2014 (2) TMI 1208 - AT - Income Tax

Deemed dividend u/s 2(22) - Held that - Thus issue is squarely covered in favour of assessee as in the case of Mr. Anil Bansal 2013 (8) TMI 514 - ITAT DELHI under similar facts and circumstances, the Hon ble Tribunal has considered similar transactions as Current Account transactions and has not as deemed dividend. The facts in the present case are similar as in the present case also. Credit balances remained in the period 2.8.2005 to 27.8.2005. For the rest of the periods the account remained in debit and that too with much larger amounts than the amounts where account was in credit. Therefore respectfully following the order of the Tribunal we allow this ground of appeal. - Decided in favour of assessee

Summary

Issues: Appeal against order of Ld CIT(A) upholding assessment under section 2(22)(e) of the Income Tax Act, 1961 and disallowance of financial charges as capital expenditure.

Analysis:

1. Issue of Section 2(22)(e) Assessment:
The appellant challenged the assessment order relating to the treatment of an amount received from M/s Daisy Motors Pvt. Ltd. under section 2(22)(e) of the Act. The appellant argued that the transactions were Current Account transactions and not deemed dividends. The appellant relied on a previous Tribunal order in a similar case and provided evidence of the account transactions to support their claim. The Tribunal found that the first issue was in favor of the assessee based on the analysis of the account transactions and the nature of the balances. The Tribunal referred to specific findings from the previous order to support their decision. The Tribunal concluded that the debit balance cannot be treated as deemed dividend under Section 2(22)(e) of the Act, and therefore, allowed this ground of appeal.

2. Issue of Disallowance of Financial Charges:
The second issue pertained to the disallowance of Rs. 2,11,510 representing financial charges paid by the appellant, treated as capital expenditure. The Ld AR did not argue this issue, leading to its dismissal as not pressed. Consequently, this ground was not pursued further. As a result, the appeal filed by the assessee was partly allowed based on the resolution of the first issue. The Tribunal pronounced the order in open court on the specified date.

In conclusion, the Tribunal's judgment favored the assessee regarding the treatment of the amount received under section 2(22)(e) of the Act, while the issue of financial charges as capital expenditure was not pursued by the appellant. The detailed analysis of the account transactions and the legal interpretation of the relevant provisions led to the partial allowance of the appeal.