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TMI Blog2021 (5) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2018 was not considered. Soft copy of which was also provided on 28.09.2018 through email. 2. On the facts and circumstances of the case and applicable law, Ld. CIT(A)-III, Indore erred in sustaining the addition of Rs. 7,00,000/- by applying the provisions of section 2(22)(e) in respect of the inter company loan transaction between M.L. Securities and Finance Private Limited and Vinay Securities Private Limited. 3. On the facts and circumstances of the case and applicable law, Ld. CIT(A)-III, Indore erred in sustaining the addition of Rs. 7,00,000/- by applying the provisions of section 2(22)(e) without reference to any incriminating material found in this respect during the course of search proceedings conducted in the case of the assessee as well as in the case of M.L. Securities and Finance Private Limited and Vinay Securities Private Limited. 4. On the facts and circumstances of the case and applicable law, Ld. CIT(A)-III, Indore erred in not considering facts of the case in properperspective. 5. On the facts and circumstances of the case and applicable law, Ld. CIT(A)-III, Indore erred in sustaining addition made by Ld. A.O of Rs. 7,00,000/- by applying provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound of appeal. 3. Brief facts of the case as culled out from the records are that the assessee is an individual deriving income from salary in Shakti Pumps (India) Ltd and other income of interest on his investments etc. Return of income u/s 139(1) of the Act for Assessment Year 2015-16 was filed on 04.04.2016 at Rs. 4,47,20/- and for Assessment Year 2016-17 return of income was filed on 27.08.2017 declaring income of Rs. 4,98,130/-. Search & seizure operations u/s 132 of the Act was carried out on the business as well as residential premises of the Shakti Pumps Groups including the assessee along with other concerns/business associates on 21.01.2016. The warrant of authorization u/s 132 of the Act was issued in the name of the assessee also. Notices u/s 153A were issued to the assessee for Assessment Year 2015-16 on 23.01.2017. Assessee filed its return of income for Assessment Year 2015-16 at Rs. 4,47,020/- as was disclosed u/s 139(1) of the Act. For Assessment Year 2016-17 notices u/s 143(2) and 142(1) of the Act were served upon the assessee. Assessments u/s 143(3) r.w.s. 153A for Assessment Year 2015-16 completed at Rs. 12,24,220/- after disallowance u/s 10(13A) at Rs. 77,20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect clause of the two companies in their respective Memorandum of Association evidently describes the nature of business of these companies. [PS 99- 100, 54, 102] MLSF utilized the borrowed funds for the purpose of its business and in no way assessee enjoyed any benefits out of it or received any part of it in his hands. [PS 120] More importantly, in AY 2015-16, the amount of loan was repaid by MLSF to VSPL. [PS 43] Further, in AY 2016-17, fresh loan of Rs. 7,00,000 was obtained by MLSF from VSPL. Interest was charged for Rs. 28,273 which was reported as income by VSPL in its regular return of income. This interest was claimed as an expense by MLSF in its audited Profit and Loss account. [PS 44] For both, VSPL and MLSF, interest amount has been accepted as income and expense, in their assessments, respectively, AO being common to all the three persons involved in the case under consideration, viz. assessee, VSPL and MLSF. 6.CSDT in its circular no. 19/2017 dated 12.06.2017 titled as 'CSDTIS CLARIFICATIONS ON SETTLED VIEW OF SECTION 2(22)(e) OF SAID ACT ON TRADE ADVANCES/COMMERCIAL TRANSACTIONS' deals with treatment of loans and advances in the nature of commercial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts by way of loans or advances to shareholders having substantial interest in a company to the extent to which the company possesses accumulated profits is treated as dividend. The shareholders having substantial interest are those who have a shareholding carrying not less than 20 per cent voting power as per the provisions of clause (32) of section 2. The amendment of the definition extends its application to payment made (i) to a shareholder holding not less than 10 per cent of the voting power, or (ii) to a concern in which the shareholder has substantial interest. "Concern" as per the newly inserted Explanation 3(a) to section 2(22) means a HUF or a firm or an association of persons or a body of individuals or a company. A shareholder having a substantial interest in a concern as per part (b) of Explanation 3 is deemed to be one who is beneficially entitled to not less than 20 per cent of the income of such concern 10.3 The new provision would, therefore, be applicable in a case where a shareholder has 10 per cent or more of the equity capital. Further, deemed dividend would be taxed in the hands of a concern where all the following conditions are satisfied. (i) where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words used in the statute are, on their own terms, ambivalent and do not manifest the intention of the Legislature 13.Ld. CIT(A) relied on the decision of Hon'ble Supreme Court in the case of National Travel Services (supra) by stating that a 'sharehotder' has only to be a person who is beneficial owner of shares, he need not necessarily be a registered shareholder. [PB 148-149] Ld. CIT(A) stated that the Hon'ble Supreme Court took the view that the case of Ankitech (P.) Ltd. requires to be reconsidered and referred the matter to a larger Bench. [AY 2015-16, CIT(A) order page 8 para 4.2] In view of above, the appeal of the assessee was dismissed. Present controversy is not on the above stated issue of beneficial and registered shareholding. Dismissal of appeal of the assessee on the reference of Ankitech (P.) Ltd. (supra) decision to larger Bench is grossly on incorrect premise. Reference to the larger Bench is on the issue of beneficial and registered shareholding. Finding given on the fact of 'amounts advanced for business transaction' holds good, in favor of the assessee. 14.ln the decision of National Travel Services (supra), the Hon'ble S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference to any incriminating material found during the course of search in this respect which in fact relates to AY 2014-15. [PS 34] Considering the above facts and circumstances of the case, submissions and documents on record, applicable law and judicial precedents, the assessee submits before your Honor to delete the additions made Ld. AD in the two years under consideration. 6. Per contra Ld. Departmental Representative vehemently argued supporting order of both the lower authorities. 7. We have heard rival contentions and perused the records placed before us. First common issue raised for Assessment Year 2015-16 and Assessment Year 2016-17 relates to the addition for deemed dividend made u/s 2(22)(e) of the Act at Rs. 7 lakh each for both the assessment years in respect of corporate loan received by M.L. Securities and Finance Pvt. Ltd (In short 'MLSF') from Vinay Securities Pvt. Ltd (In short 'VSPL'). We observe that the assessee is having 50% and 20% share holding in VSPL & MLSF and this fact is not disputed. Amount is not received by the assessee in his individual name. The alleged transaction is between the two companies having common share holder having substantial i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the member or partner of the concern is also beneficially entitled to 20 per cent of the income of such concern. [As defined in Explanation 3(b) to section 2(22)(e)] 9. On the other hand the contention of Ld. Counsel for the assessee is that the alleged transaction of Rs. 7 lakhs received by MLSF from VSPL is in the nature of an advance or loan received in the ordinary course of business wherein the lending of money is the substantial part of the company. To examine the facts of the case we observe that MLFS is a registered non banking finance company and is engaged in the finance business. Another concern namely VSPL is also having the object of investing finance as mentioned in the main object of this company in the Memorandum of Association placed at Page 54 of the paper book. On perusal of the ledger account of MLFS in the books of VSPL placed at 45 & 46 of the Paper Book shows that there are continuous transaction between these two concerns since Financial Year 2009-10. On 25.3.2015 the account got settled as MLFS paid the total outstanding amount of Rs. 20,25,000/- to VSPL. Working of utilisation of funds received from MLFS from VSPL are also depicted at page 120 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee by his employer to meet expenditure actually incurred On payment of rent (by whatever name called) in respect of residential accommodation occupied by the assessee, to such extent as may be prescribed having regard to the area or place in which such accommodation is situate and other relevant considerations. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply in a case where- (a) the residential accommodation occupied by the assessee is owned by him; or (b) the assessee has not actually incurred expenditure onpayment of rent (by whatever name called) in respect of the residential accommodation occupied by him; 12. The above provision clearly says that assessee is not entitled to exemption u/s 10(13A) of the Act if the residential accommodation occupied by the assessee is owned by him or the assessee has not actually incurred the expenditure for payment of rent. In the instant case no evidence has been brought on record to show that the assessee had paid House Rent during the year. Under the given facts and circumstances of the case, we find no reason to interfere in the finding of Ld. CIT(A) and confirm the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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