2018 (6) TMI 57 - AT - Income Tax

Deemed dividend addition u/s.2(22)(e) - appellant had taken loan from his closely held company - Held that - On perusal of the contention of the AR that M/s Khatore Earthmovers Pvt. Ltd. had opening balance of ₹ 83,71,112/- as on 01.04.2011 with the assessee and the total reserve of the company was less than the amount of advance given. The fresh loan of ₹ 25,000/- and ₹ 3,68,000/- by account payee cheque was for the purposes of business. M/s Khatore Earthmovers Pvt. Ltd. had earned profit of ₹ 15,376/- for financial year 2011-12, as such, advance of ₹ 28,68,000/- cannot be considered as deemed dividend and CBDT Circular No.19/2017, dated 12th June, 2017 we find that the matter needs further verification at the end of AO and accordingly, we remit the entire issue to the file of AO - Decided in favour of assessee allowed for statistical purposes.

Summary

Issues:
1. Addition of deemed dividend u/s.2(22)(e) of the Income Tax Act
2. Charging of interest u/s.234A and 234B on the assessed income

Issue 1: Addition of deemed dividend u/s.2(22)(e) of the Income Tax Act:

The case involved an appeal by the assessee against the order of CIT(A), Ranchi, for the assessment year 2012-2013, challenging the addition of ?28,68,000 as deemed dividend u/s.2(22)(e) of the Income Tax Act. The assessee contended that the loan obtained from a closely held company was in the normal course of business transactions. The AO had treated the loan as deemed dividend due to the relationship between the assessee and the company. The CIT(A) partly allowed the appeal. The Tribunal, after considering the submissions and a CBDT Circular, remitted the issue back to the AO for further verification. The Tribunal relied on the Circular, emphasizing that trade advances in the nature of commercial transactions do not fall within the ambit of deemed dividend under section 2(22)(e) of the Act. The Tribunal directed the AO to re-examine the issue in light of the Circular and provide a fresh order after hearing the assessee.

Issue 2: Charging of interest u/s.234A and 234B on the assessed income:

Regarding the charging of interest u/s.234A and 234B on the assessed income, the Tribunal directed the AO to calculate the interest as per the judgment of the Hon'ble jurisdictional High Court in a specific case. The Tribunal ordered the AO to apply the judgment in determining the interest, thereby providing relief to the assessee on this issue.

In conclusion, the Tribunal allowed the appeal of the assessee for statistical purposes, remanding the issue of deemed dividend back to the AO for re-examination in light of the CBDT Circular. Additionally, the Tribunal directed the AO to calculate the interest on the assessed income as per the judgment of the Hon'ble jurisdictional High Court.