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Shri. Varusai Mohamed Versus The Deputy Commissioner of Income Tax, Corporate Circle 5 (1) , Chennai

2018 (1) TMI 541 - ITAT CHENNAI

Deemed dividend u/s 2(22)(e) - Held that:- Assessing Officer had not examined the question whether assessee had given the same collateral security for loans raised by the assessee from SIDBI and State Bank of Hyderabad and how far the claim was correct. Much more facts have to be brought on record before the question whether the loans taken by the assessee could be deemed as dividend can be properly addressed. Considering these circumstances, it is of the opinion that issue requires a fresh look .....

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, JCIT ORDER This is an appeal filed by the assessee, directed against an order dated 30.11.2016 of ld. Commissioner of Income Tax (Appeals)- 3, Chennai, wherein he sustained an addition of B14,50,116/- out of a total addition of B31,00,116/- made by the ld. Assessing Officer. 2. Assessee has filed this appeal with a delay of thirteen days. Condonation petition has been filed. Reason shown for the delay seem to be justified. Ld. Departmental Representative did not raise any serious objection. De .....

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,875/- as on 31.03.2009. Explanation of the assessee was sought as to why Sec.2(22) (e) of the Income Tax Act, 1961 (in short the Act ) should not be applied. His reply was that he had given immovable property valued at B54.55 lakhs as collateral security for loans raised by the said Company and also provided personal guarantee for such loans. As per the assessee, the Company had taken loans from banks for meeting its working capital requirement, and but for such personal guarantee and collatera .....

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Kumar Malhotra vs. CIT, 338 ITR 538. 4. However, ld. Assessing Officer did not accept the above reply. According to him, the Company had a turnover of B8,57,12,270/- during the relevant previous year. As per the ld. Assessing Officer the Company though it was granted credit facilities by State Bank of Hyderabad, for which collateral security and personal guarantee were given by the assessee, it had not availed any such credit facilities. On the other hand, as per ld. Assessing Officer bill disc .....

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ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra) view taken by the ld. Assessing Officer was that the board of directors of the concerned Company from where Shri Pradip Kumar Malhotra had taken loans, had passed a resolution enabling them to give loans to Pradip Kumar Malhotra. Thus according to him, both the cases relied on by the assessee were on different set of facts. He held that the sum of B31,00,116/- taken by the assessee as loan/advance from M/s. Rasim Exports Priva .....

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he Company from State Bank of Hyderabad. Contention of the assessee was that there was a mutual agreement between him and the Company, by which the latter had agreed to provide financial assistance to the assessee as and when required by him. 6. However, ld. Commissioner of Income Tax (Appeals) was not impressed by the above arguments. Nevertheless he found that assessee had given a loan of B16,50,000/- to Company and hence only the net amount of B14,50,116/- could be considered for addition u/s .....

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loans raised by the Company, it could not have fulfilled its export commitments. As per the ld. Authorised Representative, there was a Board resolution of the Company authorizing the assessee to withdraw funds from the Company for his personal use. Contention of the ld. Authorised Representative was that transactions were quidpro- quo and commercial in nature. As per the ld. Authorised Representative this arrangement was purely based on business expediency. Ld. Authorised Representative further .....

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ITR 393. She thus argued that the advance received by the assessee from the Company stood outside the preview of Sec.2(22) (e) of the Act. 8. Per contra, ld. Departmental Representative strongly supporting the orders of the authorities below submitted that decision of Co-ordinate Bench in the case of G. Sreevidya (supra) had no applicability since there was no pre-condition attached to the personal guarantee and collateral security offered by the assessee. Further according to him, the Board re .....

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any M/s. Rasim Exports Private limited had not availed any cash credit facility from State Bank of Hyderabad. He has also noted that major interest expenditure incurred by the Company was on term loans from SIDBI. Ld. Assessing Officer also states that assessee was unable to furnish documents regarding collateral security given by him for bank loans other than to State Bank of Hyderabad. Terms and conditions attached to the financial assistance provided by SIDBI to M/s. Rasim Exports Private lim .....

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of 1% p.a. from the date of disbursement. 3. Guarantee Personal Guarantee The Borrower shall procure and furnish unconditional and irrevocable guarantees of Shri. R. Varusai Mohamed, Smt. V. Fasulunnisa and Smt. P. Noorjahan. The guarantee shall be joint and several and no guarantee commission shall be payable by the Borrower to the guarantors . What is stated in the Board resolution dated 30.06.2008 placed at paper book page 33 read as under:- CERTIFIED TRUE COPY OF THE RESOLUTION PASSED AT THE .....

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facility taken by the company Specimen Signatures of Directors:- 1. Name and Signature - Mr. R. Varusai Mohamed 2. Name and Signature - Mrs. V. Fasulunnisa .. As for the collateral offered by the assessee for loans raised by the Company from State Bank of Hyderabad, there is an affidavit of the assessee which is placed at paper book pages 21 to 25. What is stated at para 3 to 9 of this affidavit is apposite and this is reproduced hereunder:- 3. That I am/ we are owner(s) of the property with po .....

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ADI ROAD·, KARAIYANCHAYADI CHENNAI - 56 on my/our confirmation to give said property as security. 6. That the property is free from all encumbrances, charges etc., and there are no dues payable to any statutory authorities or others in respect of this property. No taxes, or levies or fees are payable" to any municipal or other. 7. That the property is not the subject matter of any agreement of sale or other agree1nent or attachment, injunction from any court or statutory authorities. .....

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