2019 (3) TMI 1802 - AT - Income Tax

Deemed dividend u/s.2(22)(e) - loan given by the company is in the nature of gratuitous loan advanced only because of the fact of the assessee being a substantial shareholder - HELD THAT - We find that similar issue had cropped up for the assessment year 2012-13 and the Ld. CIT(Appeals) in that case of the assessee after placing reliance on the decision in the case of Pradeep Kumar Malhotra v. CIT 2011 (8) TMI 16 - CALCUTTA HIGH COURT has provided relief to the assessee. Thereafter the Revenue had preferred an appeal before the Tribunal wherein the Co-ordinate Bench of the Pune Tribunal after placing reliance on the same judgment of the Hon ble Calcutta High Court has upheld the findings of the Ld. CIT(Appeals) and dismissed the Revenue s appeal. No infirmity with the findings of the Ld. CIT(Appeals) in his orders for all the assessment years before us and therefore these orders of the Ld. CIT(Appeals) are upheld and relief provided to the assessee is sustained.

Summary

Issues Involved:
1. Deletion of addition in respect of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.

Detailed Analysis:

Background and Proceedings:
These appeals by the Revenue arise from the order of the CIT(Appeals)-2, Nashik, dated 02.01.2017, concerning the assessment years 2008-09, 2009-10, and 2011-12. The primary issue is the deletion of addition regarding deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961. The cases were heard together due to common issues and similar facts, and a consolidated order was issued.

First Appellate Proceedings:
During the first appellate proceedings, the CIT(Appeals) referred to his earlier decision in the assessee's case for A.Y. 2012-13, where the issue was decided in favor of the appellant. The CIT(Appeals) noted that the appellant had mortgaged his property to secure a loan for VEPL, and the advances made by VEPL to the appellant were not gratuitous but were in consideration of the commercial benefit derived by VEPL from the mortgage.

Legal Precedents:
The CIT(Appeals) relied on the judgment of the Calcutta High Court in Pradeep Kumar Malhotra v. CIT [(2011) 338 ITR 538], where it was held that advances made by a company to a shareholder in consideration of a benefit conferred upon the company do not constitute deemed dividend under Section 2(22)(e). The decision emphasized that loans given for further consideration beneficial to the company are not deemed dividends.

Similar Case Law:
The CIT(Appeals) also referenced several other judgments, including:
- ACIT v. Smt. G. Sreevidya (ITAT Chennai)
- Shital Kumar Vij v. ACIT (ITAT Amritsar)
- Pragti Agarwal v. ACIT (ITAT Indore)
- Nimeshchundra V. Vashi v. DCIT (ITAT Ahmedabad)
- Puroshottam Das Mimani v. DCIT (ITAT Kolkata)

These cases consistently held that advances made out of commercial expediency do not fall under the ambit of deemed dividend as per Section 2(22)(e).

Tribunal's Analysis:
The Tribunal reviewed the records and rival contentions, noting that the CIT(Appeals) had provided relief based on the precedent set in the assessee's case for A.Y. 2012-13 and the Calcutta High Court's judgment in Pradeep Kumar Malhotra v. CIT. The Tribunal found no contrary decision against this precedent and upheld the CIT(Appeals)'s findings.

Conclusion:
The Tribunal concluded that the CIT(Appeals) correctly applied the legal principles and judicial precedents in deleting the additions under Section 2(22)(e). The Tribunal upheld the CIT(Appeals)'s orders for all assessment years under consideration, dismissing the Revenue's appeals.

Order Pronouncement:
The appeals of the Revenue for the assessment years 2008-09, 2009-10, and 2011-12 were dismissed, and the order was pronounced on the 28th day of March, 2019.