TaxTMI 
TaxTMI 
2019 (1) TMI 1017
X X X X Extracts X X X X
X X X X Extracts X X X X
....rsy briefly are that in respect of assessment year 2010-2011, the respondent assessee was found having received amounts/loans and has paid various amounts to Tanushka Automobiles Pvt. Ltd and M/s Vinayaka Farms and Resorts (India) Pvt. Ltd., during assessment year 2010-2011. The assessee in his return filed on 4.9.2010 declared his total income of Rs. 5,91,17,150/-. The case was selected for scrutiny. After notice under Section 142 of 1961 Act, a questionnaire was issued on 22.11.2012. During the course of assessment proceedings the assessment officer noticed that the assessee received various amounts from and paid various amounts to Tanushka Automobiles Pvt. Ltd. The Assessing Officer treated such loans/advance amount of Rs. 3,69,12,500....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal ITA 327/Agra/2014 Accounting Year 2010-2011, the Income Tax Appellate Tribunal upheld the deletion. As regard to deemed dividend under Section 2(22) (e) of 1961 Act, we, at the outset, observe that the issue as to applicability of said provision to a nonmember/ non-shareholder of the concerned company which has given the loan/advance has been settled by the decision in "CIT Vs. M/s Ankitech Pvt. Ltd and others [340 ITR 14 (Del)] (ITR 462/2009)" wherein Division Bench of High Court of Delhi held: "24. The intention behind enacting provisions of Section 2(22)(e) is that closely-held companies (i.e. companies in which public are not substantially interested), which are controlled by a group of members, even though the company h....
X X X X Extracts X X X X
X X X X Extracts X X X X
....advance given under the conditions specified under Section 2(22)(e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction. It is a common case that any company is supposed to distribute the profits in the form of dividend to its shareholders/members and such dividend cannot be given to nonmembers. The second category specified under Section 2(22)(e) of the Act, viz., a concern (like the assessee herein), which is given the loan or advance is admittedly not a shareholder/member of the payer company. Therefore, under no circumstance, it could be treated as shareholder/member receiving dividend. If the int....
X X X X Extracts X X X X
X X X X Extracts X X X X
....binding on the Courts. Once it is found that such loan or advance cannot be treated as deemed dividend at the hands of such a concern which is not a shareholder, and that according to us is the correct legal position, such a circular would be of no avail. 29. No doubt, the legal fiction/deemed provision created by the legislature has to be taken to 'logical conclusion' as held in Andaleeb Sehgal (supra). The Revenue wants the deeming provision to be extended which is illogical and attempt is to create a real legal fiction, which is not created by the Legislature. We say at the cost of repetition that the definition of shareholder is not enlarged by any fiction. ....................... 32.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ank at a much higher rate but also there is another fact that Tanuksha Automobiles Pvt Ltd had totally different terms and conditions of rental agreement. They were older tenant and the space given to Axis Bank was the prime space of the property. Further the appellant had taken a security deposit of Rs. 2 cr. from Tanushka Automobiles Pvt Ltd as against no security deposit received from Axis Bank Ltd. Thus arrival of fair rental value on rent received from Tanushka Automobiles Pvt. Ltd. on the basis of rent received from Axis Bank Ltd. would not be a correct position as the terms and circumstances of both the tenants are different. In the various case laws cited by the appellate it has been held that if the appellant has received ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tween the two parties. The only issue arises that whether the rate of 6% paid by the appellant is in excess of the fair market rate. As per the AO the entire interest paid has to be disallowed. The AO has not doubted that fact that the appellant received a security deposit and an advance. The AO has also not doubted the fact that there was a formal agreement between both the parties to pay interest. The AO has also not doubted the fact that the interest provided/paid by the appellant to Tanushka Automobiles Pvt Ltd. was 6%. The AO has also not doubted and has allowed interest paid to other depositors @ 12% per annum by the appellant. Merely because no interest was paid on certain security deposit would not be the factor for determining the ....