TaxTMI 
TaxTMI 
2015 (2) TMI 619
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....essee is a closely held company, with Sri Uppala Kantha Rao and Smt. Uppala Rajani as the two shareholders with 50% shares each. A survey operation under section 133A was conducted in the case of APL on 25.1.2011 during which it came to light that Mr. U. Kantha Rao and Mrs. U. Rajani held more than 200/0 of share holding in APL and that APL had given advances to the assessee. The peak advances were as follows for the three years in appeal: A.Y. Deemed dividend (Rs. ) 2006-07 63,70,034 2007-08 36,22,056 2008-09 1,07,85,352 3. The Assessing Officer also noted that APL had the following accumulated profits for the three years which was substantially higher than the amounts advanced to the assessee ....
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....mporarily. Further, the amount has been utilised for the business needs and not for the individual benefit of any person. SPG is not a share holder in ATPL and this transaction is outside the purview of deemed dividend. All the other payments are of the same nature as above viz., for meeting the financial needs of SPG and / or expenditure incurred on behalf of SPG like payments to DFO, ROC filing fees, hydel project expenses, salaries of the personnel of SPG, Insurance premia, telephone bills, travelling expenses etc. this is only an accommodation in business expediency. This is neither a loan nor an advance but making available funds temporarily." 5. The learned A.R. of the assessee submitted that the entire funds transferred by APL ....
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....No.6182/Mum/08 dated 07.2.2009) vii. Shruti Properties P Ltd. 004 ITR (Trib) 186 (Mum) 7. In short, the AR submitted that (a) The assessee was not a registered share holder of APL and hence the payments cannot be deemed to be dividend in its hands u/s 2(22)(e). (b) The payments were in the nature of business transactions carried out for business expediency and thus, they cannot be held to be in the nature of 'advance or loan' as envisaged under section 2(22)(e). 8. The submissions of the AR were forwarded to the Assessing Officer for his comments. The Assessing Officer has submitted that the amounts advanced to the appellant were finally appropriated as share application money to the credit of Sri U. Kantha Rao and Sm....
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.... during the appellate proceedings for the first time, are required to be taken cognizance of. 9.1. The CIT(A) further observed that the Assessing Officer has also referred to the letter of APL accepting the liability of the assessee to being assessed for deemed dividend. 9.2. The CIT(A) held that the assessee and APL are two separate and independent legal entities and the mere fact that they have common shareholders does not blur this distinction. The CIT(A) stated that he was unable to understand how the letter of APL can be said to bind the assessee to a liability under the Act and stated that even otherwise, it is trite law that there can be no estoppel against law. The CIT(A) further observed that an agreement by an assessee to be....
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....ned the deemed dividend u/s.2(22)(e), as the amounts advanced were utilized for the benefit of the shareholders of the assessee company, where the Directors were common. 4. Any other ground that may be urged at the time of hearing." 11. The learned Counsel for the assessee reiterated the contentions raised before the A.O. and the CIT(A) and submitted that the issue is covered by the decision of the Special Bench of the Tribunal in the case of Bhaumik Colour P. Ltd. 313 ITR (AT) 146 (Mum.) (SB). 12. The learned D.R. fairly conceded that the issue was covered as stated by the learned Counsel for the assessee. 13. We have heard both the parties and perused the material available on record. In the present case before us, the assesse....