2022 (7) TMI 383 - AT - Income Tax

Addition u/s. 2(22)(e) - deemed dividend for trade advance received from associate company - HELD THAT - We note that assessee has established that these are business transactions, which do not come in the ambit of the provisions of section 2(22)(e) of the Act. Therefore, respectfully following the judgment of the Hon'ble jurisdictional High Court of Gujarat in the case of Shripad Concrete Pvt. Ltd. 2013 (7) TMI 117 - GUJARAT HIGH COURT we delete the addition made. Thus, ground no. 1 raised by the assessee is allowed. Addition u/s 36(1)(va) r.w.s 2(24)(x) for delay in depositing of employees' contribution of PF and ESI - HELD THAT - The issue relating to delay in depositing of employees' contribution of PF and ESI, is squarely covered against the assessee by the judgment of Jurisdictional Hon'ble Gujarat High Court in the case of Gujarat State Road Transport Corporation 2014 (1) TMI 502 - GUJARAT HIGH COURT - SLP has been filed by the assessee, which has not been adjudicated yet therefore we are of the view that the issue may be remitted back to the file of the Ld. CIT(A) to decide the matter after taking into account the judgment of the Hon'ble Supreme Court as and when will be passed by the Hon'ble Supreme Court. - Decided in favour of assessee for statistical purposes. Nature of expenses - Addition of ROC (Registrar of company) expenses for increasing in authorized share capital - CIT-A and AO rejected the contention of the assessee and made disallowance holding that ROC expenses are in the nature of capital - HELD THAT - Considering the law of the land as settled on this issue by the Hon' Supreme Court of India in the case of Punjab State Industrial Development Corporation 1996 (12) TMI 6 - SUPREME COURT and later decision of General Insurance Corporation Ltd. 2006 (9) TMI 116 - SUPREME COURT finding of the Assessing Officer to disallow the expenses towards increase in authorized share capital and treating the same as capital expenditure is confirmed and the disallowance so made is sustained. - Decided against assessee.

Summary

Issues Involved:
1. Addition of Rs. 96,47,549/- under section 2(22)(e) as deemed dividend.
2. Addition of Rs. 1,56,954/- under section 36(1)(va) r.w.s 2(24)(x) for delay in deposit of employees' contribution to PF and ESI.
3. Addition of Rs. 3,32,000/- out of ROC expense for increase in authorized share capital.

Issue-wise Detailed Analysis:

1. Addition of Rs. 96,47,549/- under section 2(22)(e) as deemed dividend:
The assessee received financial advances of Rs. 4,23,25,000/- from M/s. PMC Import Pvt. Ltd., in which it held a 39.79% share. The Assessing Officer (AO) noted that the company had accumulated profits of Rs. 96,47,569/- and treated the advances as deemed dividends under section 2(22)(e) of the Income Tax Act. The assessee contended that these were trade advances and not loans, supported by sale and purchase bills and challans. The CIT(A) upheld the AO's decision. However, the Tribunal found merit in the assessee's argument that these were current account transactions related to business activities and not loans or advances. Citing the Gujarat High Court's decision in Shripad Concrete Pvt. Ltd., the Tribunal concluded that the transactions did not fall under the ambit of section 2(22)(e) and deleted the addition of Rs. 96,47,549/-.

2. Addition of Rs. 1,56,954/- under section 36(1)(va) r.w.s 2(24)(x) for delay in deposit of employees' contribution to PF and ESI:
The AO added Rs. 1,56,954/- for the delay in depositing employees' contributions to PF and ESI. The CIT(A) upheld this addition. The Tribunal noted that the issue was settled against the assessee by the Gujarat High Court in the case of Gujarat State Road Transport Corporation (GSRTC), which held that such sums must be credited by the due date as per section 36(1)(va). However, considering that an SLP was pending before the Supreme Court, the Tribunal remitted the issue back to the CIT(A) to decide based on the Supreme Court's judgment. The ground was dismissed with the provision for revival if the Supreme Court's decision favored the assessee.

3. Addition of Rs. 3,32,000/- out of ROC expense for increase in authorized share capital:
The AO disallowed Rs. 3,32,000/- incurred for ROC fees to increase authorized share capital, treating it as a capital expenditure. The CIT(A) confirmed this disallowance, citing the Supreme Court's decision in Punjab State Industrial Development Corporation, which held such expenses as capital in nature. The Tribunal found no infirmity in the CIT(A)'s order and upheld the disallowance, dismissing the ground raised by the assessee.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the addition of Rs. 96,47,549/- under section 2(22)(e) as deemed dividend, remitted the issue of Rs. 1,56,954/- under section 36(1)(va) for delay in deposit of employees' contribution to PF and ESI back to the CIT(A) for reconsideration post-Supreme Court judgment, and upheld the disallowance of Rs. 3,32,000/- for ROC expenses as capital expenditure.