TMI Blog2019 (3) TMI 1289X X X X Extracts X X X X X X X X Extracts X X X X ..... er And Shri O.P. Kant, Accountant Member For the Assessee : None For the Department : Shri B.S. Rajpurohit, Sr. DR Nidhi Srivastava, CIT(DR) ORDER PER O.P. KANT, A.M. These two appeals by the revenue are directed against two separate order dated 22nd January, 2016 passed by the Ld. CIT(A) 30 New Delhi for assessment years 2011-12 and 2012-13 respectively. Since issues involved in both the appeals are common arising out of identical set of facts, therefore, same were heard together and are being disposed off by way of this consolidated order for convenience Grounds of appeal in ITA No. 2034/Del/2016 for asstt. year 2011-12 are reproduced as under :- (a) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in arriving at the conclusion that the transaction in the client ledger account, are related to business activities. (b) On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by holding that recasting of ledger account of assessee in the books of JCSL and FNSL by the AO is not correct. (c) On the facts and in the circumstances of the case, the Ld. CIT(A) had erre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled verification of the facts has observed that these transactions were in the nature of the trade advance. As far as the share holding of the company in those companies is concerned, there is no dispute between the Revenue and the assessee. The only dispute is in respect whether the advances were in the nature of trade or not. The Ld.CIT(A) has noted that those companies were engaged in the brokerage of stock derivatives, currency and commodities etc. and the transactions of the assessee with those companies are in respect of dealing with shares, commodities, etc. Relevant finding of the Ld. CIT(A) on the issue in dispute are reproduced are as under :- 8.3 Findings: The findings are as under: 8.4 I have carefully considered the assessment order, written submissions, case laws relied upon and oral arguments of the Ld. AR. The A.O. in the assessment order, has made an addition of ₹ 7,88,99,522/- u/s 2(22)( e), for the following reasons: (i) The companies namely M/s Jaypee Capital Services Pvt. Ltd.(JCPL), M/s Futurz Next Services Ltd.(FNSL) and M/s Gen X Commodities Ltd.(GCL), are closely held companies, in which assessee has substantial share holding. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the appellant. The A.O., while recasting the account, has picked up the figure of payments made by the 2 companies during the year and the negative balance appearing after the payments. Lower of the two figures i.e. amount paid by the companies and the negative balance appearing after the payment, has been taken as the deemed dividend by the A.O. The A.O. has adopted pick and choose, whereby he picked up only the transactions relating to purchase and sale of share / currency / derivatives /commodities . (b) Both the above alleged accounts extracted by the special auditor and A.O., did not take into consideration, the business transactions entered into by the appellant/concern with these companies. This fact is evident from the amount of ₹ 7,43,00,000/-, computed by the A.O. in the case of JCPL and ₹ 45,99,522/-, in the case of FNSL on the basis of alleged re-casted copy of account, as against the actual copy of account maintained in the books of accounts of these 2 companies. (c) It has been further submitted that the even alleged account prepared by the special auditor, which has not been followed by the A.O. and has prepared another account. The A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns/advances, as to cover the same within the provisions of section 2(22)( e). (b) The 2 companies JCPL and FNSL are the registered stock, derivative, currency and commodities brokers. The JCPL deals in stock, currency and derivatives on NSE, BSE, USE and MCX Sx and the FNSL, deals in commodities on NCDEX and MCX. The transactions entered by the said companies with appellant and group concerns are related to their business only. The appellant and the group concerns, maintain client account with these 2 companies, where in large number of share / currency / derivatives / commodities trading transactions, has taken place in the year under consideration. These transactions are nowhere prohibited under any existing law and not covered u/s 2(22)(e) of the act. (c) The transactions entered into are in the regular course of business and it is not a case where it has been alleged by the A.O. that transactions of sale/purchase of share / currency / derivatives / commodities, are not genuine. In fact, these purchase and sale transactions, have not even doubted by the special auditor in the audit report as well as by the A.O. in assessment order. The special auditor and A.O. has re-c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra). This Court in Raj Kumar's case (supra) extensively referred to the report of the Taxation Enquiry Commission and the speech of the Finance Minister in the Budget while introducing the Finance Bill Ultimately, this Court in the said judgment held as under: 10.3 A bare reading of the recommendations of the Commission and the Speech of the then Finance Minister would show that the purpose of insertion of clause (e) to section 2(6A) in the 1922 Act was to bring within the tax net monies paid by closely held companies to their principal shareholders in the guise of loans and advances to avoid payment of tax. 10.4 Therefore, if the said background is kept in mind, it is clear that sub-clause (e) of section 2(22) of the Act, which is pari materia with clause (e) of section 2(6A) of the 1922 Act, plainly seeks to bring within the tax net accumulated profits which are distributed by closely held companies to its shareholders in the form of loans. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding the payment of taxes by having these companies pay or distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound is consequential in nature. Accordingly, A.O. is directed to charge interest u/s 234A, 234B, 234C and 234D as per provision of the Act, on total income after giving effect to this order. Therefore, for statistical purposes, ground no. 15, is treated as allowed. 10. In the result, the appeal is partly allowed. 5. The Ld. CIT(A) has observed that the transactions in the ledger account of the assessee are in regular course of the business of purchase and sales of the shares/currency/derivatives/commodities etc. The Ld. DR could not controvert the above factual findings of the Ld. CIT(A) before us. In view of the above facts, the Ld. CIT(A) is justified in holding that the transactions between the assessee and those companies are in the nature of trading transactions which are beyond the ambit of deemed dividend in view of the decisions of the Hon ble Jurisdictional High Court in the case of CIT vs. Creative Dyeing Printing (P.) Ltd. (Supra). The Ld. CIT(A) has followed the above decision of the Hon ble Delhi High Court. In our opinion, the Ld. CIT(A) has not committed any error in following the above decision of the Hon ble Delhi High Court. Accordingly, we uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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