the face of it this amount of ₹ 25,24,796/- was taken as a loan and advance by the assessee from M/s. Chaitanya Packagings (P) Ltd., in financial year 2007-08 relevant to the assessment year 2008-09. Accordingly, the A.O. has assessed an amount of ₹ 25,24,796/- in the hands of the assessee as an income from other .....

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eferred to business transactions between M/s. Tulasi Filling Systems and M/s. CPPL. However, it is relevant to note that the Assessing Officer has treated only the loan taken by M/s. Tulasi Digital Studios as deemed dividend and not transactions between M/s. Tulasi Filling Systems and M/s. CPPL. In the case of M/s. Tulasi Digital Studios, there is no business transaction between it and M/s. CPPL, and the amounts received are clearly loans given to accommodate the appellant s concern. Secondly, t .....

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5 lakhs were received during the year. In the case of ITO Vs. Kalyan Gupta (293 ITR 249) it has been held that for the purpose of determination of deemed dividend u/s 2(22)(e), repayment of an earlier loan cannot be adjusted against advancement of fresh loan so as to reduce liability which has fastened itself on the earlier loan. Repayment does not reduce liability . Keeping the above in view, I do not see any merit in the argument of the appellant and the addition of ₹ 25,24,796/- on acco .....

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2(22)(e) of the Act has no application. The Ld. Counsel for the assessee alternatively submitted by raising additional ground that as there is no accumulated profit, provisions u/s 2(22)(e) of the Act do not come into play. He also filed paper book and relied on the various case laws 6. On the other hand, the Ld. D.R. submitted that admittedly there is an accumulated profit as on 1.4.2007 and it is also fact that assessee has borrowed an amount of ₹ 25,24,796/-. It is a clear case of deem .....

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si Filing Systems , as a proprietor. The assessee company having a shares of 25,500 out of total shareholdings of M/s. Chaitanya Packagings (P) Ltd. 1,95,000 which comes to 13%. M/s. Chaitanya Packagings (P) Ltd. has advanced an amount of ₹ 25,24,796/- from the accumulated profits of ₹ 48,03,137/- as on 1.4.2007. From the above it is clear that as on the date of loan advanced by M/s. Chaitanya Packagings (P) Ltd. to M/s. Tulasi Digital Studio is having accumulated profit. It is also .....

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vidend in the hands of the assessee and the same was correctly taxed as income from other sources for the assessment year 2008-09 and the same was confirmed by the Ld. CIT(A). 8. So far as arguments of the Ld. Counsel for the assessee is concerned, M/s. Chaitanya Packagings (P) Ltd. advanced the amount as a business advance. The assessee is failed to establish before us by filing relevant material to show that the amount advanced to the assessee by M/s. Chaitanya Packagings (P) Ltd. is a busines .....

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as requested the Indian bank to give a loan to M/s. Chaitanya Packagings (P) Ltd. For that he is ready to give a personal guarantee and all other properties. The letter filed by the A.R. of the assessee, it is not clear whether M/s. Chaitanya Packagings (P) Ltd. has obtained any loan from the Indian Bank or not. If so, what is the amount? Whether Mr. Tulasi Yogish Chandra, assessee has actually stood guarantee on behalf of M/s. Chaitanya Packagings (P) Ltd. is not clear. Therefore, this argument .....

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ot assessed by the revenue. This argument raised by the assessee is hyper technical and it cannot be accepted. As per section 2(22)(e) of the Act any payment by any such company on behalf of a share holder to the extent to which the company in either case possess accumulated profit, deemed to be a deemed dividend to the extent of accumulated profit or loan advanced, whichever is less. 10. Therefore, it is clear from the above that as on the date of loan advanced to the assessee by the M/s. Chait .....

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