9911796707
TMI Blog2022 (7) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... on Vs. Mst. Katijoi & Ors. (1987) 167 ITR 471 (SC) to condone the impugned delay. This main appeal is taken up for adjudication on merits. 3. We now advert to the assessee's pleadings of all these years to note that its former twin appeals IT(SS)A 06 & 07/Pun/2017 raise an identical issue of correctness of Section 2(22)(e) deemed dividend addition(s) of Rs.60,92,388/- and Rs.1,08,07,866/; respectively. The CIT(A)'s common detailed discussion affirming the impugned addition to this effect reads as under: - "5. Vide ground No.2, the appellant has contended that the AO erred in invoking the provisions of section 2(22)(e) *in relation to extra payment towards sale price of Rs.,1,19,27,086/- on the, ground that the sum paid did not have any attribute ,of loan and only advances having the attributes of loan are hit by the provisions of section 2(22)(e) and not business advances allowed against value. The AO in the impugned assessment order has dealt with issue in para 06.7 of his assessment order as under : 06.7 Without prejudice to this fact, the assessee is having 34% shareholding in the company. Therefore even at any stage if assessee takes the stand that this advances on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT, Delhi "C‟ Bench, in the case of Gomti Exim Pvt. Ltd. (Page Nos 59 to 62) has held that such advance is not liable to be considered as deemed dividend u/s 2(22)(e). In this context following observations of the Calcutta High Court in the case of Pradip Kumar Malhotra v/s CIT, at Page Nos. 12 & 13 thereof (Page Nos. 63 to 69) also need to be noted - "After hearing the learned Counsel for the parties and after going through the aforesaid provisions of the Act, we are of the opinion that the. phrase "by way of advance or loan" appearing in sub-section (e) must be construed to mean those advances or loans which a share holder enjoys for simply on account of 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; but if such loan or advance is given to such share holder as a consequence of any further consideration, which is beneficial to the company received from such a share holder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, for gratuitous loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of provisions of Section 2(22)(e) of the Act. Having held otherwise, the said judgments of the Supreme Court, in our view, will have no applicability to the facts of the instant case. 12. In view of the above, the question of law as framed by us is answered in favour of the assessee and against the Revenue. We hold that trade advance does not fall with in the ambit of the provisions of Section 2(22)(e) of the Act. Resultantly, the appeal is dismissed. There shall be, however, no order as to costs." (emphasis supplied) Thus, the advances received from the company against land under development agreement, by owner of it as owner thereof; cannot be said to be hit by the provisions of sec. 2(22)(e) & the A.O. erred in alternatively holding that, the advances paid to appellant by JREPL, in excess of entitlement, constituted dividend income u/s 2(22,)(e). In this connection, reliance is also placed, on the Bombay High Court, decision in the case of CIT vs Nagindas M. Kapadia (1989) 177 ITR 393 (Page Nos 74). 4,6. Alternatively and without prejudice to above claim, appellant would like to submit that, if at all such deemed dividend income was to be assessed in the hands of appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us year. Similarly, there can be income from other sources also such as receipt of or dividend income or interest which may not have to wait for determination at the end of the year. Similarly, some subsidy may be received from the Government which may be taxable on receipt basis. Such income shall also have to be taken into account in determining the accumulated profits as it has not to wait for determination of income at the dose of the year." From the above decision of the ITAT it is evident that, the A.O. erred in including current year's business profits of JREPL in the accumulated profits for determination of the quantum of deemed dividend taxable in the hands of appellant. Therefore, it is prayed to exclude current year's income from the determination of the amount of accumulated profits, as it consisted of business income. Further, such accumulated profits belonged to all shareholders. Appellant's share in such accumulated profits, in law, was restricted to the extent of his share holding i.e. to 34%. Accordingly, at the most, as already submitted, deemed dividend could have been assessed at Rs.15,76,497/- in the hands of appellant, as against Rs.1,19,27,086/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. While disposing off Ground No. 2 of this appeal, it has been held vide paras 4.2 to 4.5 that amount received were not in nature of business receipts as amount to the extent of .entitlement under the Development Agreement accrued to the appellant under mercantile system of accounting followed by the appellant. Therefore, alternative addition made by the AO u/s 2(22)(e) is required to be adjudicated. Ledger account of the Company M/s. JREPL in the books of appellant for the year under consideration is produced below: MANOJ JAIKUMAR TIBREWALA JAIKUMAR REAL ESTATES PVT. LTD. Ledger Account 1-April-2011 to 31-March-2012 Date Particulars Vch Type Vch No. Debit Credit 8-4-2911 Cr Union Bank CC A/C 75004 CHQ No. 41110367 BANK PAYMENT BANK PAYMENT/9 25,000.00 17-5-2011 Cr Union Bank CC A/C 75004 CHQ No. 41110415 BANK PAYMENT BANK PAYMENT/59 25,00,000.00 7-7-2011 Cr Union Bank CC A/C 75004 CHQ No. 41116169 BANK PAYMENT BANK PAYMENT/131 25,000.00 16-82011 Cr Union Bank CC A/C 75004 CHQ No. 41116277 BANK PAYMENT BANK PAYMENT/189 2,50,000.00 29-8-2011 Cr Union Bank CC A/C 75004 CHQ No. 41116289 BANK PAYMENT BANK ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 1-3-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/0708/146 5,00,000.00 5-3-2012 Dr (as per details) Union Bank CC A/C 75004 Bank Charges online tr. BANK RECEIPT BANK RECEIPT/0708/150 30,62,000.00 15-3-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/0708/151 58,02,708.00 21-3-2012 Dr Union Bank CC A/C 75004 CH NO. 02079568 TR. BANK RECEIPT BANK RECEIPT/0708/155 27,00,000.00 28-3-2012 Dr Union Bank CC A/C 75004 Bank Charges RTGS BANK RECEIPT BANK RECEIPT/0708/160 17,68,175.00 31-3-2012 Cr PATHARDI LAND (PARKSYDE) BEING Journal 154 3,18,84,136.00 Cr Closing Balance 3,60,34,136.00 4,79,61,222.00 1,19,27,086.00 4,79,61,222.000 4,79,61,222.00 Perusal of the above ledger account clearly shows that apart from money to be received on account of development agreement, the appellant was indulged in giving advances and receiving advances from the company M/s. JREPL. In the month of April, 2011 to August, 2011, the appellant has advanced amount of Rs.31,50,0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l shares in the lender company, therefore, I uphold the findings of the AO that provisions of Section 2(22)(e) would apply. 5.3 The AO had treated entire amount of Rs:1,19,27,686/- as deemed dividend considering accumulated profit of M/s. JREPL at Rs1,63,91,548/- as on 31.03.2012. The appellant has contended that accumulated profit would not include current business profits earned during the year as held by the Apex Court in the case of Ashokbhai Chimanbhai (56 ITR 42) and followed by ITAT, Ahmedabad in case of M.B. Stock Holding Pvt. Ltd. It was contended that M/s. JREPL had accumulated profit of Rs.46,36,756/- as on 01.04.2011. Therefore, deemed dividend has to be computed with reference to this amount and the profit of the current previous year was not to be considered as accumulated profit. I find merit in the contention raised by the appellant as regards to the definition of accumulated profit. Hon'ble Bombay High Court in the case of P.K.Badiani (76 ITR 0360) has held as under: "16. Question No.2 raised at the instance of the assessee raises the question whether the development rebate reserve provided for the accounting year 1957 alone would constitute "accumulated pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the fact that such an event has taken place in the middle of the year. It is so the determination of capital gains is not to wait for the end of the previous year. Similarly, there can be income from other sources also such as receipt of or dividend income or interest which may not have to wait for determination at the end of the year. Similarly, some subsidy may be received from the Government which may be taxable on receipt basis. Such income shall also have to be taken into account in determining the accumulated profits as it has not to wait for determination of income at the close of the year." Combined reading of decision of Bombay High Court and ITAT Ahmedabad leads to the conclusion that accumulated profit is to be considered on the day when advance was given and it would include all the profits which are capable of quantification meaning thereby it would include accumulated profit as on 01.04.2011 and profits of the current year excluding the income under the head 'Business or Profession' which is not capable of quantification during the year. In the case of appellant, there was accumulated profit of Rs.46,36,756/- as on 01.04.2012 and out of current year's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dend to the extent to which the company possess accumulated profits at the time when such payment is made. Section 2(6A)(e) uses the words "any payment" meaning every payment made by a company which falls within one of the three categories specified in the section and provides that such payment shall' be included within the meaning and connotation of the word "dividend" provided, of course, the two conditions which we have just referred to are satisfied. The reference in section 2 (6A) (e) is to "any payment" and not to any proportionate part of it. The only limitation on the quantum liable to be treated as dividend is that it should be to the extent to which the company possesses accumulated profits. If the accumulated profits possessed by the company at the time of payment exceed the amount of payment made by the company, the whole of the payment should be liable to be regarded as dividend. There is nothing in section 2 (6A) (e) to indicate that the legislature intended to tax not the whole of the payment made by the company but only that apart of it which represented proportionate share of the shareholder in the accumulated profits of the company. There is no reference in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant of treating deemed dividend in proportion to appellant's share holding is rejected. 5.5 To sum up, it is held that advance of Rs.1,19,27,086/- received by the appellant was in nature of payment covered u/s 2(22)(e) of the Act. However, accumulated profit at te time of payment of advance stood to Rs.60,92,388/-, hence deemed dividend can be taxed only upto accumulated profit. Addition of Rs.60,92,388/- u/s 2(22)(e) is upheld and appellant gets relief of Rs.58,34,698/-. Ground raised by the appellant is partly allowed." 4. Mr. Shingte vehemently argued during the course of hearing that the lower authorities have erred in law and on facts adding the impugned sum(s) as covered under the deeming fiction of dividend under Section 2(22)(e) of the Act. He first of all quoted CBDT circular dated 12.06.2017 that trade advances in the nature of commercial transactions do not fall within the ambit of Section 2(22)(e) of the Act. We find no merit in the assessee's instant first argument as he could hardly prove the impugned sums forming subject matter of addition herein in as commercial transactions. Mr. Shingte invited our attention to the CIT(A)'s detailed discussion; and more par ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
