TaxTMI 
TaxTMI 
2018 (8) TMI 1881
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....e has entered into an agreement to sell with M/s Ramsan Communication Limited who finds it difficult to operate from Shimla and intends to purchase an industrial land in Delhi to shift its operation from there to here, M/s. S.L. Enterprises (proprietary ship concern of assessee) made an agreement with the said company for sale of industrial plot at Mangolpuri, New Delhi. Thus, the company advanced of Rs. 1.12 crores to the assessee for the purchase of industrial plot. The Assessing Officer, however, noted that the balance sheet of the assessee shows there was unsecured loan from the said company was outstanding and similarly in the books of the said company this amount is outstanding under the schedule of loans and advances. The assessee has also claimed to have paid interest on the outstanding loan. Hence, the argument of the assessee was rejected. As this loan have been taken from the said company in which the assessee has substantial interest, therefore, an amount of Rs. 8,23,964/- was treated as deemed dividend assessable in hand of assessee u/s 2 (22) (e) of the IT Act. The addition was accordingly made. The Ld. CIT (A) noted that the assessee do not produce any evidence or th....
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....in the years under appeal but also in the preceding as well as subsequent years. In view of the above, we have no hesitation to hold that advancing of money by M/s Superior Films (P) Ltd. to the group concerns was during the course of normal course of advancing money for the purpose of earning interest. 9. In the case of Praaip Kumar Malhotra (supra), Hon'ble High Court of Calcutta has held as under :- "Held, allowing the appeal, that for retaining the benefit of loan availed of from the bank if decision was taken to give advance to the assessee such decision was not to give gratuitous advance to its shareholder but to protect the business interest of the company. The sum of Rs. 20,75, OOO could not be treated as deemed dividend" 10. In Circular No.19/2017, paragraph 3, the CBDT has also held that trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word 'advance' in Section 2 (22)(e) of the Act. No contrary decision was brought to our knowledge. 11. In the case under consideration, the addition u/s 2(22) (e) is made in the case of an assessee who is an individual. Admittedly, no advance or borrowed money is recei....
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....ne cannot be considered from the benefit angle as envisaged under section 2 (22) (e), it is observed that the judicial pronouncements cited by the ld. counsel for the assessee clearly support the case of the assessee." 8. The Ld. Counsel for the assessee submitted that since loan was given to the assessee for further extension of business, therefore, transaction was outside the purview of section 2 (22) (e) of the IT Act. He has submitted that rule of consistency apply to the income tax proceedings and relied to the decision of Hon'ble Supreme Court in the case of CIT Vs. Excel Industries Limited 358 ITR 295. On the other hand, Ld. DR relied on orders of authorities below. 8.1 We have considered the rival contentions and perused the material on record. The Ld. Counsel for assessee submitted that since it was a commercial transaction and similar transactions were entered into in earlier and subsequent assessment year and no addition have been made on account of deemed dividend against the assessee, therefore, rule of consistency do apply. The assessee further claimed that the assessee has entered into an agreement to sell with M/s. Ramsan Communication Limited for sale of the in....
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....nce of Rs. 3,00,000/- on account of labour charges. 10. The assessee furnished the details of month wise labour charges incurred by him. From the details it was observed that expenditure has suddenly increased many fold in the month of March, 2011. The assessee explained that he is in business of electrification of Government department. For this, the assessee receives contracts/ tender from Government and because of this kind of business, there are quite variations in amount received from them/ sale-proceeds and the labour and contract staff expenses. It is difficult to correlate the expenses from one month to another. Also, in this kind of industry in which the assessee works, involves a lot of contractual work with the people working under unorganized sector. The assessee makes advance payments to the contractors on a monthly basis and deducts TDS. However, the expenses can only be booked when the invoice is received by the assessee. The Assessing Officer, however, in the absence of documentary evidence such as invoices or bills raised by the said contractor disallowed Rs. 3,00,000/-. The Ld. CIT (A) on the same reasoning confirmed the addition because most of the payments a....
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....n of Sub-Station Equipments, Transformers, HT Panels, Earthing System, Safety Equipments, Emergency M. V. Panel etc. The Assessing Officer, however, did not accept explanation of assessee. The Assessing Officer noted that assessee has not been able to justify the payments on the basis of any services rendered by the persons to whom commission is being paid. The presentation is routine function. There is no agreement between the parties. It is not explained such services have been rendered and same is not supported by any evidence. Further commission is paid to the commission agents for procuring orders from Government agency which is not allowable as per explanation to section 37 (1) of the IT Act. The Assessing Officer accordingly disallowed the entire amount of the commission paid. The Ld. CIT (A) on the same reasoning also confirm the addition. 15. The Counsel for the assessee reiterated the submission made before the authorities below and submitted that the details of payment to the commission agents were filed and explained that there is no relation between assessee and the commission agents. The similar commission payment was paid in earlier year as well as in subsequent ye....
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.... of the revenue are dismissed." 16. On the other hand DR heavily relied on the orders of the authorities below. 17. We have considered the rival submissions and perused the material available on record. It is a settled law that disallowance of expenses would not be made on assumption and presumptions. The burden is upon assessee to prove the fact that services have been rendered by the commission agents in the course of business of the assessee. In the instant case, there is no dispute that the assessee worked with the various government agencies. The assessee is an individual and carrying on business of electric, contractor in the name of M/s. S. L. Enterprises prop. concern. The assessee has shown better GP and NP in assessment year under appeal as compared to earlier year. The Assessing Officer considering the same accepted the financial results of the assessee. The assessee explained that in the nature of the business of the assessee, commission agent to represent him before various agencies for getting the work and to complete the work by giving presentation before the different agencies of the government. The assessee explained that the commission was paid to various part....