TMI Blog2020 (3) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... of both the appeals by way of common order. 2. In ITA No. 2302/Ahd/2017, the assessee has taken following grounds of appeal: 1.Ld. CIT (A) erred in law and on facts confirming addition made by AO of ₹ 83, 00, 000/- security deposit received from the user of the property in the year of agreement u/s 2(22)(e) of the Act. Ld. CIT (A) ought to have deleted addition when amount taken is not a loan but security deposit. Ld. 2.Ld. CIT (A) erred in law and on facts to hold that the appellant received an amount of ₹ 83, 00, OOO/- in the form of loans/ advances from PASPL. 3.Ld. CIT (A) erred in law and on facts in holding receipt of ₹ 83,00, 000/- as deemed dividend on the basis of the appellant being a shareholder of a company advancing the amount secondly in absence of any business being transacted between the two entities. 4.Ld. CIT (A) erred in law and on facts confirming addition made by AO not appreciating the fact that there is no applicability of Sec 2 (22)(e) of the Act without there being any transaction of security deposit with the user of the property during the year under consideration. 5.Ld. CIT (A) erred in law and on facts conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also has a sister concern, which is a Private Limited Company known as M/s Atul Generators Pvt. Ltd. 3.The assessee was incurring heavy losses. On the other hand, the sister concern was unable to utilise the natural gas that was being supplied by M/s Gas Authority of India Limited (hereinafter referred to as GAIL ) under a contract wherein the sister concern was under an obligation to obtain 80% of the quantity of gas as a minimum guarantee. The assessee had generators worth ₹ 93 lacs for the purpose of generating power, but had no gas. Accordingly, an agreement was executed between the assessee and its sister concern whereby generators were supplied by the assessee for which a floating security deposit of ₹ 80 lacs was given by the sister concern. In this agreement, the sister concern was to use the generators and generate electricity on the basis of the gas supplied by the GAIL. In return, the sister concern would supply electricity to the assessee at concessional rate. The deposit was made by the sister concern to the assessee in the ordinary course of business. The assessee firm is not a shareholder in the Company though its partners are shareholders in the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 (22) dividend includes (e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) [made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; (ii) any advance or loan made to a shareholder [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company; From a perusal of the aforesaid provision dividend includes any payment by a Company by way o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the said amount given by the sister concern was a security deposit and not a loan or an advance. The finding arrived at by the Tribunal is a finding of fact based on appreciation of evidence, which has not been doubted by the appellant. 11.The only ground urged that since the partners of the assessee firm had worked as shareholders in the Company and had a substantial interest, such deposit of loan was by way of diversion of the profits of the Company and, therefore, such deposit has to be treated as a deemed dividend under Section 2(22)(e) of the Act, in view of the ratio laid down in Commissioner of Income Tax vs. Sunil Chopra, (2011)201 Taxman 316(Delhi), Commissioner of Income Tax vs. National Travel Services, (2011)202 Taxman 327(Delhi), P.K.Badiani vs. Commissioner of Income Tax, I.T.R. 105 (SC)642, Sadhana Textiles Mills Pvt. Ltd. vs. Commissioner of Income Tax, I.T.R.188 (Bombay High Court) 318, M.D.Jindal vs. Commissioner of Income Tax, I.T.R. 164(Calcutta High Court)28, Commissioner of Income Tax vs. P.K.Abubucker, I.T.R. 259 (Madras High Court)507, Commissioner of Income Tax, Andhara Pradesh vs. C.P. Sarathy Mudaliar, I.T.R. 83 (S.C.)170. We find that the af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f fact, which is based on the appreciation of evidence. 16.Consequently, we find that the order of the Tribunal does not suffer from any manifest error of law. No substantial question of law arises for consideration. 17.The appeal fails and is dismissed. 7. Apart from that ld. A.R. also cited a Board Circular No. 19/2017 dated 12.06.2017 wherein it is held that some trade advances/commercial transactions held to be not covered under section 2(22)(e) of the Act are as follows: i. Advances were made by a company to a sister concern and adjusted against the dues for job work done by the sister concern. It was held that amounts advanced for business transactions do not to fall within the definition of deemed dividend under section 2(22) (e) of the Act. (CIT v.Creative Dyeing Printing Pvt. Ltd. , Delhi High Court). ii. Advance was made by a company to its shareholder to install plant and machinery at the shareholder's premises to enable him to do job work for the company so that the company could fulfill an export order. It was held that as the assessee proved business expediency, the advance was not covered by section 2(22)(e) of the Act. (CITv. AmrikSingh, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and circumstances are similar to aforesaid judgments and assessee has taken ₹ 83,00,000/- security deposits from his sister concern. In our considered opinion, same will not be covered under section 2(22)(e) of the Act and we hold advances were given for business purpose only. 10. In the result, appeal filed by the Assessee is allowed. 11. Now we come to ITA No. 2366/Ahd/2017 Revenue s appeal, the revenue has taken following grounds of appeal: 1. The Ld.CIT(A) has erred in law and on facts by deleting the addition of income of ₹ 84,88,368/- from industrial Shed 'A' 'B' under the head house property income taking ALV @ 8.5% of the cost of the building let out by the assessee instead of calculating ALV on the Fair Market Value basis as per Section 23(1) (a) of the Act. 2. The Ld.CIT(A) has erred in law and on facts by not taking cognizance of AO's observation on this issue and placing reliance on the Hon'ble Gujafat High Court's decision in the case of M/s. Sakarlal Balabhai which is based on different facts. 3. The Ld.CIT(A) has erred in law and on facts by deleting the addition of ₹ 87,687/- made u/s 14A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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