TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 1835
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.... the Act to the tune of Rs. 17,25,000/-, holding that deemed dividend would be attracted in the hands of the Directors being the shareholders and not in the hands of the assessee company, who is not a shareholder." 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting deemed dividend in the hands of the assessee company which received the accumulated profits under the garb of loan. The CIT(A) failed to appreciate Explanatory Notes on the provisions of Finance Act, 1987 given in Circular No.495 dated 22-09-1987 which clarified that amendment to section 2(22)(e) has been brought to plug the loophold of the closely held company not distributing profits to "shareholders" but distributing the accumulated profit by way of advance or loan to a "concern" in which shareholder has substantial interest i.e. the assessee company in the present case. The CIT(A) erred in interpreting that assessee company not being shareholder of lender company is not covered u/s. 2(22)(e)." 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred by failing to follow the "mischief rule" of interpretation and did not take into account the rationale b....
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..... Against the same, expenditure of Rs. 17.82 Lacs as claimed by the assessee in Profit & Loss Account was allowed and balance amount of Rs. 74.37 Lacs was treated as income of the assessee. In other words, the income from the contract was worked out to Rs. 74.37 Lacs as against Rs. 18.78 Lacs reflected by the assessee. 2.4 The second addition stems from the fact that the assessee received unsecured loan of Rs. 17.25 Lacs from an entity namely Best Roadways Limited. It was noted that two individuals namely Jai Kumar Gupta & Suman Gupta who had substantial interest i.e. shareholding of more than 20% each in the assessee company had shareholding of more than 10% each in the lender company. The aforesaid fact led the Ld. AO to invoke the provisions of Section 2(22)(e) and accordingly, the stated amount was added as deemed dividend in the hands of the assessee company. 3. Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 14/02/2013 wherein the assessee agitated the impugned additions by way of written submissions which have already been extracted in the impugned order. The assessee submitted that there was significant uncertainty in re....
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....ellant that a mere mention in the Directors Report to the shareholders of a turnover of Rs. 422 lakhs does not substantiate recognition of the said income. It is worth noting here that the AO has computed income based on the work-in-progress of Rs. 4,57,95,049/- and has computed income on the said figure. 3.11 I am inclined to agree with the contention of the appellant that only the income, which accrues or is deemed to accrue during the year under consideration can be, included in the total income of the appellant. The appellant has, in this regard cited various decisions including the judgment of the Hon'ble Patna High Court in the case of CIT v/s. Chanchani Brothers (Contractors) Pvt. Ltd (supra). These decisions support the argument of the appellant that the additions could not be made only on the basis of the disputed bills and the income can be deemed to accrue to the appellant only when such disputed bills are paid by the contractee. 3.12 In the case of CIT v/s. Dhampur Sugar Mills Ltd (No. 1) (supra), Hon'ble Allahabad High Court held that since the right to receive the payment had been in dispute, it therefore does not form part of the trading receipt of the assess....
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..... CIT(A), the revenue is in further appeal before us. 4. Rival contentions have been heard and perused. So far as the estimation of net profit is concerned, we find that it is undisputed fact that the assessee was having difficulty in realizing the dues from the aforesaid contractee which is evident from consent terms dated 21/02/2009 as approved by Hon'ble Bombay High Court and contempt petition filed by the assessee against the aforesaid entity for not honouring the terms of the consent terms by the contractee. These facts give credence to the arguments of Ld. AR that there was significant uncertainty as to the recovery of the final amount and the income, under the circumstances, could not be recognized with reasonable certainty. No defects have been found in the books and therefore, the action of the assessee in estimating the income @10% of capital work in progress could not be said to be without strong foundation. Therefore, we find no infirmity in the order of Ld. first appellate authority in deleting the estimated additions as made by Ld. AO. 5. So far as the addition of deemed dividend u/s 2(22)(e) is concerned, nothing on record suggest that the assessee company was regi....
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....lders both in the assessee-company and Indev Logistics Pvt. Ltd. Therefore, quite correctly, as noted by the Tribunal, though, the advance received by the assessee company may have been for the benefit of the aforementioned registered shareholders, it could only be assessed in the hands of those registered shareholders and not in the hands of the assesseecompany. 4.4 In our view, on a plain reading of the provisions of Section 2 (22)(e) of the Act, no other conclusion can be reached. As a matter of fact, a Division Bench of this Court, in the case of Commissioner of Income Tax v. Printwave Services P. Ltd., (2015) 373 ITR 665 (Mad.), has reached a somewhat similar conclusion. 5. Mr. Senthil Kumar, however, contends to the contrary and relies upon the judgment of the Supreme Court in Gopal and Sons (HUF) v. Commissioner of Income-tax, Kolkata-XI, (2017) 77 taxmann.com 71 (SC). 5.1 In our view, the question of law considered by the Supreme Court in the case of Gopal and Sons (supra) was different from the issue which arises in the present matter. The question of law which the Supreme Court was called upon to consider was whether loans and advances received by a HUF could be dee....