TMI Blog2019 (2) TMI 286X X X X Extracts X X X X X X X X Extracts X X X X ..... e held to be prejudicial to the interest of the revenue. Accordingly, we are unable to sustain the order of the Pr.CIT passed u/s 263 and the order of the Pr.CIT passed u/s 263 is set aside and the order of the AO is restored.- Decided in favour of assessee. - I.T.A.No.267/Viz/2018 - - - Dated:- 1-2-2019 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER For The Appellant : Shri I.Kama Sastry, AR For The Respondent : Shri D.K.Sonowal,CIT DR ORDER PER D.S. SUNDER SINGH, Accountant Member: This appeal is filed by the assessee against the order of the Pr.Commissioner of Income Tax (Pr.CIT), Rajahmundry vide F.No.10263/Pr.CIT/RJY/2017-18 dated 28.03.2018 for the Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ga Hanuman Agro Oils Pvt Ltd. The said money of ₹ 1.50 crores was sourced from M/s Naga Hanuman Agro Oils Pvt Ltd ,through, the account of M/s Naga Hanuman Solvent Oils Pvt. Ltd., where the assesses is the Managing Director of M/s. Naga Hanuman Agro Oils Pvt Ltd holding 75% share and the said company has got accumulated profits to the extent of 1.08 crores as on 31.03.2013. The funds of ₹ 1.50 crores were flown from M/s Nagahanuman Agro Oils Pvt. Ltd. to the assessee through M/s Nagahanuman Solvent Oils Pvt Ltd to circumvent the provisions of sec. 2(22)(e). The Ld.Pr.CIT further observed from the share application account copy from the books of the assessee and found that the amounts of ₹ 1.50 crores and Rs. I crore have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Solvent Oils Pvt., Ltd. which is being conduit to circumvent the provisions of section 2(22)(e) of the Act. Therefore, held that the transaction attracts deemed dividend u/s 2(22)(e) of the Act, and the AO did not examine this issue, hence, held that the assessment order passed by the AO was erroneous and prejudicial to the interest of the revenue in view of the Explanation-2 to section 263 inserted by the Finance Act, 2015 w.e.f. 01.06.2015. Accordingly directed the AO to redo the assessment after giving opportunity to the assessee. 4. We have heard both the parties and perused the materials placed on record. In this case, the contention of the assessee is that there was no transfer of money or the payment made by Naga Hanuman Agro Oils ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions relating to purchases made by Nagahanuman Agro Oils Ltd., Nagahanuman Solvent Oils Ltd and Kanaka Durga Agro Oils Products (P) Ltd., and there were no transactions other than trade transactions as appearing from the account copies placed before us by the Ld.AR in the paper book. As per the balance sheet in the case of Nagahanuman Agro Oils Ltd., the opening reserve was only ₹ 50 lakhs and even it is presumed that the liabilities as loans, the addition should not be more than ₹ 50 lakhs U/S 2(22)(e) of the Act. However, as submitted by the Ld.AR, the trade liabilities were transferred to the assessee through journal entry and there was no passing of money or direct payment made by the company to the assessee. As per section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .08 crores. Thus, we find from the submission made by the assessee that the trade liabilities, obligation to make payments resulting into purchases were transferred to the assessee to improve the balance sheet appears to be correct. The assessee is not a shareholder in the Nagahanuman Solvent Oils Ltd. and Kanaka Durga Agro Oils Private Ltd., where from the funds were transferred. Though the liabilities were transferred from Nahahanuman Agro Oils Pvt. Ltd., through journal entries from Kanaka Durga Agro Oils Products (P) Ltd., and Nagahanuman Solvent Oils Ltd., it did not reduce any asset or reduce the accumulated profits and the assessee did not get any benefit out of the transfer of liabilities. The department has not made out any case to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing loan of ₹ 1,76,39,425 and further loan of ₹ 11,68,135advanced during the relevant financial year. This was merely an entry regarding the provision. No interest was actually received by AMPL. This amount which was not paid by the AMPL to the assessee cannot be treated as loan/advance paid by the AMPL to the assessee during the relevant previous year. The opening words any payment occurring in cl (e) of s. 2(22) of the Act contemplates actual payment made by the company to the assessee for being treated as a dividend in computing income of the assessee. Moreover, making of a provision for an interest which the assessee would ultimately be required to pay to the lender on the money lent cannot be regarded as a payment mad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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