AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (3) TMI 463
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.... to hold that the appellant received an amount of Rs. 83, 00, OOO/- in the form of loans/ advances from PASPL. 3.Ld. CIT (A) erred in law and on facts in holding receipt of Rs. 83,00, 000/- as deemed dividend on the basis of the appellant being a shareholder of a company advancing the amount & secondly in absence of any business being transacted between the two entities. 4.Ld. CIT (A) erred in law and on facts confirming addition made by AO not appreciating the fact that there is no applicability of Sec 2 (22)(e) of the Act without there being any transaction of security deposit with the user of the property during the year under consideration. 5.Ld. CIT (A) erred in law and on facts confirming addition made by AO of Rs. 83,00, OOO/- as deemed dividend though AO himself estimated ALV &assessed additional rental income but refused to acknowledge the security deposit for the same rented premises retained by the appellant. 6.Levy of interest u/s 234A/ 234B/234/C & 234D of the act is not justified. 7.Initiation of penalty proceedings u/s 271 (l)(c) of the Act is not justified. 3. It was noticed that assessee company has taken loan of Rs. 83,00,000/- from M/s. Patel Alloy Ste....
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.... no gas. Accordingly, an agreement was executed between the assessee and its sister concern whereby generators were supplied by the assessee for which a floating security deposit of Rs. 80 lacs was given by the sister concern. In this agreement, the sister concern was to use the generators and generate electricity on the basis of the gas supplied by the GAIL. In return, the sister concern would supply electricity to the assessee at concessional rate. The deposit was made by the sister concern to the assessee in the ordinary course of business. The assessee firm is not a shareholder in the Company though its partners are shareholders in the Company. The payment received by the assessee was utilised for payment to the creditors from whom the assessee had purchased the raw material for manufacture of its products and other statutory liabilities. 4.The assessing officer did not agree with the contention of the assessee that the amount received by the assessee from its sister concern was a security deposit for the loan of the generator. The assessing officer held, that even though the relationship between the assessee firm and its sister concern was symbiotic and not unilateral since ....
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....member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)] or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; (ii) any advance or loan made to a shareholder [or the said concern] by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company; From a perusal of the aforesaid provision "dividend" includes any payment by a Company by way of advance or loan to a shareholder or to any concern in which such holder is a member or a partner and in which he has a substantial interest would be a deemed dividend, but such dividend would not include any advance or loan made to a shareholder by a Company in the ordinary course of its business. 8.The essential ingredient is a "loan" or an "advance" to a shareholder or to a concern in which such shareholder has a substantial interest. Under this provision a deemed fiction is created whereby the scope and ambit of dividend has been enlarged to cover "loan" and "advance" granted by....
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....f Income Tax vs. Sunil Chopra, (2011)201 Taxman 316(Delhi), Commissioner of Income Tax vs. National Travel Services, (2011)202 Taxman 327(Delhi), P.K.Badiani vs. Commissioner of Income Tax, I.T.R. 105 (SC)642, Sadhana Textiles Mills Pvt. Ltd. vs. Commissioner of Income Tax, I.T.R.188 (Bombay High Court) 318, M.D.Jindal vs. Commissioner of Income Tax, I.T.R. 164(Calcutta High Court)28, Commissioner of Income Tax vs. P.K.Abubucker, I.T.R. 259 (Madras High Court)507, Commissioner of Income Tax, Andhara Pradesh vs. C.P. Sarathy Mudaliar, I.T.R. 83 (S.C.)170. We find that the aforesaid decisions are distinguishable and not applicable as in these cases the advance was made to a shareholder and, therefore, a finding was given that it was a deemed dividend. 12.In Commissioner of Income Tax vs. Creative Dyeing and Printing Pvt. Ltd., 318 ITR 476, an advance was given to the said assessee by the sister concern, which held 50% of the share holding in the assessee concern for mordenisation project. The advance so given was adjusted against the dues for job work to be done by the assessee. The Delhi High Court held that it was a business transaction and the advance was not assessable as a....
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....ts advanced for business transactions do not to fall within the definition of deemed dividend under section 2(22) (e) of the Act. (CIT v.Creative Dyeing & Printing Pvt. Ltd. , Delhi High Court). ii. Advance was made by a company to its shareholder to install plant and machinery at the shareholder's premises to enable him to do job work for the company so that the company could fulfill an export order. It was held that as the assessee proved business expediency, the advance was not covered by section 2(22)(e) of the Act. (CITv. AmrikSingh, P&H High Court). iii. A floating security deposit was given by a company to its sister concern against the use of electricity generators belonging to the sister concern. The company utilised gas available to it from GAIL to generate electricity and supplied it to the sister concern at concessional rates. It was held that the security deposit made by the company to its sister concern was a business transaction arising in the normal course of business between two concerns and the transaction did not attract section 2(22) (e) of the Act. (CIT, Agra v. Atul Engineering Udyog, Allahabad High Court) 3. In view of the above it is, a settled p....