TaxTMI 
TaxTMI 
TaxTMI 
2020 (6) TMI 290
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.... to be considered whereas the amount of advances which was received by the assessee from its subsidiaries was rightly treated by the Assessing Officer as deemed dividend. 2. The ld. CIT(A) has erred in deleting the addition of Rs. 24,25,168/- being transaction with EDP Software Ltd. ignoring the fact that the assessee is holding all the shares of the above said company which needed to be considered, whereas the amount of advance which was received by the assessee from its subsidiaries was rightly treated by Assessing Officer as deemed dividend. 3. That the appellant craves leave to add, delete or modify any of the grounds of appeal before or at the time of hearing. 3. Ground No. 1 raised by the Revenue relates to addition of Rs. 2,88,30,842/- being the transaction with E-edit Infotech Pvt. Ltd; treated by assessing officer as deemed dividend u/s 2(22) (e) of the Act. 4. Facts of the case which can be stated quite shortly are as follows:The assessee company filed its return of income for the assessment year under consideration declaring total income of Rs. 79,51,000/-. Subsequently, assessment order u/s 143(3) of the Act was passed wherein Assessing Officer has treated Rs. 3,1....
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....- with respect to amount received from E- Edit Infotech Pvt. Ltd., 1 find that the appellant was maintaining two ledgers for E-Edit Infotech Pvt. Ltd., one with respect to sale of immovable property and second one, being in the nature of current account. This is even evident from the assessment order wherein at Page 6, the Ld. Assessing Officer has reproduced ledger copy of first nature of transactions and at Page 7 to 9, wherein he has reproduced ledger copy of second nature of transactions. The Assessing Officer has separately calculated peak credit for both the types of transactions and applied the provisions of section 2(22)(e) of the Act. Ld AR emphasized that the money advanced to the assessee co. by EIPL is either an advance for property and current account transaction or a loan. If it is an advance for property then it is a business advance and therefore section 2(22) (e) would not apply. The AR argued that alternatively if it is a loan then since substantial part of the business of the lending company is granting of loan and hence section 2 (22) (e) would not apply. Ld AR also pointed out that the assessee is subsequently paying interest on this loan/business advance amo....
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....t in the books of EDP Software Ltd as on 31.03.2011. At this juncture it is relevant to mention here the written submissions furnished by the assessee before the ld CIT(A) in respect of accumulated profit in the books of EDP Software Ltd as on 31.03.2012: "Debit Balance of profit & loss account of EDP Software Ltd. was Rs. 10,60,332/-. Break up of Reserves & Surplus as on 31.03.2011 of EDP Software Ltd. is given below: Sl. No. Particulars Amount (Rs.) Amount (Rs. ) 1. Securities Premium Account 34,85,000 2. Debit Balance in Profit & Loss Account (33,55,749) 3. Add: Surplus / (Deficit) during the year 2011-12 22,95,417 (10,60,332) Total 24,25,168 It is further submitted that securities / share premium appearing under the head Reserves & Surplus cannot be construed as accumulated profits of the company as held by the Hon'ble Calcutta High Court in the matter of CIT, Kol-III vs. Shree Balaji Glass Manufacturing Pvt. Ltd. [2016] 386 ITR 128 (Calcutta) that where money was lent out of reserve and surplus representing share premium and not from accumulated profits, there cannot be deemed dividend in hands of recipient. Hence,....
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....ows: G. No. 1 That in the facts and circumstances of the case, the Learned Assessing Officer has erred in treating the entire accumulated profit as on 01.04.2011 for the purpose of section 2(22)(e) of Income Tax Act. The Learned Assessing Officer should have reduced the opening balance of advance received while making addition of Rs. 2,88,30,842/- under section 2(22)(e) of the Act. The Learned CIT (A) has erred in not discussing this issue while passing appellate order. G. No. 2 That in the facts and circumstances of the case, the learned assessing Officer has erred in treating the entire accumulated profit as on 01.04.2011 for the purpose of section 2(22)(e) of Income Tax Act. The Learned Assessing Officer should have reduced the opening balance of advance received while making addition of Rs. 24,25,168/- under section 2(22)(e) of the Act. The Learned CIT (A) has erred in not discussing this issue while passing appellate order. G. No. 3 That in the facts and circumstances of the case, the Learned Assessing Officer has erred in making addition of Rs. 1,84,509/- under section 2(22)(e) of the Act, on account of advances received from NathvarTracon (P) Ltd, since such am....
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....ore it is a current account and as per the ld. Counsel the addition u/s 2(22)(e) should not be made. As per the ld. Counsel for the assessee mere perusal of the ledger account placed on page no. 10 to 12 of the Assessment order, it is clear that the said account was for the purpose of doing business which was in the nature of current account wherein one can find debit entry and credit entry on several occasions which needs to be examined by the ld. CIT(A). Therefore, we are of the view that this matter should be remitted back to the file of ld. CIT(A) for fresh examination. We also make it clear that if the ld. CIT(A) having examined the ledger account finds that it is a current account, no addition is warranted as held by the Co-ordinate Bench of this Tribunal in ITA No. 1010/Kol/2016 for A.Y. 2012-13 in the case of M/s Snehapusph Barter Pvt. Ltd. wherein it was held as under: "2. We have heard rival submissions and gone through the facts and circumstances of the case. The main thrust of the argument of the Ld. Counsel for the assessee is that while exercising the revisional jurisdiction u/s. 263 of the Act, not only that the impugned order of the AO should be erroneous but it ....
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....d on 15.03.2012 the assessee had given Rs. 60 lacs to M/s. Subhchintak VancomPvt. Ltd. In the assessment year under consideration, the assessee had given to M/s. Subhchintak Vancom Pvt. Ltd. Rs. 2,44,25,000/- whereas it owed to M/s. Subhchintak Vancom Pvt. Ltd. Rs. 1,35,85,000/-. From the ledger, the assessee had only debited Rs. 1,35,85,000/- whereas M/s. Subhchintak VancomPvt. Ltd. has drawn Rs. 1,08,40,000/- in excess from the assessee. From the aforesaid facts stated above, according to ld counsel it is a clear case wherein there is a shifting of balance is apparent. On such factual matrix the assessee's argument is that such kind of transaction cannot be termed as loan/advance to attract the provisions of section 2(22)(e) of the Act. The Hon'ble Supreme Court in the case of Kesari Chand Jaisukh Lal Vs. Shillong Banking Corporation Ltd. 1965 AIR 1711 has held as under: "To be mutual there must be transactions on each side creating independent obligations on the other and not merely transactions which create obligations on the one side, those on the other being merely complete or partial discharges of such obligations." The Hon'ble Supreme Court in this context h....
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....ovisions of Sec.2(22)(e) of the Act will not be applicable to the case of the Assessee. We, therefore, concur with the decision of the CIT(A) and dismiss the appeal of the Revenue." 5. Similarly, the Coordinate Bench of this Tribunal in Mr. Purushottam Das Vs. DCIT and vice versa in IT(SS)A Nos. 60 to 62 & 73-76/Kol/2011 dated 17.10.2014 has held as under: "5. ........ It is pertinent to note here that when dividends are declared by a company, it is solely the shareholders who benefit from the transaction. No benefits accrue to the company by way of dividend distribution. Thus, section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. In the case of the assessee, by giving and taking financial assistance from each other. both the assessee and the company were benefited and such transactions between them were nothing but commercial transactions and dividend attributable to the shareholder is nothing to do with such business transaction. From the above discus....
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....e Supreme Court in Keshri Chand Jaisukh Lal, supra and Hon'ble Calcutta High Court in Pradip Kumar Malhotra, supra, we note that sec. 2(22)(e) of the Act is not attracted in the transaction with M/s. Subhchintak VancomPvt. Ltd. It should be remembered that for exercising revisional jurisdictional the Pr. CIT should find that the order of the AO is not only erroneous but also it should be prejudicial to the interest of revenue. It should be kept in mind that the assessee cannot dictate the AO how to pass the order or to ask how to investigate or what question to ask or what should be enquired into. We also note that a search warrant was executed in the case of the assessee on 15.06.2011 and search happened in the assessment year under consideration and, therefore, scrutiny u/s. 143(3) of the Act was framed. All the records including all the books of account were before the AO. Appraisal report prepared by the Investigation Wing was also before the AO. In the original assessment order itself in para 4 the AO notes that assessee has been served notice u/s. 143(2) and 142(1) of the Act along with the questionnaire dated 31.12.2012. The AO notes that the assessee's AR appeared....