TMI Blog2018 (12) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... latable to term loan having been fully utilized for acquiring immovable property in the name of assessee firm for its business purposes - Held that:- It is not disputed that there was a net overdrawing of ₹ 1,70,69,208/- in partners accounts, if considered together, as on date of obtaining the loan viz 12.11.2011. It may be true that the loan was immediately put to use for the purpose of acquiring property. However, if the partners had not overdrawn by ₹ 1,70,69,208/-, assessee could have saved atleast the interest on such amount. In other words, we cannot say that there was full utilization of loans taken by the assessee for the purpose of its business. As already mentioned by us, assessee itself had admitted before ld. CIT (Appeals) that cash credit account was not used for the purpose of business. In such circumstances, we are of the opinion that CIT (A) was justified in sustaining Addition - decided against assessee. - I.T.A. No.2365/CHNY/2016, I.T.A. No.2805/CHNY/2016 - - - Dated:- 5-12-2018 - Shri Abraham P. George, Accountant Member And Shri Duvvuru RL Reddy, Judicial Member For the Assessee : Shri. M. Karunakaran, Advocate For the Department : Shri. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 2(22) (e) of the Act did not apply. As per the assessee, a part of the such advances, was given as loan to one Smt. Priya Rachel who was the wife of a friend of one of the partners. Assessee relied on a judgment of Hon ble Jurisdictional High Court in the case of CIT vs. Printwave Services P. Ltd, (2015) 373 ITR 665. Another submission made by the assessee was that the advances could also be considered as inter corporate deposit. 7. However, ld. Assessing Officer was not impressed by the above reply. According to him, assessee had maintained separate trading ledger in the name of M/s. Symbiotic Infotech P. Ltd and had shown trading advances separately. As per the ld. Assessing Officer, the impugned advance was different from what was shown in such trading advances. Further, as per the ld. Assessing Officer, the advances were never adjusted against any services rendered by the assessee. Further, as per the ld. Assessing Officer, judgment of Hon ble Jurisdictional High Court in the case of Printwave Services P. Ltd, (supra) relied on by the assessee was on a different set of facts. In the said case what was considered was advances received by a limited company and not by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m had returned the said loan to the company immediately on receipt of the same from Mrs. Priya Rachel in March, 2A12. ln support of the above claim, the learned AR submitted copies of the bank account of the appellant with HDFC Bank, Shenoy Nagar Branch, the loan account of smt. Priya Rachel and the statement of account of M/s Symbiotic lnfotech P Ltd. The direct nexus between the loaned funds from the company and advance made to Mrs. Priya Rachel was proved beyond doubt by bank entries. The appellant, therefore ,pleaded that so far as the sum of ₹ 3,00,00,000/- is concerned, it is a loan to a third party and not to the partners and the same was also returned back to the company within a short span of 4 months and, therefore, this sum of ₹ 3,00,00,000/-- should not at all be considered as deemed dividend as the partners had not utilized the said loan for their personal purpose, nor the firm had used the funds for its business purposes. The company instead of giving the loan by itself has routed the loan through the firm as the partners are the shareholders of the company. According to the AR, in any view of the matter, the sum of ₹ 3,00,00,000/-may be exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s given to the assessee. 9. Now before us, assessee is aggrieved that ld. Commissioner of Income Tax (Appeals) did not delete the addition made u/s.2(22) (e) of the Act in toto. As against this, Department in its appeal is aggrieved on the relief of ₹ 3,00,00,000/- given by the ld. Commissioner of Income Tax (Appeals). 10. Ld. Authorised Representative assailing the order of the ld. Commissioner of Income Tax (Appeals) in so far as he sustained the addition to the extent of ₹ 4,54,00,000/- u/s. 2(22)(e) of the Act, submitted that the judgment of Hon ble Apex Court in the case of National Travel Services (supra), though it was in favour of the Revenue, the issue was still to be settled. According to him, preference ought have been given to the judgment of Hon ble Apex Court in the case of CIT vs. Madhur Housing and Development Co. (2018) 401 ITR 152. In any case, according to decision of ld. Commissioner of Income Tax (Appeals) to exclude a sum of ₹ 3,00,00,000/-, while making the addition could not be faulted. According to him, this amount was advanced by the assessee to Smt. Priya Rachel and there was no benefit to the partners. Thus, according to him, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd (2012) 340 ITR 14 and the judgment of their Lordship in Madhur Housing and Development Co. (supra). Here before us, admittedly, the shareholders were the same as the partners of the assessee firm and the facts are very similar to the one before Hon ble Apex Court in National Travel Services (supra). 14. Coming to the question of relief given to the assessee for the sum of ₹ 3,00,00,000/- given by the assessee firm to Smt. Priya Rachel, it is an admitted position that Smt. Priya Rachel was the wife of one of friends of a partners. Or in other words, assessee could not have advanced the loan of ₹ 3,00,00,000/-, if she was not closely related to one of the partners. No doubt, ld. Authorised Representative argued that such loan given to Sm. Priya Racherl did not individually benefit any partners or firm and hence Section 2(22) (e) of the Act would not apply. However, we are of the opinion that such a narrow definition to the word individual benefit cannot be given. The benefit will include direct or indirect things. Partner whose friend s wife received the advance had indirectly benefited from the advance received by the assessee from M/s. Symbiotic Infotech ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry of these accounts given by the ld. Commissioner of Income Tax (Appeals) at para 4.9 of his order is reproduced hereunder:- Sl. No Name of the partner Balance in the capital account (Cr) as on 12.11.2011 Balance in the current account (Dr) as on 12.11.2011 Net amount overdrawn (debit balance) as on 12.11.2011 1 Sri. T. Padmakumar (+)1,43,88,691 (-)1,92,84,246 (-)48,95,555 2 Sri. V. Sundramoorthy (+)1,45,48,495 (-)1,78,11,996 (-)32,63,502 3 Sri. J. Selvakumar (+)77,51,845 (-)1,66,61,996 (-)89,10,151 Total (+)3,66,89,031 (-)5,37,58,238 (-)1,70,69,208 Thus, according to the ld. Commissioner of Income Tax (Appeals) assessee need not have borrowed at least a sum of ₹ 1,70,69,208/- from the bank, if there was no net debit balance in the partners accounts. Or in other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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