2022 (8) TMI 1382 - AT - Income Tax

Income Tax Appeal: Loan treated as deemed dividend under section 2(22)(e). Upheld decision emphasizes consistency in judicial rulings.

DCIT, Circle -1 (2), Pune Versus Dhariya Construction Pvt. Ltd.

The Tribunal upheld the Revenue's appeal, determining that the amount received was considered a loan/advance rather than an Inter Corporate Deposit, thus ... Deemed dividend addition u/s 2(22)(e) - correctness of the CIT(A)'s action reversing the assessment findings making sec.2(22)(e) addition - assessee’s stand throughout is that the impugned sum represents intercorporate deposits bearing interest than loans/advances covered under the deeming fiction of dividends u/s.2(22)(e) - HELD THAT:- The very issue had arisen between the parties in succeeding assessment year 2012-13 [2020 (2) TMI 616 - ITAT PUNE] where in this tribunal’s co-ordinate bench has accepted the Revenue’s appeal No merit therein once the learned co-ordinate bench has already considered all the relevant facts hereinabove. The same would amount to revisiting the earlier findings in our considered opinion. We therefore adopt judicial consistency and restore the impugned deemed dividend in light of learned co-ordinate bench forgoing observations. Revenue succeeds in its instant sole substantive grievance. Assessee at this stage sought to highlight the fact that the impugned sum of deemed dividends wrongly includes transaction of recovery of deposit given/ paid. Mr. Abhay Avchat also sought to highlight fact the assessee has preferred its cross objections as against the CIT(A)’s instant order well regarding erroneous computation impugned addition amount to this effect. The foregoing cross objection(s) is neither registered nor listed as on date.It shall be very much open to the assessee to seek correct computation of the impugned addition in-consequential proceeding. Issues Involved:1. Whether the amount received by the assessee from Dhariya Infrastructure Pvt. Ltd. is to be treated as 'Inter Corporate Deposit' or as a 'loan' under section 2(22)(e) of the Income Tax Act, 1961.2. Whether the amount received constitutes deemed dividend under section 2(22)(e) of the Income Tax Act, 1961.3. The applicability of judicial precedents and interpretation of section 2(22)(e) in the context of the transaction.4. The correctness of the computation of the deemed dividend amount.Issue-wise Detailed Analysis:1. Characterization of the Amount Received:The primary issue revolves around whether the amount of Rs. 1,61,35,222/- received by the assessee from Dhariya Infrastructure Pvt. Ltd. should be classified as an 'Inter Corporate Deposit' (ICD) or a 'loan.' The CIT(A) held that the amount received was an ICD and not a loan, citing the Mumbai Tribunal's decision in Bombay Oil Industries Ltd. Vs. DCIT, which distinguished between deposits and loans/advances. The CIT(A) noted that section 2(22)(e) of the Income Tax Act, 1961, mentions advances or loans and not deposits, thereby excluding ICDs from its ambit.2. Deemed Dividend under Section 2(22)(e):The Revenue contended that the amount should be treated as a deemed dividend under section 2(22)(e), arguing that the assessee tried to camouflage the loan/advances as ICDs. The CIT(A) rejected this, stating that the nature of the deposit does not change merely due to a shorter repayment period or lower interest rates. However, the Tribunal's co-ordinate bench, in the succeeding assessment year 2012-13, accepted the Revenue's appeal, treating similar transactions as loans/advances and thus taxable as deemed dividends.3. Judicial Precedents and Interpretation:The Tribunal's co-ordinate bench in the 2012-13 assessment year emphasized the need for documentary evidence to substantiate the nature of the amount as ICD. They pointed out the lack of documentation, terms and conditions, and board resolutions supporting the claim of ICD. The bench referred to the Companies Act, 1956, and relevant judicial pronouncements to highlight the distinction between loans and deposits, asserting that the transaction in question was more akin to a loan due to the lack of voluntariness and formal agreements.4. Correctness of Computation:The assessee raised an objection regarding the inclusion of Rs. 60 lakhs in the deemed dividend computation, arguing that it was a recovery of a deposit given/paid and not an acceptance of a new deposit. The Tribunal noted that the cross objections were not registered or listed but allowed the assessee to seek correct computation in consequential proceedings, which would be considered as per the law by the Assessing Officer.Conclusion:The Tribunal upheld the Revenue's appeal, agreeing with the earlier findings that the amount received was in the nature of a loan/advance and thus taxable as deemed dividend under section 2(22)(e). The Tribunal emphasized judicial consistency and rejected the assessee's objections, allowing the Revenue's appeal and directing the Assessing Officer to consider any corrections in the computation of the deemed dividend in subsequent proceedings. The order was pronounced on 12th August 2022.