TaxTMI 
TaxTMI 
2025 (2) TMI 440
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....erred in supporting and simply confirmed the addition of Rs 90100000 on presumption that the fresh loan taken by Merino Industries Limited after repayment therefore the higher pick balance of loan account should be considered as deemed dividend in the hand of the assessee for the financial transaction between the assessee and its subsidiary company. 2. On the fact and circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) did not justify in confirming the addition of Rs 90100000 under section 2(22) (e) out of the total addition of Rs. 393410000 made by the Ld. Assessing Officer whereas the actual nature of the financial transaction between holding and subsidiary company was during the normal course of business in view of commercial expediency as the transaction which was actually on current account basis and there are also several transactions between the assessee and its subsidiary company and some occasions, the assessee has taken financial assistance from its subsidiary company and similarly on the some occasion the assessee has given financial assistance to its subsidiary company and the account for the financial transaction was squared ....
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.... on the basis of calculation available of the assessee on the market value and to give instruction to the Assessing Officer to adopt the basis for allowing deduction for the eligible undertaking under section 80IA (4) (iv) of the Act but the CIT(A) ignored to give specific order for determination of the deduction amount. 10. For that the learned Commissioner of Income Tax (Appeals) is not justified to ignore the deduction claimed by the assessee in the revised return of income tax. 11. For that the learned Commissioner of Income Tax (Appeals) is wholly unjustified for not giving the specific amount of deduction and he did not require any specific calculation from the assessee. 12. That the Appellant craves leave to add, alter or abrogate any grounds of appeal at the time of hearing." 2.1 The assessee has taken the following additional grounds of appeal: "1. That on the facts and circumstances of the case and in law, The hon'ble CIT(A) has erred both in facts and laws, in not considering to allow the Focus Market Scheme (FMS) of Rs. 86,72,177/- as non-taxable income which was not considered by the Learned Assessing Officer during the course....
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....ery validity of the assessment order, hence, the same is taken up first for adjudication. 4. The ld. counsel for the assessee has contended that the assessment order in question is null and void because the Assessing Officer has passed the impugned assessment order in respect of original return of income filed by the assessee, whereas, the assessee had filed revised return of income within the limitation period prescribed under the Act, however, the Assessing Officer failed to consider the revised return of income and even did not issue notice u/s 143(2) of the Act in respect of the revised return of income. Therefore, the assessment order passed in respect of earlier return of income was bad in law and not sustainable. The ld. AR of the assessee in this respect has made the following submissions: "1. Matter related to the Assessment order which is null and void under the law because of not considering the revised return filed by the Assessee within the stipulated due date under section 139(5)of the Income Tax Act 1961. (A). The Learned Assessing officer considered the original return which was filed by the assessee on 1st December 2014(i.e. on Monday which was....
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....5). The relevant portion of the para 6.1.1 of the CIT(A)'s order is attached herewith our additional paper books- Vide Page No -13 We argued before your honour that the assessment order is null and void because the assessing officer didn't consider our revised return as filed by your appellant company within the due date. It is settled law that the original return as filed earlier cannot form the basis of assessment whereas the revised return is filed. It is also to be noted that once the revised return is filed by the assessee, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment. We attached herewith the judicial pronouncement of Hyderabad ITAT in Shri Ashok Reddy Cheruvu Vs. Dy. Commissioner of Income Tax-1, International Taxation, Hyderabad dtd. 26th March, 2021. Kindly refer to para 4-Page No. 5 which related to the ground no 21 and the para no 10-(6 )of page no.12 and also para no 10 of page no 13 of the judicial pronouncement. We highlighted the portion of the decision for your kind reference and attached with our additional paper books under page No 14 to 26. The Hyderabad ITAT held tha....
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.... which the due date for furnishing the return of income was extended from 30.09.2014 to 30.11.2014 for assessment year 2014-15 for all purposes of Act. The ld. counsel has further placed reliance on section 10 of the General Clauses Act to submit that it is settled proposition of law that when due date falls on a date which happens to be a holiday, the due compliance can be made on the following working day and in that case, the due date will be the last working day and not the holiday. He in this respect has relied upon various case laws, the reference of which has been given in his written submissions as reproduced above. He therefore has submitt4ed that since 30.11.2014 was a Govt. holiday, hence the return filed on the next working day i.e. on 01.12.2014 was within the prescribed limitation period and further that the Assessing officer had accepted the same and did not reject it on the ground of limitation. The ld. counsel has further submitted that the revised return was filed by the assessee u/s 139(4) of the Act on 31.03.2016 which was also within the due date. That the Assessing Officer failed to take note of the revised return filed by the assessee. The Assessing Officer d....
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....has categorically held that the Assessing Officer was required to issue fresh notice u/s 143(2) of the Act after filing of revised return of income and that the previous notice issued on the basis of original return of income will not hold the field. The relevant part of the order of the Coordinate Hyderabad Bench of the Tribunal (supra) is reproduced as under: "7. We have given our thoughtful consideration to rival hearings qua assessee's petition dt.18.02.2021 seeking to raise the impugned additional grounds. It is not in dispute that he had canvassed the corresponding substantive ground Nos.7 to 9 before the CIT(A) to the very effect. It is thus clear that the impugned issue duly emanates form the lower appellate order not requiring any afresh factual examination. Coupled with this, learned co-ordinate bench decision in ITA No.22/Mds/2016 & CO No.56/Mds/2016 M/s. Yes & Yes Hitech Premier Homes India Pvt. Ltd. Vs. ITO Dt.19.06.2017; after considering honourbale apex court judgment in NTPC Ltd Vs. CIT (supra), holds that we can very well entertain such a pure question of law provided the relevant facts are already on record so as to determine the correct tax liability....
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.... into account for the purpose of making assessment. There is no dispute on this. But, it has not been said that the legal proceedings, validly initiated with reference to the original return, will get invalidated with the filing of the revised return of income. The enabling provision of sec. 139(5) provides an opportunity to the assessee to file revised return if the assessee discovers any omission or any wrong statement in the original return filed vi]«. 139(1). Having utilized such opportunity, the appellant cannot turn back and argue that the scrutiny assessment proceedings, initiated on the basis of the original return, do not survive. 7.4 Similarly, the other decisions in the cases of Niranjan Lal Ram Chandra and Machine Tool Corporation of India Limited, cited by the appellant, do not support the argument made by the appellant. Nowhere it is said that the validly initiated pending legal proceedings, on the basis of the original return, will die a natural death with the filing of the revised return. 7.5 As the scrutiny assessment proceedings were already pending (based on original return), there was no legal requirement to once again initiate the procee....
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.... multi storied buildings and sale of ITA Nos.1560 & 1597/Hyd/2019 plots. It was a submission that the AY 2012-13 was the first year of business of the assessee. It was a submission that the assessee had filed original return of income u/s.139(1) on 13.09.2012. There was a survey u/s.133A on 02.11.2012. The assessee had filed a revised return u/s.139(5) on 30.11.2012 disclosing an income of Rs. 5,67,630/-. It was a further submission that subsequently the second revised return was filed by the assessee on 26.02.2014 declaring Nil income. It was a submission that the AO had issued notice u/s.143(2) on 12.09.2013 in response to the return filed by the assessee on 30.11.2012. It was a submission that no notice u/s.143(2) was issued by the AO in respect of the revised return filed on 26.02.2014. It was a submission that once revised return was filed the earlier returns stands effaced. It was a submission that as no notice u/s.143(2) had been issued in respect of the return filed on 26.02.2014, the assessment was liable to be annulled. It was a submission that the assessment was getting time barred on 31.03.2015. It was a further submission that the factum of non-issuance of notice u/s.1....
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....s time limit is computed from the end of the financial year in which the return is furnished. It is mandatory for the issuance of notice u/s.143(2) in the event that the AO proposes to make assessment u/s.143(3). In the present case, the AO having not issued notice u/s.143(2) in respect of a valid revised return filed on 26.02.2014 and more so, the said return have not been treated as invalid, the consequential assessment is bad in law, in view of the principles laid down in the Hon'ble Supreme Court in the case of ACIT vs. Hotel Blue Moon reported in 321 ITR 362 (SC). Further, in view of the position in law that if a revised return is filed u/s.139(5) and if such return is a valid return then the assessment can be completed only on the basis of such revised return as has been held by the Hon'ble High Court of Orissa in the case of Orissa Rural Housing Development Corporation Ltd. reported in 343 ITR 316, the assessment is liable to be annulled. 6. In these circumstances, as notice u/s.143(2) has not been issued in respect of the valid revised return filed by the assessee u/s.139(5) on 26.02.2014, the consequential Assessment Order u/s.143(3) dated 30.03.2014 for t....
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....e the assessee had not filed original return of income. However, the case is that pursuant to filing of revised return of income, the Assessing Officer was supposed to take cognizance of revised return of income and the assessment order passed by the Assessing Officer in respect of original return of income neither can be treated as an order passed u/s 144 of the Act nor the same could be held to be a valid order as the same has not been passed in respect of valid/revised return of income filed by the assessee. Therefore, this legal issue is decided in favour of the assessee and against the revenue. The assessment order passed by the Assessing Officer is hereby quashed. 9. However, at the instance of the parties, we also proceed to decide the issues on merits also. Issue of Deemed Dividend: 10. All the Grounds of the revenue's appeal and Grounds No. 1 to 3 of the assessee's appeal pertain to issue of deemed dividend u/s 2(22)(e) of the Act. The assessee is aggrieved by the action of the ld. CIT(A) in sustaining the addition to the extent of Rs. 9,01,00,000/- out of the total addition made by the Assessing Officer of Rs. 39,34,10,000/- whereas, the revenue is aggrieved from....
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....ic provision of section 2(22)(e) of the Act, once the loan has been granted by the subsidiary company to its holding company, the provisions of section 2(22)(e) of the Act get triggered. He however observed that though as per the various case laws, there was an exception to the applicability of this rule if the loan was granted in the ordinary course of business. He further observed from the case laws that the Courts and Tribunal have enlarged the scope of exception from "ordinary course of business" to "normal/day to day course of business" or "cases where commercial expediency remain present". He however observed that in his understanding, the said overstretching was not justified and held that the provisions of section 2(22)(e) being deeming provisions should be strictly interpreted. He, therefore, rejected the contention of the assessee that the loan was given and taken in the normal course of business and out of commercial expediency only on the ground that he was not convinced with the proposition of law settled on this issue by his higher judicial forums including by the decisions of various High Courts and Tribunal. He also rejected the contention of the assessee that since....
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....ot be treated as loan or advance and further this sum has been given out of normal course of business and therefore falls outside the scope of deemed dividend. The fact in the appellant case is totally different as in this case there is no correlation between the loan taken by the appellant company and its dealing with the subsidiary. The AR of the appellant did not cite a single linkage or produced a single piece of evidence to prove that loan was given in ordinary course of business. Hence, this judgement is not applicable. * In the case of M/s Sree Krishna Gyanodya Flour Mills Pvt. Ltd. -vs. PCIT (Supra)the assessee company held substantial beneficial interest in SVPL. The assessee company has taken loan form its subsidiary company (i.e. SVPL) of Rs. 14.26 crores. The AO treated the same as loan and advances and held it to be as deemed dividend u/s 2(22)(e). However, in this case it is observed that the assessee company maintained regular account from where it is clearly visible that the assessee has taken loan/advance from SVPL, correspondingly, on many occasions it has given advance to SVPL. Thus there was a change of balance shown by the assessee. Therefore, it canno....
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....ties are benefited, then Sec. 2(22)(e) will not attract. Therefore, the decision was given in favour of the assessee. But coming to the present case only the appellant company is benefited by such transaction. Therefore, this case is also not applicable in favour of the appellant company. 2.3.4. In view of the specific provision of sec. 2[22] (e) and above mentioned judicial precedent it is amply clear that once the conditions specified in said sections are satisfied than the advance/loan has to be taxed as deemed dividend in the hands of the recipient. The only limitation or reprieve available to the recipient of the loan is that the above loan was granted by the lender company in the ordinary course of business. The Legislature in its wisdom has given only one circumstances or exception under which said loan or advanced cannot be taxed deemed dividend. This exception of loan given in ordinary course of business provided in the statute to protect the assessee's from genuine hardship from taking loan from any finance or NBFCS companies which also might be its related concern. Otherwise, any loan or advance given partake the colour of deemed dividend. 2.3.5. I ....
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....appellant company. Additionally, on perusal of the ledger balances it is evident that at most of the time the appellant had credit balance in the loan account i.e. loan taken was higher which itself suggest that the said loan was given for appellant sole benefit. The above facts clearly demonstrate that this loan transaction is purely in the nature of deemed dividend and not a loan or advance granted during normal course of business. 2.3.8 One of the contention raised by the AR of the appellant company is that the assessee has paid interest on the said loan received from the subsidiary and therefore this is a pure commercial transaction. The above submission of the AR does not impress me as the provision of Sec. 2(22) (e) is very clear in this regard. Once the loan is granted and other conditions are fulfilled the provision of Sec. 2(22) (e) triggers. The fact that interest is paid on said loan is immaterial in deciding the taxability. The above view finds support from the decision of Calcutta HC in NandlalKanoria -vs.- CIT reported in [TS-5254-HC- 1979-CAL) where the Hon'ble Court has categorically held that payment of interest does not mean that loan does not confer ....
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....bsidiary company already passed the resolution in the Board of Directors for such transaction which was for financial or accommodation under the current for fulfilling the business need for the company. We attached the respective resolution (Minutes of the Meeting) in the additional paper book in page no 39 & 40. Your appellant company has taken money under the current account from the subsidiary company, namely M/s Merino panel Products Limited which is now amalgamated with your appellant company as per order of NCLT, Bench, Kolkata. It is also to be noted that your appellant company provided money also to subsidiary company on some occasions for which the separate ledger is attached with our additional book as already filed. We attached again herewith the above-mentioned transactional ledger account for kind reference. Vide page 41 to 45. The Transactions between both companies under current account which is absolutely for maintaining the need of business under the running transactions during the financial year. It is also to be noted importantly that balance of the running transaction is squared off fully at the end of the financial year in the books of appellant company as well....
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.... which was held by the CIT(A) on assumption and mechanical basis for deemed dividend is to be deleted in the interest of justice. (D) Your honour is requested to kindly refer to the decision of the ITAT of Bench "B", Kolkata in the matter of MIS Sree Krishna Gyanodya Flour Mills Pvt. Ltd. Vs. Pr. Commissioner of Income Tax, Central, Kolkata-2 in which the Hon'ble bench "B" Kolkata squarely covered and held that the transactions which represents as several occasions as taken place during the financial year which is in nature of current account transactions therefore deemed divided is not applicable. We again attached herewith the above judicial pronouncement Vide page No - 59 to 64. Your kind attention is also invited to the decision of ITAT bench "B" Delhi M/s Exotica Housing and Infrastructure Company Pvt. Ltd. Vs. Income Tax Officer Ward- 8(4),New Delhi, in which it is decided that the financial transactions between holding and subsidiary company is not under preview of deemed dividend as the financial transactions taken place in several occasions during the financial year and balance at the end of the year is zero. Kindly refer to the page No 65 to 78 with our addit....
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....company and its subsidiary company as attached herewith ii) Remand report of the department of Income Tax as attached herewith iii) Judicial pronounce of the Houn arable Bench- B, Kolkata in case of M/S Sree Krishna Gyanodya Flour Mills Pvt. Ltd. Vs. Pr. Commissioner of Income Tax, Central-2 and Bench "A" of Kolkata in case of ITO vs. Smt. Gaytri Chakraborty as attached herewith from 79 to 84 with our additional paper book." 14. The ld. counsel for the assessee has further placed reliance upon the remand report of the Assessing Officer in the case of the assessee for assessment year 2013-14 on the same issue of deemed dividend, wherein, the Assessing Officer while relying upon various case laws and also considering that in the assessee's own case for earlier assessment years during A.Ys 2010-11 and 2011-12, the then Assessing Officer had not made any additions on account of deemed dividend u/s 2(22)(e) of the Act though, there were similar type of loan transactions between subsidiaries and assessee company and it was demonstrated that there was a systematic practice of loan transaction between subsidiaries and assessee which were in normal course of business. T....
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....cy. The assessee company emphasised on the stand of the department in the earlier year on the said issue and further submitted various case laws with regard to The Principle of Consistency which should be followed in the instant case. Reliance was placed on the judgements of Hon'ble Apex Court in the case of pronounced by Hon'ble Apex Court in the case of Radhasoami Satsang vs. Commissioner of Income-Tax, (1992) 193 ITR (SC) 321&Godrej & Boyce Manufacturing Company Limited -vs.-DCIT & Anr (2017) 394 ITR 0449 (SC). In view of the above, in the assessee's own case assessments during the AY- 2010-11 and AY-2011-12, the then AO has not made any additions on account of 2(22)(e), though there were loan accommodation transaction between the subsidiaries companies Merino Panel Products limited and Merino Industries Limited, the assessee submitted Assessment Orders or AY-2010-11 and AY-2011-12 and board resolutions agreeing unsecured financial accommodations between the subsidiaries which shows there is a consistent practice of financial transaction(loan accommodation between the subsidiaries are in general course of business Therefore, deemed dividend is not applicable....
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....z-a- vis loans/advances. Section 2(22)(e) enacts a deeming fiction whereby the scope and ambit of the word dividend has been enlarged to bring within its sweep certain payments made by a company as per the situations enumerated in the section. Such a deeming fiction would not be given a wider meaning than hat it purports to do. The provisions would necessarily be accorded strict interpretation and the ambit of the fiction would not be pressed beyond its true limits. The requisite condition for invoking Section 2(22)(e) of the Act is that payment must be by way of loan or advances. Since there is a clear distinction between the intercorporate deposits viz-a-vz loans/advances, according to us the authorities below were not right in treating the same as deemed dividend u/. 2(22)(e) of the Act" [emphasis supplied] Similarly, we also support and guidance from the judgment of Hon'ble jurisdictional High Court in the case of Pradip Kumar Malhotra v. CIT 338 ITR 538 (Cal) wherein the Hon'ble High Court held as under:- "The phrase "by way of advance or loan" appearing in sub-clause (e) of section 2(22) of the Income-tax Act, 1961, must be construed to mean those ad....
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....ainst its own findings in the remand report. The Jurisdictional High Court has also in this respect taken note that the Tribunal while holding so has relied upon the decision of the Madras High Court in the case of "Smt. B. Jayalakshmi v. Assistant Commissioner of Income-tax, Salary Circle-II, Chennai" [2018] 96 taxmann.com 486 (Madras) and further another decision of the Coordinate bench of the Tribunal in the case of "D.C.I.T, Central Circle-1(4), Kolkata vs. M/s. Shraddha Tower Pvt. Ltd.", 2018(10) TMI 1405. In the case in hand, since the Assessing Officer has thoroughly examined the nature of the transactions done by the assessee which have been done regularly and consistently and has noted that the same being in the ordinary course of business and out of commercial expediency and the account between the assessee and its subsidiary was in the nature of current account and further since the issue is squarely covered by the decision of the various High Courts/Tribunal decisions, therefore, in view of the above discussion, the addition made/confirmed by the lower authorities u/s 2(22)(e) of the Act is not sustainable in this case and the same is accordingly ordered to be delete....
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....d under section 80-IA of the Act: (A) We argued the case before your honour on the matter of claiming of deduction under section 80IA(4) (iv) of the income tax Act.1961. The Ld A.O ignored our claim of deduction because the assessee company did not claim the deduction in the original return. The Ld A.O mentioned in his order "the assessee had not claimed the deduction in the original return of Income, nor any revised Return was filed in this regard. It is apparently clear that Ld A.O accepted our return filed on 01-12-2014 as original return u/s 139(1) but he ignored the revised filed by your appellant on 31-03-2016. (B) It is to be noted at the outset that our return as filed on 01-12-2014 which is within due date u/s 139(1) as the Ld A.O accepted and mentioned that the assessee is eligible to revise the return u/s 13915). Kindly refer to the page no 8 of the assessment order as we highlighted the portion. (C) The Ld A.O mentioned wrongly that the assessee did not file the revised return as your appellant had filed the revised return within due date on 31- 03-2016 and claimed deduction u/s 80IA. The copy of original return and revised return as attached ....
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....e assessee to the electricity board. We already attached the decision of the ITAT, Kolkata with our paper books. The relevant part of the order is attached for your immediate reference with our additional paper book. Vide- 88 to 89 (I) It is to be noted that there is no dispute by the department for our eligibility and cost of production for claiming deduction Section 80IA(4) (iv). The dispute as raised by the Ld A.O & Ld CIT(A) which is related to claiming of deduction in the return of tax. The second dispute was related to the computation of notional profit for claiming of deduction. Your honour is requested to kindly consider our revised Return of income tax u/s 139(5) and allow the calculation of deduction u/s 80IA as per line of judgement of the Supreme court and in the line of the order of the ITAT Bench-C Kolkata. The CIT(A) also agreed and recommended to allow the deduction in our case based on market rate. We attached herewith the calculation of deduction u/s 80IA based on market rate for your kind consideration. 20. The ld. Counsel has duly demonstrated that the deduction u/s 80IA was duly claimed in the revised return. As observed above, both the lower author....
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.... one unit of electricity therefore the cost of one unit of electricity is calculated (4 KgXRs. 1.17) because cost of steam of 1 Kg is Rs. 1.17 as per cost sheet. As far as the market price is concerned which is considered as actually paid by the assessee average of Rs. 6.58 per unit to the electricity board, namely Paschimanchal Viyut Vitran Nigam Ltd. As per calculation on the basis of market value of electricity, the deduction amount of Rs. 9,91,15,486/- Submitted and claimed by the assessee. ... It is therefore concluded that the claim of the assessee is acceptable." 22. Now, the question remains as to what will be the actual quantum of deduction admissible to the assessee for the year under consideration. The ld. Counsel in this respect has given the following computation chart: Statement showing the calculation of deduction under section 80-IA (4)(iv) For the Assessment year 2014-15( Fy 2013-14) ______________________________________________________________________________ Total Steam produced during the year -213778450 Kg. Estimation: Steam required for generate one unit of Power - 4 Kg. Total units of Power distributed....