2015 (12) TMI 351 - AT - Income Tax

Deemed dividend under section 2(22)(e) - CIT(A) deleted the addition - whether the interest free amount of ₹ 10,00,000/- advanced to the assessee by the company, in which the assessee is 50% shareholder, was neither a trade advance in normal commercial expediency, because no supporting documents exists, nor the premises were given to the said company on leave and licence - Held that - We have observed that the assessee has received ₹ 10 Lac during the assessment year as advance from M/s Mahavir Dwellers Pvt. Ltd towards the leave and license deposit for office premises of the assessee and the statement has been made before us by the Ld AR of the assessee that these amounts were further received in connection with the same agreement for office premises in assessment years 2008-09 and 2009-10. The issue has already been considered at length by the CIT(A) and also by Mumbai Bench of Tribunal for assessment year 2008-09 2015 (7) TMI 734 - ITAT AHMEDABAD whereby the matter is decided in favour of the assessee. Even remand report has been called from the assessing officer by CIT(A) for assessment year 2008-09 whereby the assessing officer has considered at length supporting evidence such as copies of agreement, ledger accounts, bank statements , ledger account in the books of Mahavir Dwellers Private Limited and the assessing officer found it to be correct and arrived at conclusion in favour of the assessee. We uphold the decision of the CIT(A) who has deleted the addition made by the assessing officer - Decided in favour of assessee.

Summary

Issues:
1. Deletion of addition of Rs. 10,00,000 as deemed dividend under section 2(22)(e) by CIT(A) without appreciating the commercial expediency.

Detailed Analysis:
1. The Revenue filed an appeal against the order passed by the CIT(A) for the assessment year 2007-08, challenging the deletion of the addition of Rs. 10,00,000 as deemed dividend under section 2(22)(e). The assessing officer treated the amount as deemed dividend due to the interest-free loan advanced to the assessee by a company in which the assessee held a 50% share. The company had reserve and surplus in its balance sheet, and no interest was charged on the loan. The assessing officer found no commercial expediency for the loan and brought the amount to tax as deemed dividend.

2. The assessee contended that the loan was obtained for business purposes, specifically to buy office premises. The company intended to purchase office premises and had been using the assessee's office since its incorporation. The assessee had already booked office premises elsewhere and made payments towards it. The company requested a refund of the loan as they acquired their own office premises. The CIT(A) deleted the addition after considering that the loan was received for business expediency and was reflected in the company's balance sheet.

3. The Revenue appealed against the CIT(A)'s decision, arguing that the assessing officer's order should be upheld. The assessee relied on previous decisions in their favor for assessment years 2008-09 and 2009-10. The Tribunal and CIT(A) had previously ruled in favor of the assessee based on the commercial nature of the transaction and the evidence provided. The assessing officer's remand report also supported the assessee's contention.

4. The Tribunal considered the submissions and evidence on record, noting that the loan was received for office premises and further amounts were received in subsequent assessment years. The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 10,00,000, citing previous rulings in the assessee's favor and the correctness of the supporting evidence provided. The Tribunal followed the decision of the coordinate bench and dismissed the Revenue's appeal.

5. In conclusion, the Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 10,00,000 as deemed dividend under section 2(22)(e), based on the commercial nature of the transaction and the supporting evidence provided by the assessee. The Tribunal's decision was in line with previous rulings and the assessing officer's remand report, leading to the dismissal of the Revenue's appeal.