2021 (4) TMI 940 - AT - Income Tax

Deemed dividend under section 2(22)(e) - HELD THAT - In the present case, the amount of loan in question was given to the assessee by the concerned company on interest and since the said loan was not a gratuitous one and was given in return to an advantage conferred upon the company by the assessee in the form of interest, we find merit in the contention of the ld. Counsel for the assessee that the same cannot be treated as deemed dividend within the meaning of section 2(22)(e) of the Act. Even the ld. D. R. has not been able to raise any contention to rebut or controvert this position. Therefore, respectfully follow the decision of Pradip Kr. Malhotra 2011 (8) TMI 16 - CALCUTTA HIGH COURT and delete the addition made by the Assessing Officer and sustained by the ld. CIT(Appeals) on account of deemed dividend under section 2(22)(e) of the Act. Ground No. 1 of the assessee s appeal is accordingly allowed. Deduction on account of interest on Housing Loan - D.R. has contended that this claim made by the ld. Counsel for the assessee requires verification by the Assessing Officer - HELD THAT - Since the ld. Counsel for the assessee has also not raised any objection for getting this matter verified by the Assessing Officer, restore this issue to the file of the Assessing Officer for the limited purpose of verifying the claim of the assessee that deduction on account of interest on Housing Loan was claimed only to the extent of ₹ 1, 50,000/- and not ₹ 5,18, 115/- as wrongly taken by the ld. CIT(Appeals). If the claim of the assessee is found to be correct on verification, the Assessing Officer shall delete the disallowance of ₹ 3,68, 115/- as directed to be made by the ld. CIT(Appeals) on this issue. Ground No. 2 of the assessee s appeal is accordingly treated as allowed for statistical purposes. Disallowance of depreciation on motor car and disallowance on motor car maintenance - HELD THAT - As observed that the assessee was owner of two cars, one Chevrolet Beat and the other Maruti Van. Since the Maruti Van was being used by the assessee for the purpose of business, depreciation claimed on the said car was allowed by the Assessing Officer. The claim of depreciation amounting to ₹ 76,401/- made by the assessee on account of Chevrolet Beat car, however, was disallowed by the Assessing Officer. In my opinion, even though the personal use of Chevrolet Beat car by the assessee cannot be ruled out, the claim of the assessee for depreciation on the said car cannot be entirely disallowed and it will be fair and reasonable to restrict the same to one- third for such personal use as the claim of the assessee of having used the said car for business purpose also cannot be outrightly rejected - therefore, direct the Assessing Officer to restrict the disallowance made on account of depreciation of Chevrolet Beat car to the extent of 1/3r d. Similarly the disallowance made by the Assessing Officer on account of car maintenance for personal use to the extent of 50% is directed to be restricted to one-third.

Summary

Issues:
1. Condonation of delay in filing appeal.
2. Addition of deemed dividend under section 2(22)(e) of the Act.
3. Disallowance of interest on housing loan.
4. Disallowance of depreciation on motor car and motor car maintenance.

Condonation of Delay in Filing Appeal:
The appeal filed by the assessee faced a delay of 199 days, which was condoned by the Tribunal upon the assessee's application. The Tribunal found sufficient cause for the delay and proceeded to dispose of the appeal on merit.

Addition of Deemed Dividend under Section 2(22)(e) of the Act:
The Assessing Officer added an amount as deemed dividend under section 2(22)(e) due to a loan taken by the assessee from a company where he was a shareholder. The CIT(A) upheld this addition based on certain transactions. However, the Tribunal, after considering relevant material and legal precedents, found that the loan was not gratuitous and was given in return for an advantage conferred upon the company by the assessee. Citing a High Court decision, the Tribunal allowed the appeal, deleting the addition made under section 2(22)(e).

Disallowance of Interest on Housing Loan:
The issue revolved around the disallowance of interest on a housing loan claimed by the assessee. The Tribunal directed the matter to be verified by the Assessing Officer to confirm the correct deduction claimed by the assessee. If the claim of the assessee regarding the interest deduction is found to be accurate, the disallowance made by the CIT(A) is to be deleted.

Disallowance of Depreciation on Motor Car and Motor Car Maintenance:
Regarding the disallowance of depreciation on a Chevrolet Beat car and maintenance expenses for personal use, the Tribunal observed that while personal use could not be ruled out, the disallowance should be restricted to one-third for depreciation and maintenance. The Tribunal directed the Assessing Officer to make the necessary adjustments accordingly. As a result, this ground of the assessee's appeal was partly allowed.

In conclusion, the Tribunal partly allowed the appeal filed by the assessee, addressing the issues of deemed dividend addition, interest disallowance, and depreciation/maintenance disallowance on the motor car. The Tribunal provided detailed reasoning for each issue, considering legal precedents and factual circumstances to arrive at its decisions.