TMI Blog2017 (12) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... able to produce relevant information before Ld.AO to establish that M/s Reliance Capital Ltd. and M/s Bajaj Capital Ltd. have paid tax on such interest received, then Ld.AO shall grant relief to assessee as per law. Addition made towards purchase of medicines and materials - Held that:- We observe that assessee is rendering OPD services, where patients are attended by assessee and cost of medicines issued at the counter are included in the fees payable by them. However, we fail to understand how entire medicines/materials worth ₹ 21,41,248/- would be distributed amongst the patients. Ld.AR has not filed any details like total number of patients attended by assessee during the year, in order to establish a reasonable distribution of medicines purchased by assessee. He has also not placed on record details of medicines/materials purchased. We therefore do not find any infirmity in restricting the disallowance to ₹ 50,000/- by Ld.CIT(A). The same is therefore upheld. - ITA No. 5480/Del/2014 - - - Dated:- 20-12-2017 - SHRI R.S. SYAL, VICE PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBER For The Appellant : Shri Kapil Goel, Adv. For The Respondent : Shri At ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. Accordingly notice under section 143(2) of the Act along with detailed questionnaire, and notice under section 142(1) of the Act were issued. In response to statutory notices, representatives of assessee attended proceedings and filed details asked for. 2.1. Ld. AO observed that assessee has shown income from medical profession and other sources etc. and assessee is Doctor by profession. On perusal of audited accounts, Ld. AO noticed that besides secured loan of ₹ 51.55 lakhs, assessee has shown unsecured loan at ₹ 72.54 lakh, out of which amount of ₹ 39,67,183/-has been shown to have been taken from M/s Sharma Medicare Pvt. Ltd. It was also observed by Ld. AO that assessee himself is a director in the company and holds 91.67% of its shares. The Ld. AO accordingly issued notice show causing assessee as to why the above loan of ₹ 39,67,183/-advanced by M/s Sharma Medicare Pvt. Ltd. may not be treated as deemed dividend, within the meaning of section 2(22) (e) of the Act. 2.2. In response to the notice assessee replied that M/s Sharma Medicare Pvt. Ltd. has given loan/advanced to Dr Sunil Sharma for construction of hospital building of M/s Eastern Cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the transaction between M/s Sharma Medicare Pvt. Ltd. and the appellant is to be viewed from the financial status of the loaner company and the purpose for Which such loans were given to the appellant. M/s Sharma Medicare Pvt. Ltd. was not having any plot on which the hospital was proposed. The plot was existing in the name of M/s Eastern Creations Pvt. Ltd. in which the appellant, Dr. Sunil Sharma was one of the directors. Thus, the loan given by M/s Sharma Medicare Pvt. Ltd. to the appellant was for the purpose of creation of an asset of M/s Eastern Creations Pvt. Ltd. in which the appellant was having substantial interest. No business purpose of M/s Sharma Medicare Pvt. Ltd. is served by advancing loans to the appellant since ultimately it had taken the asset (hospital building) on rent by paying rent @ ₹ 22,100/- w.e.f. 16.03.2013. Therefore, so far as the status of M/s Sharma Medicare Pvt. Ltd. is concerned it is paying rent for the hospital which it could have otherwise acquired on rent from any party immediately before making such arrangement of loan. It is therefore beyond doubt that the arrangement of taking loan in the name of M/s Shanna Medicare Pvt. Ltd. a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan from HDFC Bank and taken over by M/s Sharma Medicare Pvt. Ltd. The amount of ₹ 14,21,889/- is therefore, directed to be excluded from the amount of deemed dividend in the hands of the appellant. The balance amount of ₹ 25,45,305/- is definitely deemed dividend u/s 2(22)(e) of the Act in the hands of the appellant. The addition to the extent of ₹ 25,45,305/- is therefore, sustained. The appellant gets the consequential relief. Ground no.1 of the appeal is partly allowed. 3. Aggrieved by the order of Ld. CIT (A) assessee is in appeal before us now. 3.1. It was argued by Ld.AR that M/s Sharma Medicare Pvt. Ltd. intended to expand its business activity and to take the proposed property of M/s Eastern Creations Pvt. Ltd. on rent. Ld.AR further submitted that M/s Eastern Creations Pvt. Ltd. was having a plot at NH-198, block, L , Delta-II at Greater Noida for Hospital purposes, where the assessee and his wife were having substantial interest. It has been argued by the Ld.AR that to facilitate the construction of the hospital building in the said plot assessee made an arrangement in seeking loans in the hands of M/s Sharma Medicare Pvt. Ltd. However since M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Companies Act 1956 under section 3(1)(iii)(d). Ld.AR submitted that by virtue of this provision of the Companies Act, a private company can take deposits/loan from its members, directors or their relatives. And that was the reason why loan from M/s Sharma Medicare Pvt. Ltd. to M/s Eastern Creation Pvt. Ltd. was channeled through common director Dr Sunil Sharma. Assessee in its reply dated 08/07/14 filed before Ld.CIT (A) placed at page 14-16 of the paper book provides the details of alleged loan advanced to M/s Eastern Creation Pvt. Ltd. through assessee by M/s Sharma Medicare Pvt. Ltd. which has been borrowed from various financial institutions. The details are as under: S.No. Source Disbursement 1. Loan from HDFC bank ₹ 14,66,183/- dated 24.06.10 ₹ 7 lakhs dated 24/06/10 2. Loan from HDFC bank ₹ 37,77,543/- dated 13/09/10 ₹ 40 Lacs and ₹ 8 Lacs dated 13/09/10; ₹ 3 Lacs dated 15/09/10 ₹ 3.50 Lacs dated 18/09/10 (total ₹ 18.50 Lacs) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of additional evidence vide application dated 16.11.17. While responding to queries raised, Ld.AR placed reliance on observation in the decision by Hon ble Supreme Court in the case of CIT vs. Mukundray K Shah reported in 290 ITR 433 which is as under. We find merit in this civil appeal. The companies having accumulated profits and the companies in which substantial voting power lies in the hands of the person other than the public (controlled companies) are required to distribute accumulated profits as dividends to the shareholders. In such companies, the controlling group can do what it likes with the management of the company, its affairs and its profits. It is for this group to decide whether the profits should be distributed as dividends or not. The declaration of dividend is entirely within the discretion of this group. Therefore, the legislature realized that though funds were available with the company in the form of profits, the controlling group refused to distribute accumulated profits as dividends to the shareholders but adopted the device of advancing the said profits by way of loan to one of its shareholders so as to avoid payment of tax on accumulated profits. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the merits of the case, assessee has not established regarding construction carried out by Eastern M/s Eastern Creation Pvt. Ltd. Even from the submissions before Ld. CIT (A), assessee has not established any repayment of the said amount back to M/s Sharma Medicare Pvt. Ltd. Before us there has been nothing that is brought on record regarding alleged loan being repaid back to M/s Sharma Medicare Pvt.Ltd. Under such circumstances, more particularly when assessee was having substantial interest in Eastern Creations Pvt. Ltd., financial exigency in transferring the funds from M/s Sharma Medicare Pvt. Ltd. to M/s Eastern Creations Pvt. Ltd. through assessee has not been established as per the requirement of law. We therefore do not find any infirmity to interfere with the findings of Ld. CIT (A). 5.7. Ld.AR emphasised upon the reference made by Hon ble Supreme Court in the case of CIT vs. L Alagasundaram Chettiar (supra), the word payment has to be construed in the context to know if any benefit has accrued to the assessee. He submitted that in the facts of present case assessee has merely been a medium to transfer the loan amount by M/s Sharma Medicare Pvt.Ltd. to M/s East ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted the disallowance by observing as under: On examining the facts of the case, it is observed that the appellant being a professional doctor, charges its professional fee along with the cost of medicines. The accounts produced before the AO show that there is more than ₹ 10 lac surplus generated by the appellant, which includes the profit element from the sale of medicine as well as the professional fee charged by him. The AO has not made any inquiry for quantifying the disallowance. As such disallowance has been made purely on adhoc basis. However, there is no certification from the appellant that closing stock on the last day of the year was NIL. Even otherwise, it is not practically possible that entire stock of medicines is utilised on the last day of the financial year when the OPD of a professional doctor is running on day-to-day basis. Keeping in mind this factual position, it would be reasonable and justified to uphold the addition at ₹ 50,000/- only on this issue. The appellant gets equivalent relief. 7.2. Ld.A.R. submitted that a reasonable view that assessee renders OPD services on day-to-day basis. 7.3. Ld.DR placed reliance on orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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