2016 (12) TMI 1852 - HC - Income Tax

High Court Dismisses Appeal Over Delay in Refiling; Upholds ITAT's Interpretation on Income Tax Act

The High Court dismissed the appeal due to a delay of 210 days in refiling, deeming the reasons provided unsatisfactory. The Court upheld the ITAT's ... Deemed dividend addition u/s 2(22)(e) - HELD THAT:- ITAT analysed the facts and based upon the material on record deduced firstly, that similar transactions were not treated as advances but were in respect of third parties and the explanation that they were trade credits were accepted. The ITAT, therefore, was of the view that there was no loan to the assessee in the circumstances of the case. We are of the opinion that the plain text of Section 2(22)(e) does not authorise the treatment of the amounts as a loan to a shareholder since concededly the amounts were not received by the assessee, an individual. See ANKITECH PVT LTD. & OTHERS [2011 (5) TMI 325 - DELHI HIGH COURT] - No substantial question of law arises. Issues:1. Delay in refiling the appeal2. Interpretation of Section 2(22)(e) of the Income Tax Act, 1961Delay in refiling the appeal:The High Court noted a delay of 210 days in refiling the appeal and found the explanation provided for the delay unsatisfactory. The appellant cited work overload within the Revenue department and administrative circumstances as reasons for the delay. However, the Court deemed these reasons insufficient to justify the delay, emphasizing that a mere transfer of files during reorganization does not constitute a 'sufficient cause' for the delay.Interpretation of Section 2(22)(e) of the Income Tax Act, 1961:The central question of law in this appeal revolved around the correct application of Section 2(22)(e) of the Income Tax Act, 1961 by the Income Tax Appellate Tribunal (ITAT). The ITAT, after analyzing the facts and the material on record, concluded that the provision was inapplicable in the circumstances of the case. It was observed that the transactions in question were not treated as advances but were related to third parties, with the explanation that they constituted trade credits being accepted. Consequently, the ITAT determined that there was no loan to the assessee based on these findings.The High Court concurred with the ITAT's interpretation, stating that the amounts in question could not be considered a loan to a shareholder as per the plain text of Section 2(22)(e), especially since the amounts were not received by the assessee as an individual. The Court supported its decision by referencing a previous ruling in CIT v. Ankitech (P) Ltd. & Ors. 2012 (340) ITR 14, where a similar conclusion was reached. Ultimately, the High Court held that no substantial question of law arose from the case and consequently dismissed the appeal.