AI Drafter 
TaxTMI 
TaxTMI 
2009 (11) TMI 913
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....hat the assessee had received various amounts from M/s. Atma Ram Properties Ltd (in short. ARPL). The opening balance of the amount received from M/s. ARPL was shown at Rs. 61,97,474/-. During the year, the assessee had received Rs. 1,38,00,000/-. The assessee is the majority share holder in M/s. ARPL holding 47.5% of shares of ARPL. The assessee was, thus, asked by the AO to show cause as to why the amount received from M/s. ARPL should not be treated as deemed dividend u/s. 2(22)(e) of the Act. The assessee filed its reply which has been reproduced by the AO in his assessment order. The assessee contended before the AO that the amount was received by the assessee towards a running current account which should not originally be regarded as a account indicating a receipt by way of advances or loan. The assessee further submitted before the AO that in case section 2(22)(e) is attracted, it is only a net amount which can be charged u/s. 2(22)(e) of the Act. The assessee also pointed out before the AO that the accumulated profit of M/s. ARPL as on the opening of the year i.e. as on the 01.04.2001, is to be covered by the loans taken in earlier years and, therefore, the net amount take....
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....and, therefore, the amount of loan of Rs. 61,97,474/- taken in F.Y. 2000-01 could be deemed to be dividend in AY. 2001-02 to the extent of accumulated profit of Rs. 59,62,679/- available in that year as on 31.03.2001. Therefore, the learned counsel for the assessee submitted that accumulated profit to be taken into account in the year under consideration could be Rs. 1,03,89,811/- and not Rs. 1,63,52,490/-, which includes sum of Rs. 59,62,679/- brought forward from earlier years ended on 31.03.2001. He, therefore, contended that addition of Rs. 1,38,00,000/- made u/s. 2(22)(e) is excessive by sum of Rs. 59,62,679/-. In this connection, a reference was made to the decision of ITAT, Cochin Bench, in the case of Gordhandas Khimji 11 ITD 158 (Coch) and ITAT, Delhi Benches "A", Delhi in the case of Mokul Finance Pvt. Ltd (ITA no. 2620/D/2002). 9. The ld. DR, on the other hand, supported the order of the authorities below and contended that the loan taken by the assessee to the extent of Rs. 1,38,00,000/- is fully covered by the surplus and reserve amounting to Rs. 1,63,52,490/-, and as such the same has been rightly brought to tax as deemed dividend by the AO. 10. We have consider....
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....nd. In other words, it was held that the advances or loans in the earlier assessment had to be treated as dividend which the department omitted to assess, and the accumulated profits had to be reduced by the earlier loans or advances in spite of the fact that they were not assessed to tax as deemed dividends by the department. 13. In the present case, the profit of the current year taken to reserve and surplus account is of Rs. 1,03,89,811/-. The profit of the year ended on 31.03.2001 was amounting to Rs. 59,62,679/-, which has been brought forward to the present year making total accumulated profit at Rs. 1,63,52,490/- as on 31,03.2002, However, the assessee had also taken loans and advances with closing balance of Rs. 61,97,474/- in the year ended on 31.03.2001. In the light of these facts, it has been claimed by the assessee that accumulated profits of the year ended on 31.03.2001 amounts to Rs. 59,62,679/- was assessable as deemed dividend u/s. 2(22)(e) on account of loans and advances of Rs. 61,97,474/- received by the assessee and remaining outstanding as on 31.03.2001. 14. We have perused the statement of account of loans and advances of the assessee as appearing in th....
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....he light of the decision of ITAT, Cochin Bench, in the case of ITO vs. Gordhandas Khimji (supra), the accumulated profit of earlier years is to be treated as deemed dividend with reference to the loan or advances taken in earlier years. We, therefore, hold that the deemed dividend u/s. 2(22)(e) with reference to the amount of loan of Rs. 73,67,936/- is assessable in A.Y. 2001-02 to the extent of accumulated profit available on the date of loan taken by the assessee in the F.Y. 2000-01, and the accumulated profit which is found to be assessable as deemed dividend in the hands of the assessee in the AY 2001-02, is to be reduced from the accumulated profit available as on 01.04.2001, and the balance shall be treated to be accumulated profit available to the be considered against the loans and advances taken by the assessee in the current F.Y 2001-02 relevant to the A.Y. 2002-03. 16. The ld. counsel for the assessee further contended that the total amount of loan taken of Rs. 1,38,00,000/- during the current financial year on various dates can only be treated to be the deemed dividend u/s. 2(22)(e) to the extent of the accumulated profit that was available on the date on which amoun....
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....vidend by the AO and the net amount of deemed dividend was worked out at Rs. 1,72,278/-. The reason for treating the amount as deemed dividend u/s. 2(22)(e) of the Act is given by the AO are in brief as under:- "The assessee was asked to give the details of share holding of M/s. Atma Ram Construction P. Ltd. Mr. C M Chadha, and the legal heir of late Shri A R Chadha, each in having 50% shares of M/s. Atma Ram Construction Pvt. Ltd. It is seen from the share holding pattern of the assessee company that legal heir of late Shri A R Chadha hold 56.49% shares of Ms. A R Chadha and Co. (India) P. Ltd. (assessee company) and Mr. C M Chadha holds 32.5% shares in the assessee company. Therefore, the assessee company is a concern in which majority share holders M/s. Atma Ram Construction Pvt. Ltd. hold substantial interest. Hence, the loan and advances given to M/s. A R Chadha and Co. (India) P. Ltd. is covered u/s. 2(22)(e) of the IT. Act. 1961. M/s. Atma Ram Construction P. Ltd. was having accumulated profits of Rs. 6,24,797,12 as on 31.03.2001. Therefore, the conditions specified u/s. 2(22)(e) are satisfied and loan/advance received by the assessee company is treated as deemed dividend....
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....current assessment year. The copy of bank account was furnished by the assessee to the AO. The assessee submitted that the house taxes are to be allowed when they were actually paid, and since the cheques were cleared on April 24, 2001, the payment should be allowed as deduction in the year under consideration. 26. The aforesaid arguments of the assessee was not found favour with the AO, who observed that the receipt of house tax clearly indicated what the cheque was issued on 31.03.2001 i.e. in the earlier period relevant to the A.Y. 2001-02. The AO also observed that the assessee's stand is inconsistent with its own stand as house tax paid by cheque on 30.03.2002 for Rs. 30,00,000/- has been claimed as paid on the day when the cheques were issued, and the cheque dated 30.03.2002, must have been cleared only in the next year. The AO, therefore, stated that on the one hand, the assessee was claiming the house tax payment on cheque clearing basis in so far as the payment of 26.28 lacs was concerned, and, on the other hand, the assessee was claiming the house tax on the basis of dates on which cheques were given to municipal corporation on 30.03.2002, in to far as the payment ....
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....1. particularly in view of the fact that the assessee claim of the deduction of Rs. 30 lacs paid by cheque on 31.03.2002 has been allowed by the AO on the basis of deposit of cheque with the Municipal authorities. Thus, this ground raised by the assessee is rejected. 33. Ground no. 5 reads as under:- "That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and an facts in not accepting the Annual Letting Value equal of M-Block, Cannought Place property to actual rent received of Rs. 17,177/- and has erred in not deleting the excess addition of Rs. 12,00,726/- and that too by adopting the notional interest @ 18%." 34. In the course of hearing of this appeal, it has been pointed out that this issue is covered by Tribunal's order passed in A.Y. 1996-97 and 1998-99, which is placed at page numbers 185-195 of the Paper Book filed by the assessee. In order for the A.Y. 1998-99 (ITA no. 3087/D/2004), the Hon'ble Tribunal vide order dated 17.03.2006 has directed the AO to accept the Annual Letting Value shown by the assessee in respect of M-block property at Rs. 25,416/-, and the determination of ALV by computing notional interest was del....