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2009 (11) TMI 913 - AT - Income TaxDeemed dividend u/s. 2(22)(e) - loan taken during the current financial year on various dates - The case of the assessee is that there was no accumulated profit with loan provider and, thus, the alleged loan could at best be treated as deemed dividend to the extent of accumulated profit only - HELD THAT - In the light of the decision of ITAT, Cochin Bench, in the case of ITO vs. Gordhandas Khimji 1984 (8) TMI 116 - ITAT COCHIN , the accumulated profit of earlier years is to be treated as deemed dividend with reference to the loan or advances taken in earlier years. Thus we hold that the deemed dividend u/s. 2(22)(e) with reference to the amount of loan of ₹ 73,67,936/- is assessable in A.Y. 2001-02 to the extent of accumulated profit available on the date of loan taken by the assessee in the F.Y. 2000-01, and the accumulated profit which is found to be assessable as deemed dividend in the hands of the assessee in the AY 2001-02, is to be reduced from the accumulated profit available as on 01.04.2001, and the balance shall be treated to be accumulated profit available to the be considered against the loans and advances taken by the assessee in the current F.Y 2001-02 relevant to the A.Y. 2002-03. As per assessee total amount of loan taken during the current financial year on various dates can only be treated to be the deemed dividend u/s. 2(22)(e) to the extent of the accumulated profit that was available on the date on which amount of loan taken - There is no dispute in the proposition that the loan taken by the assessee can be regarded as deemed dividend u/s. 2(22)(e) of the Act only to the extent of accumulated profit available on the date when the loan was taken - we, therefore, restore this issue back to the file of the AO for walking out of the actual amount of loans or advances which could be treated as deemed dividend u/s. 2(22)(e) in the year under consideration. The assessee shall submit his working before the AO regarding the actual amount of deemed dividend that could be taxed in the A.Y. 2001-02, and the actual amount of deemed dividend that is taxable in the current assessment year i.e. A.Y. 2002-03. Deemed dividend - Shareholding in loan granting company - Whether the assessee company is registered share holder of the shares of M/s. Atma Ram Construction Pvt. Ltd? - HELD THAT - From the order of the AO, it is clear that Mr. C M Chaddha and legal heir of late Shri A R Chaddha had 50% of shares each in M/s. Atma Ram Construction Pvt. Ltd. Thus, the register share holder of the shares of M/s. Atma Ram Construction Pvt. Ltd are Mr. C M Chaddha and the legal heir of late Shri A R Chaddha and not the present assessee company. Though Mr. C M Chaddha holds 32.5% shares in the assessee company and legal heir of late Shri A R Chaddha holds 56.49% shares in the assessee company, the assessee company cannot said to be a registered share holder and as well as a beneficiary. This issue is now well settled by the decision of Bhaumik Colour (P) Ltd. 2008 (11) TMI 273 - ITAT BOMBAY-E , where it has been held that deemed dividend can be assessed in the hands of a registered share holder, and, who, at the same time, should be a beneficiary. Decided in favour of the assessee. Disallowance the deduction on house tax against the Income From House Property - why the payment should not be disallowed as the same was paid in the earlier assessment year? - as per AO, at one hand, the assessee was claiming the house tax payment on cheque clearing basis in so far as the payment was concerned, and, on the other claiming the house tax on the basis of dates on which cheques were given to municipal corporation, in to far as the payment is concerned, thus disallowed assessee's claim on account of house tax payment - CIT(A) confirmed the AO's order by observing that the date of payment is to be taken as the date on which the cheques were handed over to the Municipal Corporation of Delhi as it is settled principle of law that date of tendering of cheque is to be treated as date of payment, and not the clearing of cheque - HELD THAT - On perusal of house tax payment receipt issued by Municipal Corporation of Delhi, it is clear that the assessee paid the amount on 31.03.2001 by cheque. These cheques were cleared on April 24, 2001. The cheques so issued by the assessee on 31.03.2001 were not bounced, but were cleared and debited in the assessee's account by the bank on 24.04.2001. The payment by cheque is, thus, to be treated as the actual payment made by the assessee - assessee has adopted a contradictory stand in claiming the house tax paid - we are in agreement with the orders of the authorities below in rejecting the assessee's claim on account of deduction on house tax paid by cheque on 30.03.2001. Thus, this ground raised by the assessee is rejected. Determination of ALV by computing notional interest - actual rent received - excess addition by adopting the notional interest @ 18% - HELD THAT - Respectfully following the Tribunal's order passed in A.Y. 1996-97 and 1991-99, we decide this issue in favour of the assessee. In order for the A.Y. 1998-99, the Hon'ble Tribunal has directed the AO to accept the Annual Letting Value shown by the assessee in respect of M-block property, and the determination of ALV by computing notional interest was deleted. Addition on Annual Letting Value of the property - HELD THAT - This issue has been decided in the case of CIT vs. A R Chadha and Co. India 2000 (9) TMI 63 - DELHI HIGH COURT , where it has been held that the property in question did not belong to the assessee. We, therefore, decide this issue in favour of the assessee accordingly. Disallowance on deduction u/s. 80G - donation given by the assessee being the management committee share/maintenance grant to Atma Ram Sanatan Dharma College- HELD THAT - The certificate of Atma Ram Sanatan Dharma College dated 05.11.2004, speaks about the approval granted to the University of Delhi and not to the Atma Ram Sanatan Dharma College. Mere because Atma Ram Sanatan Dharma College is affiliated to the University of Delhi for the purposes of providing degree and education to the students, it is not sufficient to say that Atma Ram Sanatan Dharma College has also been approved for the purpose of section 80G. It is not the case of the assessee that Atma Ram Sanatan Dharma College is owned and fully controlled by the University of Delhi. We do not find any basis to allow the deduction u/s. 80G to the present assessee, in respect of the donation given by the assessee being the management committee share/maintenance grant for the year 2001-02, to Atma Ram Sanatan Dharma College. The orders of the authorities below on this issue are confirmed. Disallowance on ESI and PF u/s, 43B read with section 36(i)(va) - delayed payment - HELD THAT - In the light of the decision of High Court in the case of CIT vs. P.N. Electronics Ltd 2008 (11) TMI 3 - DELHI HIGH COURT and CIT vs. Dharmendra Sharma 2007 (11) TMI 39 - DELHI HIGH COURT , we decide this issue in favour of the assessee with a direction to the AO to allow the deduction provided the payment has been made within the due date of filing of the return of income as applicable in the case of the assessee. Interest u/s. 234B and 234D is consequential and to be recomputed as per total income finally determined in the present case - Charging of interest u/s. 234D is not justified in as much as it has been held by the Tribunal, in the case of ITO vs. Ekta Promoters P. Ltd. 2008 (7) TMI 452 - ITAT DELHI-E that provisions of section 234D are perspective in nature applicable from A.Y. 2004-05 and thus, not applicable to the present A.Y. 2002-03, which is under consideration. We, therefore, delete the charging of interest u/s. 234D. We order accordingly. Appeal filed by the assessee is partly allowed.
Issues Involved:
1. Addition of Rs. 1,38,00,000 as deemed dividend under Section 2(22)(e). 2. Addition of Rs. 1,72,278 as deemed dividend under Section 2(22)(e). 3. Deduction of Rs. 26,28,712 on account of house tax. 4. Determination of Annual Letting Value (ALV) for M-Block, Connaught Place property. 5. Addition of Rs. 86,400 as ALV for Kirti Nagar property. 6. Disallowance of deduction under Section 80G amounting to Rs. 5,85,000. 7. Disallowance of Rs. 15,661 and Rs. 1,67,664 on account of ESI and PF under Section 43B read with Section 36(i)(va). 8. Charging of interest under Sections 234B and 234D. Issue-wise Detailed Analysis: 1. Addition of Rs. 1,38,00,000 as deemed dividend under Section 2(22)(e): The assessee received Rs. 1,38,00,000 from M/s. ARPL, where the assessee held 47.5% shares. The AO treated this amount as deemed dividend under Section 2(22)(e), considering the accumulated profit of Rs. 1,63,52,490 as on 31.03.2002. The assessee argued that only the net amount of accumulated profit should be taxed. The Tribunal noted that the assessee had taken loans in the previous year with an opening balance of Rs. 61,97,474, and the accumulated profit for the year ended 31.03.2001 was Rs. 59,62,679. The Tribunal held that the earlier loans should be reduced from the accumulated profit and directed the AO to determine the actual amount of deemed dividend for the current year. 2. Addition of Rs. 1,72,278 as deemed dividend under Section 2(22)(e): The AO treated Rs. 1,72,278 out of Rs. 3,75,000 received from M/s. Atma Ram Construction Pvt. Ltd. as deemed dividend. The Tribunal found that the assessee company was not a registered shareholder of M/s. Atma Ram Construction Pvt. Ltd., and following the decision in ACIT vs. Bhaumik Colour (P) Ltd., held that deemed dividend can only be assessed in the hands of a registered shareholder. Thus, the addition was deleted. 3. Deduction of Rs. 26,28,712 on account of house tax: The assessee claimed a deduction for house tax paid by cheque on 31.03.2001, which was cleared on 24.04.2001. The AO disallowed the claim, stating that the payment date should be the date the cheque was issued. The Tribunal upheld the AO's decision, noting that the assessee's claim was inconsistent as it had claimed house tax paid by cheque on 30.03.2002 on the date the cheque was issued, not cleared. 4. Determination of Annual Letting Value (ALV) for M-Block, Connaught Place property: The Tribunal noted that this issue was covered by its earlier orders for AY 1996-97 and 1998-99, where it directed the AO to accept the ALV shown by the assessee and deleted the determination of ALV by computing notional interest. The Tribunal followed its previous decision and ruled in favor of the assessee. 5. Addition of Rs. 86,400 as ALV for Kirti Nagar property: The Tribunal referred to the Delhi High Court's decision in CIT vs. A R Chadha and Co. India (P) Ltd., which held that the property in question did not belong to the assessee. Therefore, the Tribunal decided this issue in favor of the assessee. 6. Disallowance of deduction under Section 80G amounting to Rs. 5,85,000: The assessee claimed a deduction under Section 80G for a donation to Atma Ram Sanatan Dharma College. The Tribunal found that the college did not have approval under Section 80G, and the certificate provided was for the University of Delhi. As the college was not fully controlled by the University, the Tribunal upheld the disallowance. 7. Disallowance of Rs. 15,661 and Rs. 1,67,664 on account of ESI and PF under Section 43B read with Section 36(i)(va): Following the Delhi High Court decisions in CIT vs. P.N. Electronics Ltd. and CIT vs. Dharmendra Sharma, the Tribunal directed the AO to allow the deduction if the payments were made within the due date of filing the return. 8. Charging of interest under Sections 234B and 234D: The Tribunal held that interest under Section 234D is not applicable for AY 2002-03, following the Special Bench decision in ITO vs. Ekta Promoters P. Ltd. The interest under Section 234B was to be recomputed based on the final total income. Conclusion: The appeal was partly allowed, with directions to the AO to reassess specific issues as indicated.
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