2019 (3) TMI 1137 - HC - Income Tax

Deemed dividend u/s 2(22))e) - repayment of loan or advance by the Company - HELD THAT - CIT(A) and the Tribunal accepted the Assessee s contention that, the amount in question did not represent a loan or advance given to the Assessee by the Company but the same was merely in the nature of repayment of the past loan by the Assesssee to the Company. The CIT(A) in the first as well as in subsequent order after remand, has referred to the documents on record at considerable length and come to the factual finding that, upon the perusal of the accounts between the Assessee and the Company, what can be gathered is that, the sum of ₹ 4.07 Crores was repayment of the loan by the Company. Tribunal confirmed these findings and dismissed the Revenue s appeals. The entire issue is thus based on appreciation of facts on record. Therefore, no question of law arises.

Summary

Issues:
1. Territorial jurisdiction of the Bombay High Court in entertaining the appeals of the Revenue.
2. Taxation of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.
3. Interpretation of whether a payment was a refund/repayment of an advance/deposit or a loan.

Analysis:

1. Territorial Jurisdiction:
The High Court clarified that although the judgment being appealed was passed by the Delhi bench of the Income Tax Appellate Tribunal, the assessment of the Respondent-Assessee had been transferred to the Bombay jurisdiction. The Court noted that the learned Counsel for the Assessee did not raise any dispute regarding the territorial jurisdiction of the Bombay High Court in entertaining the appeals of the Revenue.

2. Taxation of Deemed Dividend:
The Respondent-Assessee, an individual, had a sum of ?4.07 Crores taxed as deemed dividend under Section 2(22)(e) of the Income Tax Act for the Assessment Year 2007-08. The Assessee appealed this decision, and after a series of proceedings, the Tribunal held that the amount in question was not a loan or advance but a repayment of a past loan by the Assessee to the Company. Both the Commissioner of Income Tax Appeals and the Tribunal accepted the Assessee's contention after reviewing the documents on record, concluding that no question of law arose as the issue was based on factual findings.

3. Interpretation of Payment Nature:
The crux of the matter revolved around determining whether the payment of ?4.07 Crores constituted a refund/repayment of an advance/deposit or a loan under Section 2(22)(e) of the Act. The Court highlighted that the CIT(A) and the Tribunal found, after thorough examination of the accounts between the Assessee and the Company, that the sum in question was indeed a repayment of a loan by the Company to the Assessee. Consequently, the Tribunal dismissed the Revenue's appeals, emphasizing that the entire issue was fact-based, and no question of law was at play.

In a related appeal, the Revenue had raised a similar question regarding the addition of ?21.20 Crores under Section 2(22)(e) of the Act. However, the Court deemed it unnecessary to discuss this question separately as it was akin to the previously rejected issue. Ultimately, both appeals were dismissed by the Court based on the factual findings and conclusions reached in the case.