9911796707
TMI Blog2025 (1) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... e same are wrong and insufficient. 2. On the facts and circumstances of the case as well as in law, the Learned CIT (A) has erred in confirming the action of the Learned Assessing Officer in initiating penalty proceedings under section 271(1)(c). 3. The order confirmed by the Learned CIT (A) is devoid of any merit, arbitrary, uncalled for and bad in law and therefore the appellant be given such relief or reliefs as prayed for." 3. The solitary grievance of the assessee is against the addition made by treating the amount received by the assessee as deemed dividend under section 2(22)(e) of the Act. 4. The brief facts of the case pertaining to this issue, as emanating from the record, are: The assessee is an individual and is a proprietor of M/s Paros Corp, a firm trading in paints, lens and garments. For the year under consideration, the assessee filed his return of income on 30/09/2014 declaring a total income of INR 1,99,74,690. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) and section 142(1) of the Act were issued and served on the assessee. During the assessment proceedings, it was noticed from the balance-sheet of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act disagreed with the submissions of the assessee and held that the amount of loan received by the assessee and the proprietary concern from M/s AGIV India Pvt. Ltd. was liable to be taxed as deemed dividend in the hands of the assessee within the meaning of the provisions of section 2(22)(e) of the Act. The AO further held that even if the loan or advance fee ceased to be outstanding at the end of the previous year, it could still be deemed as a "dividend". The AO held that the provisions of section 2(22)(e) of the Act do not mention any purpose of the loan and therefore there are no merits in the submission of the assessee that the advance was made for commercial purposes. Accordingly, the AO held that the amount of INR 1,20,06,226 advanced to the proprietor concern of the assessee is a deemed dividend under the specific provisions of section 2(22)(e) of the Act and the same was added to the total income of the assessee. 6. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee, by observing as follows: - "4.3.1 I have considered the facts of the case, grounds of appeal, statement of facts, the assessment order and submissions of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd other business interests and facilities. M/s AGIV India Pvt. Ltd. was developing ICT Performance Centre, a joint venture project with IND-AGIV Commerce Ltd. and RST Technologies Ltd. M/s AGIV India Pvt. Ltd. holds 72% shares in INDAGIV Commerce Ltd. and 90% shares in RST Technologies Ltd. 8. As the Foreign Direct Investment opened up and large multinationals like Sony, Hitachi, Canon, etc. opened in India, with newer technology and high cost of investment, as per the assessee, the promoters of M/s AGIV India Pvt. Ltd. initiated the discussion with M/s FOR-A Group Japan for selling their stakes. However, M/s FOR-A Group Japan was only interested in the prime Broadcast System Integration Business and taking over the intellectual properties of M/s AGIV India Pvt. Ltd. M/s FOR-A Group Japan was not interested in taking over the subsidiary companies and allied facilities and liabilities connected with those facilities. Accordingly, a Memorandum of Understanding ("MOU") was signed between M/s Paros Corp and other stakeholders of M/s AGIV India Pvt. Ltd. in order to facilitate the sale of the business of M/s AGIV India Pvt. Ltd. to M/s FOR-A Group Japan. From the perusal of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern, i.e. M/s Paros Corp, in which the shareholder was substantially interested and such shareholder was holding not less than 10% of the voting power in the company, the AO considered the payment as deemed dividend under the provisions of section 2(22)(e) of the Act and added to the total income of the assessee. On the contrary, as per the assessee, the entire transaction is on account of business expediency and therefore is not covered within the ambit of the provisions of section 2(22)(e) of the Act. As noted above, it is the plea of the assessee that since the promoters of M/s AGIV India Pvt. Ltd. decided to sell their shares to M/s FORA Group Japan, M/s AGIV India Pvt. Ltd. advanced a sum of INR 1,20,06,226 to M/s Paros Corp for purchase of shares of IND-AGIV Commerce Ltd. and RST Technologies Ltd. from M/s AGIV India Pvt. Ltd. Thus, it is the plea of the assessee that the advancing of the sum of INR 1,20,06,226 by M/s AGIV India Pvt. Ltd. to M/s Paros Corp was to give effect to the transaction entered into between M/s AGIV India Pvt. Ltd. and M/s FOR-A Group Japan, which was for the benefit of M/s AGIV India Pvt. Ltd. as the company was becoming part of a Japanese manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o between M/s AGIV India Pvt. Ltd. and M/s FOR-A Group Japan so that the company becomes a part of large Japanese conglomerate. 14. In support of its submission, the assessee has placed reliance upon the Circular No. 19 of 2017 dated 12/06/2017 issued by the Central Board of Direct Taxes, which provides that the trade advances, which are in the nature of commercial transactions, would not fall within the ambit of the word "advance" in section 2(22)(e) of the Act. We find that the Hon'ble Calcutta High Court in Pradip Kumar Malhotra v/s CIT, reported in [2011] 338 ITR 538 (Cal.) held that gratuitous loan or advance given by the company to its shareholders would come within the purview of section 2(22)(e) of the Act but not the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder. In the present case, as noted in the foregoing paragraph, upon receipt of advance from M/s AGIV India Pvt. Ltd., M/s Paros Corp purchased the shares of IND-AGIV Commerce Ltd. and RST Technologies Ltd., which facilitated the completion of the transaction between M/s AGIV India Pvt. Ltd. and M/s FOR-A Group Japan. Thus, we are of the considered vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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