2018 (10) TMI 2003 - AT - Income Tax

Deemed Dividend addition u/s. 2(22) (e) - assessee s common share in both the concerns granting advances to assessee firm - assessee defended the same by submitting that the stated advances were mere trade advances in nature towards purchase of land - HELD THAT - We find that similar additions u/s 2(22)(e) were made in the hands of the firm which were deleted by first appellate authority in case of the firm Pathik Construction 2015 (2) TMI 898 - ITAT MUMBAI finding the same to be purely commercial transactions. The stand of FAA has been confirmed by the Tribunal vide cited order. Therefore, since a view has already been taken, we find no reason to take a different view, the factual matrix being identical. Another reason to concur with the stand of the assessee is that the assessee herself has not received any amount from the Company rather the amount has been received by the firm, in which the assessee was a partner to the extent of 23%. Therefore, the basic condition of Section 2(22)(e) i.e. the assessee has received the amount from the concern, is missing in the case. Decided in favour of assessee.

Summary

Issues:
1. Appeal by revenue for Assessment Years 2008-09 & 2009-10 against orders of Ld. first appellate authority and cross-objections by the assessee.
2. Deletion of addition under Section 2(22)(e) of the Income Tax Act, 1961.
3. Applicability of deemed dividend provisions.
4. Interpretation of commercial transactions under Section 2(22)(e).
5. Validity of reassessment proceedings.
6. Tax effect of quantum additions below prescribed limit.
7. Benefit of Circular No.03/2018 issued by CBDT on monetary limits for filing appeals.

Analysis:
1. Cross Appeals for AY 2009-10: The revenue contested the deletion of addition under Section 2(22)(e) by CIT(A) regarding the loan/advance given by one entity to another, arguing it was not in the ordinary course of business. The assessee, a real estate broker, defended the advances as trade advances for land purchase. The Tribunal noted similar additions were deleted in a related firm's case, confirming commercial nature of transactions. As the assessee did not directly receive the amount in question, the appeal was dismissed.

2. Cross Appeals for AY 2008-2009: Similar to the previous year, the revenue appealed against the deletion of addition under Section 2(22)(e) by CIT(A), which was also based on commercial transaction grounds. The Tribunal dismissed the appeal considering the tax effect below the prescribed limit and the benefit of Circular No.03/2018 issued by CBDT.

3. Conclusion: Both appeals and cross-objections were dismissed based on the findings related to the applicability of Section 2(22)(e) and the tax effect falling below the prescribed limit as per the CBDT circular. The Tribunal upheld the decisions of the lower authorities regarding the deletion of additions, emphasizing the commercial nature of the transactions and the absence of direct receipt of funds by the assessee.