TMI Blog2024 (1) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... with substantial interest therein, in purchasing one for himself, deals with the company in the capacity of a customer. Revenue has no case that in doing so there has been any under-selling by the company, as discount allowed to him, which, where so, would rather attract section 56 of the Act. True, he has been extended a credit, which it may not to it s other customers, as would be the inference arising as the assessee has, despite the AO clearly stating so, not adduced any material may, not even made any contention in rebuttal, i.e., to the effect of it similarly allowing credit to it s other customers. The payment for the Flat, adjusting the credits arising to the assessee, stands made latest by the end of the following year. The same would not, in our view, alter its character to a loan or advance, which would, we may add, surely be the case where an extended credit, dehors the trade practice, is allowed. The company paying the remuneration to an extent of Rs. 50 lakhs per annum to the assessee assumes a limited financial risk when it extends credit to him. No inference of diversion of funds, representing the profit of the company, arises under the circumstances, to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, with reference to the actual date of the transactions. The matter shall, accordingly, travel back to the file of the AO for determination of deemed dividend u/s. 2(22)(e) afresh along the lines indicated. The assessee shall provide necessary details and working, which the AO shall verify, including seeking clarification/s in its respect, duly supported by evidences. The difference between the amount debited in account and the cost as per the document, would need to be reconciled and explained. Any fresh/new facts (inasmuch as Ms. Krishna, the ld. counsel for the assessee, could not provide reconciliation, despite being allowed time during hearing, with the information furnished before us being again so in a piecemeal manner), coming to the notice of the AO would again require being considered as per law, for which guidance may be taken by him from the instant order. Appeal by the assessee is allowed for statistical purposes. - SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI MANOMOHAN DAS, JUDICIAL MEMBER For the Appellant : Ms. K. Krishna, Advocate For the Respondent : Smt. J.M. Jamuna Devi, Sr. D.R. ORDER Per:Sanjay Arora, AM This is an appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Money received from customers 14,48,500 (d) Balance, representing net of monies advanced and received back (2,41,141) (e) Closing Balance 62,44,215 (*) (Figures in brackets represent credit balance) 4.2 The ledger account (copy on record) contains a series of payments to the assessee, both through bank and in cash, which stand adjusted against credits on account of monthly remuneration of Rs. 77,812. Besides, there are debits by way of journal entries, which again appear to be adjustments for the monies (or otherwise money s worth), received by him on company s account. The credits in his account, apart from remuneration, are principally through bank and also by way of journal entries, i.e., on account of third party adjustments, as where he had made payments to them for and on behalf of the company and, accordingly, claimed credit in their respect. Further, the said summary not reflecting his remuneration separately, it, suitably modified, on it being so, is as under: Table 2 (Amount in R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequent on the compulsory acquisition of its undertaking by the Government or a corporation owned or controlled by the Government under any law for the time being in force, include any profits of the company prior to three successive previous years immediately preceding the previous year in which such acquisition took place. Explanation 3 . For the purposes of this clause, (a) concern means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern; 4.4 Inasmuch as the same is the principal reason for the debit balance in the assessee s account in the company s books, we shall examine the transaction of sale of Villa first. The same may also operate to modify the sums appearing in respect of the other transaction groupings as well. The company having reflected the transactions qua the Flat sale to the assessee in it s accounts separately, the same would continue to be so, having been, for all we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we do not think the same could be regarded as a loan or advance so as to attract section 2(22)(e) of the Act. SHPL, the company in which the assessee has substantial interest, is in the business of real estate, selling residential houses. The assessee, it s Director, with substantial interest therein, in purchasing one for himself, deals with the company in the capacity of a customer. The Revenue has no case that in doing so there has been any under-selling by the company, as discount allowed to him, which, where so, would rather attract section 56 of the Act. True, he has been extended a credit, which it may not to it s other customers, as would be the inference arising as the assessee has, despite the AO clearly stating so, not adduced any material may, not even made any contention in rebuttal, i.e., to the effect of it similarly allowing credit to it s other customers. The payment for the Flat, adjusting the credits arising to the assessee, stands made latest by the end of the following year. The same would not, in our view, alter its character to a loan or advance, which would, we may add, surely be the case where an extended credit, dehors the trade practice, is allowed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who thereby only receives from the company, albeit through its customer/s, monies due to him. Both the categories of amounts would, thus, need to be clubbed and maintained (tabulated) in separate accounts, which shall stand to be credited, similarly, when sums are paid or transferred to the company, as well as remuneration from it. Any debit balance in the account, even if adjusted subsequently, shall attract section 2(22)(e) of the Act (Sarada (P.) v. CIT [1998] 229 ITR 444 (SC); Tarulata Shyam v. CIT [1997] 108 ITR 345 (SC)). Only the surplus, if any, in this account would stand to be adjusted against debit balance in the Flat (Villa) account. 4.7 A surviving issue would be the date of the debits or credits in respect of transactions by way of journal entries. This is as money (money s worth) stand already received or, as the case may be, discharged, though given effect to later (or, perhaps, even earlier). The transactions shall have to be reckoned, irrespective of the date of journal entry, with reference to the actual date of the transactions. 5. The matter shall, accordingly, travel back to the file of the AO for determination of deemed dividend u/s. 2(22)(e) afresh alo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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