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TMI Blog2017 (12) TMI 1217X X X X Extracts X X X X X X X X Extracts X X X X ..... t subject loan channeled through appellant was passed on to M/s Eastern Creation P Ltd. for onward construction of hospital building taken on rent by lender company M/s Sharma Medicare P Ltd. is undisputed and uncontroverted; c. There is no felonious act on part of appellant in the subject transaction; d. Inundated evidence like regular book entries etc. on records establish that loan is in the course of ordinary business activities. Addition of Rs. 143,834/- u/s 40(a)(ia) of the Act: 3. That on the facts and in the circumstances of the case and in law, ld.CIT(A) erred in approving the addition of Rs. 143,834/- u/s 40(a)(ia) of the Act without giving benefit due to appellant under second proviso to sec.40(a)(ia) which is retrospective in nature and other plausible and available legal grounds. Addition of Rs. 50,000 sustained on adhoc basis 4. That on the facts and in the circumstances of the case and in law, ld.CIT(A) erred in partly approving addition of Rs. 50,000 made by ld.AO on mere conjectures and surmises purely on presumptuous reasoning. That the appellant craves leave to add, amend, modify, rescind, supplement or alter any of the grounds stated herein above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case as well as written submissions made by the appellant very carefully. So far as, the sources of money available with M/s Sharma Medicare Pvt. Ltd. is concerned, it is observed that the company had taken secured loans from HDFC bank (about Rs. 52 lacs) and loan from TATA Capital Ltd. (Rs.34.61 lacs). The existing loans of Rs. 14,21,889/- in the name of Dr. Sunil Sharma taken from HDFC bank were also taken over by M/s Sharma Medicare Pvt. Ltd. on 01.08.2010. It is observed that the amount of loan received by the appellant from M/s Sharma Medicare Pvt. Ltd. was as under: (i) Rs. 7 lac on 24.06.2010 (from HDFC bank) (ii) Rs. 4 lac and Rs. 8 lac (total Rs. 12 lacs) on 13.09.2010 (from HDFC bank) (iii) Rs. 3 lac on 15.09.2010 (from HDFC bank) (iv)Rs. 3.5 lac on 18.09.2010 (from HDFC bank ) (v) Rs. 10 lac on 04.03.2011 (from TATA Capital Ltd.) (vi) Rs. 3 lac on 24.03.2011 (from TAT A Capital Ltd.) (vii) Rs. 1 lac on 31.03.2011 (from TATA Capital Ltd.) Thus, total of Rs. 39,67,184/- was the amount of loan taken by the appellant from M/s Sharma Medicare Pvt. Ltd. for advancing the same to M/s Eastern Creations Pvt. Ltd. So far as the argument of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which was never been to advance the money to the directors. Therefore, the following basic conditions, to qualify for a loan to be treated as deemed dividend, are satisfied:- i) The payer company is a closely held company, ii) The payer company has accumulated profits on the date of any such payment and the payments are made out of such accumulated profits and iii) The payment of loan or advance is not in the course of ordinary business activities 7.4. Therefore, the amount of loan received by the appellant from M/s Sharma Medicare Pvt. Ltd. definitely qualifies to be deemed dividend in the hands of the appellant. However, it is observed that the existing loan of Rs. 14,21,889/- in the hands of the appe1lant from HDFC bank was taken over by the company M/s Sharma Medicare Pvt. Ltd. through book entry dated 01.08.2010 and as ultimately such amount was the part and parcel of the loans advanced by M/s Sharma Medicare Pvt. Ltd. to the appellant, the same deserves to be excluded from the ambit of deemed dividend in view of the decisions of Hon'ble Jurisdictional High Court in the case of CIT vs. Ankitech Pvt. Ltd. ITA No. 462 of 2009 (Del). Therefore, out of total loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , seeking permission to adduce Additional Evidence, would be necessary to decide the issue under consideration. He also submitted that as assessee was sufficiently prevented from producing this document before the authorities below, the issue may be set-aside back to the file of Ld. AO to verify in the light of the document filed before us today. 3.4. Ld. DR on the other hand opposed for the admission of additional evidence, as according to him, this document was never available with the assessee and this is an afterthought because of the circular issued by CBDT No. 19/2017 dated 12/06/17. On merits of the case Ld. DR placed his reliance upon the orders of the authorities below. 4. We have perused the submissions advanced by both the sides in the light of the records placed before us. We have also perused the document produced by Ld.AR under Rule 29 as additional evidence. 5. On a careful reading of the said document, we observe that it is dated 29/09/14, whereas the alleged loan has been advanced by M/s Sharma Medicare Pvt.Ltd. to assessee in impugned A.Y. It has been submitted by assessee before the Ld.CIT(A) in its written submission dated 22/07/14, placed at page 10-11 of pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edicare Pvt.Ltd. could have advanced loans directly to M/s Eastern Creation Pvt. Ltd. as inter corporate loans, both being sister concerns. We fail to understand the mechanism carried out by assessee to transfer the funds from M/s Sharma Medicare Pvt.Ltd. to M/s Eastern Creation Pvt. Ltd. The alleged memorandum of understanding presented by Ld.AR before us today as additional evidence does not belong to the year under consideration as it has been signed by the parties therein as on 29/09/14 which is after the date of impugned order passed by Ld.CIT(A). It has not been executed in the proper form as required under law, which could hold an evidentiary value to establish the alleged transaction. The authenticity of so called Memorandum of Understanding cannot also be cross verified as it has not been registered with the registering authority. 5.3. The appeal was placed for certain clarification on 13.12.2017 regarding alleged document that was placed by way 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ld.AR has not been able to rebut that loan was infact advanced for benefit of assessee by way of any piece of evidence on record. Merely placing a letter signed by assessee himself does not establish, what Ld.AR has tried to canvas before us. We therefore reject the arguments advanced by Ld.AR in this regard and reach to the conclusion that the two companies were used by assessee as conduits as held by Hon'ble Supreme Court in Mukundray K Shah(supra). 5.5. In the instant case the amounts received by assessee is nothing but loan/advance received from M/s Sharma Medicare for the benefit of assessee, and assessee is camouflaging the same as a commercial transaction to get over the provisions of Section 2(22)(e) of the Act. We agree with the submission advanced by Ld.DR regarding the creation of this document being an afterthought. And therefore we are not inclined to admit the same. We thus reject the application dated 16/11/17. 5.6. Coming 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 bac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed before us. Ld.AO has rightly made addition of interest paid to these financial companies for non deduction of TDS u/s 194 of the Act. However in the event assessee is 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 assesee as per law. 6.5. We accordingly set aside this issue to Ld.AO for verification of the claim as per law. Assessee is directed to produce relevant details to establish its claim. Accordingly ground no.3 stands allowed for statistical purposes. 7. Ground No.4 This ground is in respect of addition made towards purchase of medicines and materials. 7.1. Ld.AR submitted that assessee debited Rs. 21,41,248/- towards purchase of medicines and materials, but has not shown sale of medicine. He submitted that Ld.CIT(A) restricted 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 Rs. 10 lac surplus gen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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