TaxTMI 
TaxTMI 
2021 (9) TMI 132
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....s return of income salary income in the capacity of directors of two companies namely Biotech Vision Clear Pvt. Ltd. and Biotech Opthalmics Pvt. Ltd. as under:- Nature of income Amount Name of the Company Name of the Company Salary- 60,00,000 Biotech Vision Care Pvt. Ltd. Salary 19,20,000 - Biotech Opthalmics Pvt. Ltd. On perusal of the detail filed by the assessee, the Assessing Officer noticed that assessee has withdrawn a sum of Rs. 1,67,53,246/- from salary account at the end of your and the account has been squared up by a journal entry. The Assessing Officer has also noticed that in the account name "Mehul Asnani Expenses Account" a debit of Rs. 29,29,006/- was shown and the same had been squared up by a journal entry. The Assessing Officer noticed that with Biotech Vision Clear Pvt. Ltd. the assessee was having one more account in the nature of "Mehul Asnani-WIP" wherein a debit balance of Rs. 69,71,646/- was squared by a journal entry. The assessee was asked to explain the nature of the journal entries made in salary account, expenses account as well as WIP account. The assessee has explained the same as under:- "1. Vid....
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....on to the same the assessee would like to state that no portion of amount relates to the assessee." As regards the salary account, the assessee stated that he had withdrawn various advances from salary during the year and the final amount payable by the company was adjusted against such advances taken by the assessee. The Assessing Officer was of the view that assessee had offered salary income of Rs. 60 lacs from Biotech Vision Care Pvt. Ltd. but he has withdrawn total amount of Rs. 1,67,53,246/- and Rs. 29,29,006/- from salary account and expenses account. Therefore, extra amount withdrawn was treated as deemed dividend u/s. 2(22)(e) of the act. Similarly, the debit balance in Mehul Asnani WIP of Rs. 69,71,646/- pertained to the purchasing of building in the name of the assessee by company out of their fund, the Assessing Officer has also treated this amount of Rs. 69,71,646/- as deemed dividend u/s. 2(22)(e) of the Act. Therefore, the Assessing Officer concluded that assessee has earned deemed dividend in excess of salary income to the amount of Rs. 2,06,53,898/- Rs. 1,07,53,246/- (1,67,53,246 - 60,00,000) + 29,29,006/- + Rs. 69,71,646/- as deemed dividend and added to the to....
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....hat advance was against salary and same afterthought cannot be accepted. It is pertinent to note that during year under consideration Appellant has received total salary of Rs. 2.25 crores including incentive of Rs. 1.65 crores from Bio Tech Vision Care Pvt. Ltd and such amount is already offered to tax. The above Company has also deducted TDS of Rs. 67,95,559 on above payment, it is observed that similar issue was raised in case of Appellant in A.Y. 2010-11 wherein my predecessor CIT(Appeals) has decided the issue in favour of Appellant by holding as under "4.3 In the assessment order, A.O. observed that the appellant was director in two opportunities namely Bio Tech Vision Care Pvt. Ltd. and Bio Tech Ophthalmic Pvt. Ltd.; he had withdrawn huge amounts on various occasions from Biotech Vision Pvt. Ltd.; he was holding and beneficial owner of more than 94.92% shares of the said company throughout the year; he had also received salary from the said company; the amounts drawn by him from the company were adjusted against the salary by passing journal entries on the last day of the financial year i.e. 31.03.2010; the company had free reserves of more than 25 Crores as on 01.0....
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.... paid tax on the salary and incentive received by him; taxing the same amount as deemed divided would result in double taxation; the case laws relied on by the A. & were on diffefent~set_of 7acts and are distinguishable from the facts of the instant case; AO's observation that tax of Rs. ~67,25,5357- was deducted in December, 2010 is factually incorrect; the tax was deducted duly on 31.03.2010, but was remitted to the government along with interest in December, 2010; the tax deducted was duly accounted for in the books of account as on 31.03.2010; the TDS was included in the current liabilities appearing on the credit side of the balance sheet; as on 31.03.2010 appellant's account in the books of the company shows credit balance of over Rs. 10 lacs, which shows that appellant was to receive such amount from the company; this proves that the adjustments of the advances against salary and incentive was bona fide and not an afterthought and therefore impugned addition made by the A.O. on assumptions was unwarranted. 4.5 Having considered the facts of the matter, I am inclined to accept the contentions of the Id. A.R., Appellant was paid salary of Rs. 5 lacs per month ....
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.... favour of the appellant Further, it is seen from the return of income filed by the appellant for the year under consideration that he had admitted salary income (including the incentive) of Rs. 2,77,65,484/- from Bio Tech Vision Care Pvt. Ltd. Besides he had admitted salary income of Rs. 19,20,000/~ from Bio Tech Ophthalmic Pvt. Ltd. Thus the salary admitted totaled up to Rs. 2.96,85,484/-. This fact was mentioned by the AO at para 3 of the assessment order. The contention of the Id. AR (that the taxing the salary and incentive already admitted by the appellant in the return of income once again as dividend income u/s 2(22)(e) would lead to taxing the same amount twice) is tenable. 4.7 In view of the forgoing discussion, impugned addition made by the AO u/s 2(22)(e) is not sustainable. It is deleted. This ground of appeal is allowed." The facts of the year under consideration are similar to the facts of preceding Assessment Year hence ratio of above decision squarely applies to Appellant's case. It is pertinent to note that advance received from Company and treated as deemed dividend was adjusted against salary and incentive and on identical facts Hon'ble....
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....ment of Rs. 60,00,000/- there is no reason for not allowing adjustment of incentive payment adjusted against above referred advances. It is also observed that Assessment Order in case of above referred company was also passed on 31st March, 2016 (as submitted by Appellant in paper book), salary as well as incentive payments made to Appellant is accepted as such in such order. Considering the above referred facts addition made by Assessing Officer for Rs, 2,06,53,838/- is deleted. These grounds of appeal are allowed." 5. During the course of appellate proceedings before us, the ld. Departmental Representative contended that no resolution for giving incentive to the director was passed by the companies. The ld. Departmental Representative has submitted that assessee has withdrawn the amount as advance and the entries was squared up by the journal entries of incentives. Therefore, he has contended that the amount of advances to the assessee is fallen within the scope of the deemed dividend under the provision of section 2(22)(e) of the Act. The revenue has placed reliance on the decision of Hon'ble Supreme Court in the case of Smt. Tarulati Shyam Vs. CIT (1977) 108 ITR 345 (SC) and....
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....again adding the same amount u/s. 2(22)(e) has resulted into double addition in the case of the assessee. The assessee had paid tax on the salary and incentive received by him, taxing the same amount as deemed dividend would result in double taxation. The case laws relied upon by the revenue were of different set of facts are distinguishable from the facts of the instant case. We have also gone through the copy of income tax return filed by the assessee for the year under consideration placed in the paper book. On page no. 15 of the paper book pertaining to computation of total income it is noticed that assessee has shown the income from salary from both the companies as under:- Computation of Total Income Income from Salary (Chapter IVA) 37749564/- Bio Tech Vision Care Pvt. Ltd. 305, Asiatic Trade Centre, AHMEDABAD GUJARAT Salary 6000000 Incentive 29831964 35831964 BIOTECH OPHTHALMICS PVT. LTD 305, ASIATIC TRADE CENTRE, &nb....