2019 (8) TMI 1869 - HC - Income Tax

Tribunal dismisses appeal on dividend classification under Income Tax Act

Pr. Commissioner of Income Tax­19 Versus Smt. Dina S. Shah

The Tribunal correctly dismissed the appeal against the deletion of the addition made as deemed dividend under Section 2(22)(e) of the Income Tax Act, ... Deemed dividend u/s. 2(22)(e) - assessee had substantial interest in the associated companies where in the assessee had more than 20% shareholding - CIT-A deleted the addition as confirmed by Tribunal - HELD THAT:- We find that this issue was duly considered by the CIT(A) when he called for the remand report from the AO. In the remand report, the AO did not dispute the fact that the notarized of MoU dated 9th May, 2008 was for sale/ purchases of office premises. This document was also produced before the AO during the assessment proceedings but the same was not even considered by him. MoU dated 9th May, 2008 was duly supported by cheque also dated 9th May, 2008. Thus, on the consideration of the entire evidence, both the CIT(A) and the Tribunal come to a concurrent finding of fact that the amount of Rs.4.48 Crore is not a loan to be covered by Section 2(22)(e) of the Act. Therefore, the view taken by the CIT(A) and the Tribunal on facts, is a possible view and cannot be said to be perverse. Exchange of money OR advance for purchase of property - transactions between the two entities in which the assessee had substantial shareholdings - ITAT deleted addition - HELD THAT:- CIT(A) while dealing with the remand report noticed the fact that the MoU dated 9th May, 2008, which was produced during the assessment proceedings before the AO was completely ignored by him in the Assessment Order. This, MoU dated 9th May, 2008 was also supported by the payment by Cheque No.246161 dated 9th May, 2008 drawn on Bank of India, was also made under the MoU by M/s. ADJPL to M./s. DJPL. Thus, there is nothing to suggest on record that the amount of Rs.4.48 Crores was a part of series of monetary transaction and not in respect of advance for purchase of property. No substantial question of law raised - Decided against revenue. Issues:1. Whether the Tribunal erred in dismissing the appeal against the deletion of addition made as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961Rs.2. Whether the Tribunal was correct in ignoring the ledger confirmation account and adding the amount to the income of the assessee under Section 2(22)(e) of the ActRs.Analysis:Issue 1:The case involved a dispute regarding the applicability of Section 2(22)(e) of the Income Tax Act, 1961. The respondent held shares in two companies and a loan given by one company to another was treated as deemed dividend by the Assessing Officer. However, the CIT(A) allowed the appeal, stating that the amount was an advance for the purchase of property, not a loan. The Tribunal upheld this decision, considering the documentary evidence provided, including a Memorandum of Understanding and a cheque for the advance. The court found that the transaction was not covered under Section 2(22)(e) as it was related to the purchase of property, not a loan. The appellant's argument that the finding was perverse was rejected as the evidence supported the conclusion reached by the authorities.Issue 2:Regarding the second question, the appellant failed to provide any evidence to suggest that the transaction was part of a series of monetary transactions rather than a single transaction for the purchase of property. The CIT(A) noted that the Assessing Officer had ignored crucial evidence, such as the Memorandum of Understanding and the cheque payment, which supported the nature of the transaction as an advance for property purchase. The court found no substantial question of law in this regard and upheld the decision of the authorities. Consequently, the appeal was dismissed based on the findings and conclusions drawn from the evidence presented during the assessment proceedings and appeals process.