TMI Blog2021 (10) TMI 1107X X X X Extracts X X X X X X X X Extracts X X X X ..... hat is required to be seen is whether CAPL has advanced moneys as pure loan amounts or for business purposes. The agreements produced by the assessee before Ld CIT(A), which were also confronted with the AO, would prove that the transactions entered between the parties are business transactions. The Ld A.R also submitted that both the companies are maintaining accounts as running accounts only and real estate investment activity was agreed to be a continuous activity. Hence the question of making one to one reconciliation, as contended by Ld DR. would not arise in these types of transactions. Accordingly, we confirm the order of Ld CIT(A) in deleting the additions made u/s 2(22)(e) of the Act in all the three years under consideration. Protective addition of undisclosed income in the hands of the assessee - When the sources stood explained, the question of making any addition on substantive basis or protective basis does not arise. Accordingly, we do not find any infirmity in the order of Ld CIT(A) in deleting the additions made on protective basis in all the three years. - Assessee appeal allowed. - ITA Nos.72 to 74/Bang/2018, C.O. Nos.65 & 66/Bang/2018 (Arising out of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share holder in M/s Cauvery Acqua Pvt. Ltd and also substantial share holding in M/s Brindavan Beverage Pvt. Ltd. 4) Whether on the facts and the circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of ₹ 81,76,829/- without appreciating the provisions of section 2(22)(e) of the I.T. Act, there is no distinction between an advance and a business advance. The section is akin to provisions of section 40A(2)(b) wherein a nexus for benefit is deemed. The parameters once fulfilled, there is no escape from tax liability. 5) On the second issue, addition of ₹ 1,74,00,000/- towards unexplained investment, whether the decision of Hon'ble High Court of Gujarat in 140ITR517, is not squarely applicable? 3. The facts relating to the case are stated in brief. The assessee is one of the Directors in M/s. Brindavan Beverages Pvt. Ltd. (BBPL) and also in M/s. Cauveri Aqua Pvt. Ltd. (CAPL). A search u/s 132 of the Act was carried out in the hands of the assessee and other group concerns on 18.12.2012. Consequently, assessments of the three assessment years under consideration were completed by the A.O. u/s 143(3) r.w.s. 153A of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions are business transactions and accordingly, deleted the additions made u/s 2(22)(e) of the Act in all the 3 years under consideration. The revenue is aggrieved. 8. It is pertinent to note that the AO had made additions u/s 2(22)(e) of the Act in AY 2007-08, 2008-09, 2010-11 to 2013-14. The Ld CIT(A) had deleted the additions in all the six years. We are concerned hereunder with the appeals filed by the revenue for AY 2011-12 to 2013-14. 9.The Ld D.R submitted that M/s CAPL has given loans to BBPL in various years and the aggregate amount of loans so given from AY 2007-08 to 2013-14 was ₹ 13.84 crores. The assessee had placed reliance on assignment agreements dated 28-03-2015 for sale of undivided interest in land and built up space, as per which properties worth ₹ 13.64 crores were assigned in favour of CAPL by BBPL. Accordingly, the Ld CIT(A) has granted relief to the assessee. The Ld D.R submitted that a close perusal of the assignment agreements would show that the facts are not as claimed by the assessee before Ld CIT(A). She submitted that the CAPL got following properties as per assignment agreements:- Construction Agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, BBPL has assigned property value of ₹ 13.64 crores to CAPL. Hence, M/s. CAPL has obtained properties almost equal to the amount advanced by it from assessment years 2007-08 to 2013-14. These facts prove that both the companies have joined together to carrying business activities of making investment in real estate activities. Finally, CAPL was given properties almost equal to the investments made. Accordingly, the Ld A.R submitted that the AO was not correct in considering these transactions as loan transactions. He submitted that the Ld CIT(A) has correctly appreciated these transactions as business transactions. Accordingly, he submitted that the order passed by Ld CIT(A) on this issue does not call for any interference in all the three years. 12. The Ld. A.R. further submitted that the A.O., in the grounds of appeal filed by the revenue, has taken a contention that there is no distinction between an advance and business advance . He submitted this contention is contrary to the provisions of section 2(22)(e) of the Act and also the decisions rendered by jurisdictional Karnataka High Court. 13. We heard the parties and perused the record. There is no di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the AO, would prove that the transactions entered between the parties are business transactions. The Ld A.R also submitted that both the companies are maintaining accounts as running accounts only and real estate investment activity was agreed to be a continuous activity. Hence the question of making one to one reconciliation, as contended by Ld DR. would not arise in these types of transactions. 16. At this juncture, we feel it pertinent to extract the order passed by Ld. CIT(A) in this regard:- 7.4 I considered the submissions made and materials on record. The contention of the appellant is that the deemed dividend cannot be assessed for the assessment years 2007-08, 2008-09, 2010-11 2011-12 because it was not based on any materials found at the time of search and these assessments had not abated on the date of search. The second contention of the appellant is that the advance paid by M/s. Cauvery Aqua Pvt. Ltd., to M/s. Brindavan Beverages Pvt. Ltd., is not a loan or advance since it was given in connection with property investments to be made after termination of the distribution business between the 2 companies when an amount of ₹ 1,97,11,809/-was d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our of business transaction to a loan advanced very convincing. 7.7The appellant has produced before me two assignment agreements dated 28.03.2015 by which M/s. Brindavan Beverages Pvt. Ltd., has assigned its rights in the purchase agreement with Embassy Group in respect of undivided interest in land as well as construction of the apartment no. 5211 in the project of Embassy Group called Embassy Lake Terraces . This assignment agreement is also endorsed by M/s. Embassy Group who has signed as consenting witness . This document was produced to substantiate the claim that there was an agreement between the companies to acquire real estate properties as per the agreement dated 14.11.2005 entered earlier. Since the said document has been executed on 28.03.2015 and very close to the assessment order dated 30.03.2015, the prayer of the appellant for admission of the same under Rule 46A of the I.T.Rules is considered. No specific objection has also been raised by the A.O. for admission of this additional evidence. 7.8 Taking into consideration the materials on record, I hold that The appellant has been able to establish that the amounts advanced by M/s. Cauvery Aqua Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erest. In other words the loan advanced generally on payment of interest. In other words the loan advance has to be repaid with interest. In the case of an advance also, the element of repayment is there but such a repayment may be with interest or without interest. Therefore, when the said two words are used in the aforesaid provision with the purpose of levying tax, if the intention of such advance or loan is to avoid payment of dividend distribution tax under s. 115-0 of the Act, such a payment by a company certainly constitutes a deemed dividend But if such a payment is made firstly not out of accumulated profits and secondly even if it is out of accumulated profits but as trade advance as a consideration for the goods received or for purchase of a capital asset which indirectly would benefit the company advancing the loan, such advance cannot be brought within the word 'advance used in the aforesaid provisions. The trade advance which is in the nature of money transacted to give effect to commercial transactions would not fall within the ambit of the provisions of s.2(22)(e) of the Act . 7.10 Respectfully following the judgment of the Hon'ble Jurisdictional Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue is aggrieved. 20. We heard the parties on this issue and perused the record. We notice that this bench of Tribunal has confirmed the order of Ld CIT(A) in deleting the additions made on substantive basis in the hands of Cauvery Aqua P Ltd in AY 2011-12 and 2012-13, vide its order dated 11.10.2021 passed in ITA Nos.67 68/Bang/2018. This bench has accepted the findings of Ld CIT(A) that all the transactions have been routed through the books of account and hence the question of making any addition does not arise. For AY 2013-14 also, the Tribunal has confirmed the order of Ld CIT(A) in deleting the addition in the hands of CAPL, vide Corrigendum dated 22-10-2021 issued in IT(TP)A No.27/Bang/2017. Accordingly, when the sources stood explained, the question of making any addition on substantive basis or protective basis does not arise. Accordingly, we do not find any infirmity in the order of Ld CIT(A) in deleting the additions made on protective basis in all the three years. 21. We shall now take up the cross objections filed by the assessee for AY 2011-12 and 2012-13. At the time of hearing, the Ld A.R did not press the cross objections. Accordingly, the cross ..... X X X X Extracts X X X X X X X X Extracts X X X X
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