AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 295
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..... Whether the Ld. CIT(A) erred in not appreciating the AO's efforts to pierce the corporate veil of working out the share of the assessee firm directly and indirectly in the company which has advanced the loan to the firm. 5. Whether the Id. CIT(A) is correct in not appreciating that the provisions of section 2(22 (e) are to be followed in letter in spirit, and need to be applied by digging out the shares indirectly held by the partners of the assessee firm through another corporate entity, to work out the total percentage of shares held by the partner of the assessee firm in the company advancing loan to the assessee firm. 6. Whether the Ld. CIT(A) is correct in not appreciating that the AO has disallowed the expenditure by pointing out the discrepancies in bills etc, raised by the commission agent and Ld. CIT(A) has not given cogent reasons for accepting the genuineness of the evidence as claimed by the assessee. 7. Whether the Ld. CIT(A) erred in law and. in the facts by deleting the addition of Rs. 4,58,10,307/- made by the AO on account of deemed dividend u/s 2(22)(e) of the LT. Act, 1961 by not considering the facts that the loan advanced from M....
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....to the remand report. In this case the Assessing Officer has passed assessment order after taking on record reply of assessee vide dated 18.03.2016 but the assessee was not allowed to submit any explanation regarding his observations in last para at page 6 of assessment order. Be that as it may, the assessee carried the matter before ld. CIT(A) and availed opportunity to file additional evidence under rule 46A of the Rules by stating that the assessee was not provided due opportunity to produce documentary evidences by the Assessing Officer. Although the Assessing Officer in the remand report objected to the admission of additional evidence but did not comment on the merits of the additional evidences and cause shown by the assessee which prevented the assessee from filing relevant documentary evidences before the Assessing Officer. Therefore in our humble understanding the ld. CIT(A) has not flouted the provision of rule 46A of the Rules, rather he has properly followed the said rule before admitting and considering the additional evidence. Therefore no interference is called for in the order of ld. CIT(A) in this regard. Accordingly, the grounds no. 1 to 3 are dismissed. Groun....
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....he submissions of the appellant and the comments of the AO in the remand report. As per provisions of section 2(22)(e), dividend includes any payment by a company not being a company in which the public are substantially interested of any sum whether: a) by way of advance or loan to a shareholder being a person who is the beneficial owner of shares holding not less than 10% of the voting power or b) to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereinafter in this clause referred to as the said concern) or c) 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. 6.9 The objection of the AO is that Sh Jai Prakash Singhal was holding 9.18% shares in RBRL Agro Commodities Limited and 9.38% in Amrit Polyplast Pvt. Ltd. At the same time, M/s Amrit Polyplast Pvt. Ltd was holding 19.016% shares in RBRL Agro Commodities Limited. The AO has considered the beneficial shareholding of Sh Jai Prakash Singhal on the basis of proportionate shareholding of M/s Amrit Polyplast....
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....ng such beneficial owner, whichever is later, make a declaration to the company specifying the nature of his interest, particulars of the person in whose name the shares stand registered in the books of the company and such other particulars as may be prescribed. c) The Hon'ble Delhi High Court has discussed the issue of registered owner and beneficial owner of shares in the case of CIT vs National Travel Services [2011 202 Taxman 327 (Delhi). The High Court has held that if the partnership firm which purchased shares is not treated as shareholder merely because of the legal compulsion, the shares could not be allotted to the said partnership firm. It was a non-legal entity and is not a person capable of being a 'member' within the meaning of s. 47 of the Companies Act. Obviously then, with the purchase of shares by the firm in the name of its partners, the partnership firm was not a registered shareholder and being a beneficial owner, the said firm was to be treated as shareholder. 6.10 In view of this, it is held that AO has wrongly considered the shareholding of M/s Amrit Polyplast Pvt. Ltd in the shares of M/s RBRL Agro Commodities Limited as the b....
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....sked the assessee LLP to infuse funds by way of unsecured loan and not to withdraw the same from the business till the pendency of the Bank Loan. As a matter of business compulsion, the assessee took an inter-corporate deposit from its business associate RBRL Agro Commodities Limited out of commercial expediency to meet the conditions imposed by Allahabad Bank. The assessee has submitted a photocopy of resolution passed by the Board of Directors of RBRL Agro Commodities Limited on 20-05-2012, a copy of Loan agreement executed between the two parties, a copy of account of the said company (RBRL) from the books of the assessee and a set of audited final account of the said company (RBRL). 6.14 Further the assessee has submitted that Sh Jai Prakash Singhal along with his family members had mortgaged their personal properties with the State Bank of Mysore for taking credit facilities of Rs. 32.50 Crores for RBRL Agro Commodities Ltd. They had also given personal guarantees to the bank for the benefit of the company. Thus the arrangement between the assessee and the company was merely for the sake of convenience arising out of business expediency. A photocopy of Bank Sanction L....
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.... of the word 'advance' in section 2(22)(e) of the Act. 6.19 Keeping in view the Circular No 19/2017 dated 12^th June 2017 read with decision of the Apex Court in the case of 'S.A. Builders Vs. CIT (2007) 288 IT 1 (SC), I hold that the trade deposit being a business/commercial transaction carried out of commercial expediency did not amount to a loan or advance as envisaged in section 2(22)(e) of the Income Tax Act in the hands of the assessee LLP. 6.20 Therefore, the addition of Rs.4,58,10,3071- made on account of deemed dividend under section 2(22)(e) of the Income Tax Act in the hands of the assessee is deleted and ground of appeal no. 1,1.1, 1.2, 1.3 & 1.4 are consequentially allowed. 9. From the assessment as well as remand report of the Assessing Officer, we note that the objection of the Assessing Officer was that Shri Jai Prakash Singhal was holding 9.18% shares of M/s. RBRL Agro Commodities Ltd. and 9.38% share in Amrit Polyplast Pvt. Ltd. similarly M/s. Amrit Polyplast P. Ltd. was holding 19.06% share in RBRL and considering the beneficial share holding of Shri Jai Prakash Singhal on the basis of propionate share holding of M/s. Amrit Polypl....
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..... Lakra Brothers (supra) and submitted that the amounts was advanced during the ordinary course of business under business/commercial expediency then such advance cannot be treated as loan an advance and cannot be treated deemed dividend u/s. 2(22)(e) of the Act. In the present case the assessee being a LLP received unsecured loan from RBRL and the Assessing Officer invoked provisions of section 2(22)(e) of the Act and made addition of Rs. 4,58,10,307/-. 12. The ld. CIT(A) considered that factum of obtaining loan from bank by the RBRL under mortgage of immovable properties of Shri Jai Prakash Singhal and his family members and their personal guarantee and thereafter held that the loan advanced by the company to share holder in compensation of shareholder mortgaging his immovable property for enabling company to secure bank loan cannot be treated as deemed dividend u/s. 2(22)(e) of the Act. The conclusion drawn by him also gets support from the CBDT Circular dated 12.06.2017 (supra) and judgement of Hon'ble Supreme Court in the case of SA Builders vs. CIT wherein it was held that what is to be seen as to whether the assessee advanced loan to its sister concern or a subsidiary as ....
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....irst appellate order submitted that the Assessing Officer made additions by observing certain baseless allegation against the assessee and the ld. CIT(A) deleted the same after correct and justified appreciation of facts and circumstances under which the assessee paid brokerage to the broker towards purchase of goods and packing material and on sales therefore the first appellate order may kindly be upheld. 16. On careful consideration of above submission, we note that the Assessing Officer made disallowance of brokerage/commission paid by the assessee amounting to Rs. 30,48,657/- by observing that summons under section 131 of the Act were not comply and thus, verification of commission agent could not be made. He also pointed out that party name was not mentioned in the brokerage bills, the concern was not existed on the given address, quantities in metric tones are always in round figures, assessee kept on paying commission to same party on a regular basis and commission was paid to two different parties for purchase made from the same party and figures appearing in the bills were not propionate to the rates and quantity. 17. During first appellate proceedings the assessee ....