TaxTMI 
TaxTMI 
2013 (9) TMI 445
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....ddition at Rs.1,01,20,910/- the authorities below have not rejected nor rebutted the submissions made before them in support of their contention. After taking into consideration all these documents no addition is liable to be sustained, same is liable to be deleted. (3) The learned Commissioner of Income Tax (Appeals)-II, Agra has erred both in law and on facts in confirming the addition of Rs.1,34,794/- made by the Assessing Officer u/s 36(1)(iii) of the Income Tax Act, 1961 completely ignoring the case laws and other material facts brought on record by the Appellant during the course of appellate proceedings. (4) On the facts and circumstances of the case the learned Commissioner of Income Tax (Appeals)-II, Agra has erred both on law and on facts in confirming the addition of Rs.10,00,000/- made u/s 28(iv) of the Income Tax Act, 1961 completely ignoring the material facts and pronouncements relied upon by the appellant during the course of appellate proceedings." 3. The brief facts of first and second grounds of the appeal are that during the assessment proceedings, the A.O. noticed that the assessee has made transactions....
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....of the I.T. Act, 1961 and, hence the same is added in the hands of the assessee u/s 56 of the Act i.e. income from other sources read with Section 2(22)(e) of the Act. The ld. Authorized Representative submitted that the observation of the assessee are without any basis and are based upon misinterpretation of the provisions of Section 2(22)(e) of the Act. The ld. Authorized Representative further submitted that during the course of assessment proceedings it was clarified to the assessing officer through written submission that the assessee had taken loan of Rs.1 crore from M/s Bhole Baba Buildcon Pvt. Ltd., on the basis of an Ikrarnama executed on non judicial stamp paper of Rs.100/- wherein, it is clearly stated on a piece of land (Khasra no.91, Area 4-17-0 bigha situated at Mauza Baroli Aheer, Shamshadbad Road, Agra, a cold storage is built up known as Bhole Baba Ice Factory and Cold Storage. On the basis of the aforesaid Ikrarnama it has been agreed between the Director, Shri Hari Shankar Agarwal of Bhole Baba Buildcon (P) Ltd. the owner of the said piece of land, Bhole Baba Ice Factory & Cold Storage, Shri Krishan Murari Agarwal the assessee, that the said piece of land was agr....
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....g a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; but "dividend" does not include- (i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ; [(ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised prof....
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.... 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 ;' 10. On plain reading of aforesaid section we find that sub-clause (e) of Section 2(22) lays down that dividend includes any payment by a closely held company of any sum by way of advance or loan to a shareholder who comes in the category described in that sub-clause or to a concern in which such shareholder has a substantial interest. Dividend under the sub-clause also includes any payment by such company on behalf or for the individual benefit, of any such shareholder. Deemed dividend under this sub-clause would be to the extent to the company in either case possesses accumulated profits. The shareholder referred to here should be beneficial owner of shares holding not less than 10% of the voting power but those shares should not be shares entitled to a fixed rate of dividend with or without a right to participate in profits. 11. Object of this sub clause is that a company in which public are not substantially interested may not declare dividends or adequate dividends and may not merely give loans to shareholders and such loans not being di....
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....n to advance for business transaction which is to be adjusted against the moneys payable by the latter to the assessee company in the subsequent years, same did not fall within the definition of deemed dividend under section 2(22)(e) of the Act. 14. Hon'ble Delhi High Court in the case of CIT Vs. Raj Kumar (2009) 318 ITR 462 wherein it has been held that trade advance which is in the nature of money transacted to give effect to commercial transaction does not fall within the ambit of provisions of Section 2(22)(e) of the Act. 15. Hon'ble Delhi High Court in the case of CIT Vs. Ambassador Travels P. Ltd. [2009] 318 ITR 376 (Delhi) wherein it has been held that in case of normal course of business transactions it should not be treated as deemed dividend under Section 2(22)(e) of the Act. 16. Hon'ble Calcutta High Court in the case of Pradeep Kumar Malhotra Vs. CIT (2011) 338 ITR 538 (Cal.) wherein it has been held that loan advanced by company to shareholder in compensation of shareholder mortgaging his immovable property for enabling company to secure bank loan cannot be treated as deemed dividend under Section 2(22)(e) of the Act. 17. In the light of the above discussio....
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....ant to state that for the purpose of Income-tax matter the entries in the books of account cannot be said to be a final entry or transaction. For the purpose of Income-tax, one is to examine the nature of transaction in accordance with law. In the light of the facts, the same is to be decided in accordance with law. In the case under consideration as stated above, the assessee has demonstrated that the amount was received for the purpose of commercial transaction. As regards, the second objection, which is agreement and MOU as after thought, in this regard, we are of the view that these documents are already on record and the Revenue did not point out any contrary material to these documents. Therefore, merely by stating that this is after thought, such argument of the revenue without supporting material/evidence is not sustainable, therefore, the same is rejected. 21. In the light of above discussions, we find that the amount of Rs.1,00,00,000/- received to the assessee is on account of commercial transaction, therefore, the Section 2(22)(e) is not applicable. We, therefore, delete the addition of Rs.1,01,20,910/- made by the A.O. and sustained by the CIT(A). 22. The third g....