2013 (11) TMI 323 - AT - Income Tax

Deletion of addition of Rs.26 lacs made u/s.2(22)(e) of the Act on account of received loan/advance Held that - Assessee-company is not registered share-holder of Control Plus Oil & Gas Solution Pvt.Ltd. and, therefore, the provision of section 2 (22)(e) will not be applicable Reliance has been placed upon the judgment in the case of ACIT vs. Bhaumik Colour Pvt.Ltd. reported at 2008 (11) TMI 273 - ITAT BOMBAY-E Decided against the Revenue. Deletion of addition of Rs.12,21,393/- made u/s.2(22)(e) of the Act on account of accumulated profits in the form of reserves and surplus Held that - Assessee-company had received loan of Rs.52,00,000/- from MJB India Technical Services Pvt.Ltd. He submitted that there are no accumulated profit in the case of MJB India Technical Services Pvt.Ltd., considering net of general reserve and debit balance in profit & loss account and, therefore, no amount can be considered u/s.2(22)(e) of the Act Decided against the Revenue. Disallowance of Rs.12,33,628/- made by the AO u/s.14A r.w.r.8D Held that - Assessee-company has sufficient interest-free funds. The ld.counsel for the assessee has placed reliance on the decision of Hon ble coordinate Bench (ITAT Ahmedabad) in the case of Torrent Financiers 2001 (6) TMI 165 - ITAT AHMEDABAD-A - ld.Sr.DR could not controvert the finding of the Hon ble coordinate Bench and nothing has been brought on record suggesting that the decision of the Hon ble Tribunal in the case of Torrent Financiers(supra) is not applicable Decided against the Revenue.

Summary

Issues:
1. Late payment of PF disallowance
2. Disallowance u/s.14A r.w.Rule 8D
3. Interest disallowance
4. Addition u/s.2(22)(e)

Late Payment of PF Disallowance:
The Assessing Officer made disallowance for late payment of PF, which was partly allowed by the ld.CIT(A). The Revenue appealed against this decision. The Tribunal upheld the ld.CIT(A)'s decision, citing various judicial pronouncements in favor of the assessee. The Tribunal found no infirmity in the ld.CIT(A)'s order and rejected the Revenue's appeal.

Addition u/s.2(22)(e) - Loan/Advance:
The second issue concerned the addition made u/s.2(22)(e) of the Act on account of a received loan/advance. The ld.CIT(A) concluded that the assessee was not a shareholder in the lender company, thus the provision of section 2(22)(e) did not apply. The Tribunal upheld the ld.CIT(A)'s decision, as the ld.Sr.DR failed to provide any contrary material. Therefore, the Tribunal rejected the Revenue's appeal on this ground.

Addition u/s.2(22)(e) - Accumulated Profits:
The third issue was the deletion of an addition made u/s.2(22)(e) of the Act concerning accumulated profits in the form of reserves and surplus. The ld.CIT(A) found no accumulated profit in the company to be treated as deemed dividend. The Tribunal upheld the ld.CIT(A)'s decision, as the ld.Sr.DR did not present any contrary material. Consequently, the Tribunal rejected the Revenue's appeal on this ground.

Disallowance u/s.14A r.w.Rule 8D and Interest Disallowance:
The cross-objection raised by the Assessee involved the disallowance of Rs.12,33,628/- u/s.14A r.w.Rule 8D and interest disallowance. The ld.CIT(A) confirmed the disallowance, but the Tribunal, following judicial pronouncements, allowed the ground raised by the Assessee and directed the AO to delete the addition. The Tribunal also set aside the ld.CIT(A)'s order on interest disallowance, directing the AO to delete the addition due to the availability of sufficient interest-free funds with the assessee.

In conclusion, the Tribunal dismissed the Revenue's appeal and allowed the Assessee's cross-objection, providing detailed reasoning and legal references for each issue addressed.