TaxTMI 
TaxTMI 
2017 (5) TMI 65
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....sed the grounds as well as additional grounds, however, in the course of appeal, Assessee's counsel has not pressed the grounds relating to reopening of assessment u/s 147 of the IT Act, additional grounds raised and argued only on the issue of treating the amount of loan taken by the Managing Director on interest as 'deemed dividend'. 2. Briefly stated, Assessee is Managing Director of M/s. Vasantha Tool Crafts Pvt. Ltd. (VTC) and also has interest in another company by name M/s. Renuka Plastic Crafts Pvt. Ltd. (RPC). Assessee filed return of income admitting taxable income of Rs. 10,90,695/- which was accepted u/s 143(1) of the IT Act. Subsequently, the A.O noticed that Assessee has received an amount of Rs. 56,31,320/- from M/s. VTC a....
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....onal guarantee towards working capital facility and he could not avail any further personal loan from the banks, therefore, obtained the loan from the company on interest. Assessee relied on the decision in the case of Pradeep Kumar Malhotra Vs CIT [2011] 338 ITR 538 (Cal), G. Srividhya Vs Department of Income Tax (ITA No. 1270/Mds/2011) and Madhuvathi Singh and Bheem Singh (ITAT, Jaipur). 4. Ld. CIT(A) did not accept the contentions and upheld the addition by stating as under: 5.7 The f act that the company in which the appellant is a director and declared substantial dividend in the past is not a relevant consideration f or taking a decision on this issue since the Act does not provide f or this as a mitigating circumstance. 5.8 ....
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....RPC is concerned, the amount was repayment of loan, therefore does not attract provisions of Sec. 2(22)(e) of the IT Act. It was submitted that the necessary details have been placed before CIT((A), therefore, the finding of CIT(A) in para 5.10 is not correct. Coming to the issue of loan from M/s VTC, it was submission that Assessee has obtained the loan on interest and further has given guarantee to all the loans taken by the company and accordingly there was a benefit to the company. 5.1 Ld. Counsel apart from the relying on the principles laid down by the Hon'ble Kolkata High Court in the case of Pradeep Kumar Malhotra Vs CIT (supra) also relied on the coordinate Bench decision in the case of Smt. Sangita Jain V. ITO, 2016 TaxPub(DT) ....
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....he issue of loan from M/s VTC, the account copy indicates that there was opening balance as well to an extent of Rs. 1.08 Crores. We were informed that no proceedings u/s 2(22)(e) of the IT Act were initiated in earlier year. However these amounts are not interest free. Assessee paid interest at 8% per annum to an extent of Rs. 9,92,477/- during the year, thus, we are of the opinion that this amount is not a 'benefit' obtained by Assessee, but there is a 'benefit' to the company. 8. Coordinate Bench in the case of Smt. Sangita Jain Vs. ITO (supra) has examined similar issue, wherein that Assessee also received a loan on interest and A.O invoked provisions of Sec. 2(22)(e) of the IT Act. The Coordinate Bench has held as under: "5. We h....
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....as a consequence of any further consideration, which is benef icial to the Company, received f rom such shareholder, in such case, such advance or loan cannot be said to be deemed dividend within the meaning of the Act. It was held that gratuitous loan or advance given by a Company to those classes of shareholders thus would come within the purview of section 2(22)(e) but not the cases where the loan or advance is given in return to an advantage conferred upon the Company by such shareholder. In the case of ACIT -vs.- M/s. Zenon (India) Pvt. Limited, a loan taken by the assessee was treated by the Assessing Off icer as deemed dividend under section 2(22)(e), but the ld. CIT(Appeals) did not approve the action of the Assessing Off icer af te....