TMI Blog2021 (12) TMI 1335X X X X Extracts X X X X X X X X Extracts X X X X ..... at this appellate stage. Accordingly, we affirm the finding of the CIT(A) on this issue and decide these issues in favour of the assessee against the revenue. - I.T.A. No.1003/Mum/2020 - - - Dated:- 21-12-2021 - SHRI M. BALAGANESH, AM AND SHRI AMARJIT SINGH, JM For the Revenue : Dr. Yogesh Kamat (DR) For the Assessee : Ms. Ritu Kishor ORDER PER AMARJIT SINGH, JM: The revenue has filed the present appeal against the order dated 18.11.2019 passed by the Commissioner of Income Tax (Appeals) -51 Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2012-13. 2. The revenue has raised the following grounds: - 1. Whether on the facts and circumstances of the case the Ld. CIT(A) was correct in law in deleting the addition of ₹ 1,62,20,313/- made on account of deemed dividend by holding that the provisions of the Section 2(22)(e) are not applicable when the transactions of loans/advances are made through journal entries even when the loans/advances were reflected in the balance sheets of the respective companies.? 2. Whether on the facts and circumstances of the case the ld. CIT(A) was correct in law in directing the AO to verify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l income of ₹ 2,16,52,0081-. Notices u/s. 143(2) and 142(1) were issued and duly served on the assessee. During the course of assessment proceedings, the AO asked the assessee to show cause as to why the provisions of sec 2(22)(e) should not be invoked in respect of the said loans given by M/s WWIL/EIL to the said 6 related concerns for an aggregate amount of ₹ 1,64,85,313/- and taxed in his hands. In response, the assessee contended that he was not the recipient of loan from MIs VVINIL/EIL and therefore the question of invoking the provisions of sec 2(22)(e) in his hands, would not arise. Considering the complexity of the matter, directions u/s. 144A of the Addl. CIT. CR-3, Mumbai were sought by the AO. The Addl. CIT directed the AO to invoke the provisions of Sec. 2(22)(e) and make additions on substantive basis in the hands of the shareholders viz the assessee and his mother, Sudarshan Mehra on a proportionate basis and also make addition on protective basis in the hands of the said 6 related concerns, the recipients of the loans. Following the directions of the Addl. CIT, CR-3, the AO made an addition of ₹ 1,60,50,281/-as deemed dividend on substantive basis i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22)(e) were enacted which, however, restricted the amount to be taxed as deemed dividend to the extent of the accumulated profits since, dividend is paid only out of the accumulated profits. 6.6 In submissions filed, it has been explained by the assessee that Wind World India Ltd. sells windmills including the plot of land on which the windmills are erected, to the buyers of windmills. It has further been submitted that due to restrictions on holding of land beyond a particular limit in the case of individual companies, Wind World India Ltd., buys land in the name of its other group companies including M/s. Enercon Wind Farms (Andhrapradesh) P Ltd., M/s Enercon Wind Farms (Kerala) P Ltd , M/s Enercon Wind Farms (Maharashtra) P Ltd , M/s Enercon Wind Farms (Tamil Nadu) P Ltd, M/s.Enercon Wind Farms (Uttar Pradesh) P Ltd., M/s Enercon Wind Farms (Gujarat) P Ltd. and also pays the entire cost of acquiring the land and related costs on behalf of these other group companies. From the submissions, it can be observed that the transaction being shown by the said 6 group companies to be advance received on account of purchase/sale of land is not an actual business transaction but has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lent to the assessee only a sum of ₹ 11,68,135/- in two instalments, namely ₹ 6,00,000/- on 10.9.1996 and ₹ 5,68,135/- on 31.3.1997. The opening balance of ₹ 1,76,39,425/- was not advanced by AMPL to the assessee during the relevant previous year and could, therefore, be not treated as the amount of loan or advance received by the assessee during the relevant previous year. The said amount, therefore, could not be included as the dividend (hereinafter, referred to as the deemed dividend ) under clause (e) of Section 2(22) of the Act. The amount of ₹ 32,13,367/- represented the provision for the interest which was to be paid by the assessee to AMPL on the old outstanding loan of ₹ 1,76,39,425/- and further loan of ₹ 11,68, 135/- advanced 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 a loan/advance paid by the AMPL to the assessee during the relevant previous year. The opening words any payment occurring in clause e of Section 2(22) of the Act contemplates actual payment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder so as to attract the said provision. Some light is thrown by the provision in section 205(5) of the Companies Act 1956 which provides that no dividend shall be able except in cash the only exception being the issue of fully said us bonus shares or the payment towards unsaid call monies on an shares held by the members. In this instant case, the sum of ₹ 1,65,000 could not be treated as an advance, for it was not an amount paid towards any other amount due by the company to the assessee-family. The only question then was whether the said sum represented the payment by way of loan by the company to the assessee-family. Having regard to the setting in which the said clause (e) of section 2(6A) occurs, it was not possible to say that the payment contemplated would include a notional payment by way of book entries. 6.8 Similarly, the Hon‟ble Madras High Court in the case of Smt. Savithiri Sam (236 ITR 1003) has held that by way of creating a fiction, dividend has been made to include payments of the nature of loan and advance and therefore, creating another fiction in respect of the words payment by the company to construe that even a transfer entry amounts to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of installing wind Mills and sales thereof. In order to install the windmills it needs land. The Wind Word (India) Ltd. purchases land in the name of these related companies in order to overcome the land ceiling conditions imposed by Land Ceiling Act in vogue in various States. For the said purpose, The Wind Word (India) Ltd. advances loans to these companies and thereafter the necessary adjustments are made upon purchase of land. We note that the Wind Word (India) Ltd. has to buy land in the name of related entities/companies and it is only that purpose the loans were advanced to the related companies. In our opinion the money was advanced out of business and commercial consideration and therefore not covered by the provisions of section 2(22)(e) of the Act. The case of the assessee is supported by the following decisions namely (i) Chandrashekhar Maruti vs. ACIT ITA No.5410/Mum/2012 47 CCH 0783, 183 TTJ 0459, (ii). Ackruti City Ltd. vs. DCIT [ITA No. 4869/Mum/2009(iii)CIT vs. Suraj Dev Dada [(2014) 46 taxmann.com 402 (Punjab Haryana)]. In the case of Chandrasekhar Maruti vs. ACIT (supra) the coordinate bench of the Tribunal has held that where there is a running account betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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