9911796707
TMI Blog2017 (8) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... of income was processed under section 143(1) of the Income-tax Act. That thereafter, the case was reopened under section 148 of the Act. That the assessee claimed a sum of Rs. 18,66,450 as premium paid on plot allotted by the Gujarat Maritime Board and the assessee claimed the same in its business of ship breaking as it has obtained that plot on lease from GMB. The assessee paid this amount as premium on leasehold property. According to the Assessing Officer, the assessee has acquired this plot from GMB under lease and lease agreement was for 10 years and accordingly this is a capital asset and payment made for acquiring capital asset is capital expenditure. Accordingly, the Assessing Officer allowed deduction only of one-tenth expenditure and disallowed the balance amount of Rs. 16,79,850. The Assessing Officer also made addition of Rs. 1,94,54,869 as deemed dividend under section 2(22)(e) of the Act on the loan and advance received by the assessee from one M/s. Mahavir Rolling Mills Ltd. The Assessing Officer observed that M/s. Mahavir Rolling Mills Ltd. is a company in which public are not substantially interested and one of the directors, Shri K. K. Bansal holds more than 20 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the amount and disallowed the remaining amount. It is further submitted by Shri Manish Bhatt, learned counsel for the Revenue that the learned Tribunal has materially erred in confirming the decision of the learned Commissioner of Income-tax (Appeals) that since no permanent asset had come into the assessee's possession, the amounts were deductible as revenue expenses. It is further submitted that the learned Tribunal has not properly appreciated the fact that plots were taken on long-term lease. It is further submitted that as such the learned Assessing Officer rightly allowed only the amount pertaining to one year as eligible deduction. 3.2. It is further submitted by Shri Manish Bhatt, learned counsel for the Revenue that the learned Tribunal has materially erred in deleting the addition of Rs. 1,94,54,869 made under section 2(22)(e) of the Act. 3.3. It is further submitted by Shri Manish Bhatt, learned counsel for the Revenue that while deleting the addition of Rs. 1,94,54,869 made under section 2(22)(e) of the Act, the learned Tribunal has not properly appreciated the provision of section 2(22)(e) of the Act. It is submitted that as Shri K. K. Bansal was having 20 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that where the assessee took a land on lease for 99 years at a nominal rent of Rs. 40 per year and paid a sum of above Rs. 48 lakhs as advance rent, as the land was not acquired by the assessee, advance rent was allowable as revenue expenditure and could not be treated as capital expenditure. Similar is the position in the present case. Under the circumstances, no error has been considered by the learned Tribunal in deleting the addition of Rs. 16,79,850 made on account of excess claim of premium paid on the plot. Question No. 1 is answered against the Revenue and in favour of the assessee. 6. Now, so far as question No. 2, i.e., whether the Appellate Tribunal is right in law and on facts in deleting the addition of Rs. 1,94,54,869 made under section 2(22)(e) of the Act is concerned, it is required to be noted that it is not the case on behalf of the Revenue M/s. Mahavir Rolling Mills Ltd. was a shareholder of the assessee-company nor even the assessee- company is a shareholder in the M/s. Mahavir Rolling Mills Ltd. Merely on the ground that one Shri K.K. Bansal one of the directors holding more than 20 per cent. of share was a director both in M/s. Mahavir Rolling Mills Ltd. an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or advance. Further, it is an admitted case that under the normal circumstances, such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by a legal fiction created under section 2(22)(e) of the Act. We have to keep in mind that this legal provision relates to dividend. Thus, by a deeming provision, it is the definition of 'dividend' which is enlarged. Legal fiction does not extend to 'shareholder'. When we keep in mind this aspect, the conclusion would be obvious, viz., loan or advance given under the conditions specified under section 2(22)(e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to non-members. The second category specified under section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
