TaxTMI 
TaxTMI 
2020 (12) TMI 1152
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....t on the facts and in the circumstances of the case and in the law the AO has erred in assessing the income of the appellant at Rs. 20,73,000/-, instead of Rs. 3,17,460/- returned. As such aggregate estimated additions of Rs. 17,55,535/- may please be deleted. 3. The learned assessing officer has erred in making an addition of Rs. 13,21,198/- on account of deemed Dividend as the assessee had taken unsecured loan for business purpose, as he was in need of funds for running the business properly and its sister concern had liquid funds at that time. It was a prudent business practice on the part of the assesse in borrowing funds from its sister concern at a lower rate of 12% than to borrow funds from outside market at the rate of 18% p.a. or....
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....of the Act) 4. During the course of assessment, the Assessing Officer noticed that assessee company has obtained unsecured loan of Rs. 16,28,000/- during the year from Gaurav Securities Pvt. Ltd. On clarification of the detail filed, the Assessing Officer noticed that Shri Umesh Shayamsundar Bhatiya who was the main shareholder of the assessee company was also holding substantial shareholder in the Gaurav Securities Pvt. Ltd. from whom the assessee has obtained the loan. It was also noticed from the annual account of the assessee company that there was accumulated profit of Rs. 13,21,198/- as on 31st March, 2012. In view of the above facts, the Assessing Officer observed that section 2(22)(e) of the Act prohibits advancing of loan to the p....
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....holding substantial shares in Gaurav Securities Pvt. Ltd. Looking to the above facts, the Assessing Officer has made an addition to the extent of Rs. 13,21,198/- being accumulated profit of Gaurav Security Pvt. Ltd. for the reason that section 2(22)(e) prohibits advancing money among entities having common shareholders with substantial interest in the case of closely held company having accumulated profit. After perusal of the judicial pronouncements it is noticed that identical issue on common facts have been adjudicated by the Co-ordinate Bench of the ITAT Ahmedabad in the case of ACIT vs. Leela Ship Recyling Pvt. Ltd. vide ITA No. 1658/Ahd/2012 dated 12th March, 2020 and by the Jurisdictional High Court in the case of Pr. CIT vs. Mahavir....
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....ided in favour of the assessee after following the decision of Bombay High Court in the case of CIT vs. Impact Containers Pvt. Ltd. and others vide IT Appeal No. 114 of 2012 and the decision of Delhi High Court in the case of CIT vs. Ankitech Pvt. Ltd. Ltd. reported in 340 ITR 14 Delhi. The relevant part of the decision is reproduced as under:- "50. Identical question came to be considered by the Division Bench of this Court in Tax Appeal No. 253 of 2015. After considering the decision of the Bombay High Court in the case of CIT vs. Impact Containers Private Limited & ors rendered in I TA No. 114 of 2012 and the decision of the Delhi High Court in thecase of CIT vs. Ankitech Pvt Lt d reported in 340 ITR 14 (Del) and on interpreting Sectio....
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....m loan was given, it cannot be said that the learned Tribunal has committed any err or in deleting the addition made by the Assessing Officer on deemed dividend." In view of the findings as supra Hon'ble Jurisdictional High Court wherein it is held that for the applicability of section 2(22)(e), it is required that the assessee company must be a shareholder in the company from whom the loan or advance has been taken and it does not provide that any shareholder in the assessee company who had taken any loan or advance from another company in which such shareholder is also a shareholder having substantial interest. Since the facts of the case of the assessee are squarely covered by the aforesaid decisions of Hon'ble High Court and Coordinate....
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....tivities at the premises, therefore, there is no question of making disallowance out of office expenses. On the other hand, ld. Departmental Representative has supported the order of lower authorities. 11. Heard both the sides and perused the material on record. At the time of assessment, the Assessing Officer noticed that assessee company has incurred various expenses amounting to Rs. 8,47,692/- being office expenses, telephone expense, office electrical expenses, municipal taxes, depreciation of furniture and fixture, depreciation of office equipment and depreciation of office building etc. The Assessing Officer was of the view that the associated concern of the assessee M/s. Gaurav Securities Pvt. Ltd. has shared the same address theref....