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TMI Blog2013 (9) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 1 (a). That, while retaining the addition of Inter-corporate Deposit (ICD) of Rs. 11.20 crs., the Ld.CIT(A) failed to consider that Sec.2(22)(e) of the I.T. Act contained a deeming provision and therefore its terms and conditions were required to be interpreted strictly. 1(b). That, both the Ld. A.O. and the CIT(A) erred in equating Inter-corporate Deposits (ICD) with loans as mentioned in Sec.2(22)(e) of the I.T. Act. 1 (c). That, while adding the Inter-corporate Deposit (ICD) received by the appellant from M/s IFB Automotive Pvt. Ltd., both the Ld. A.O. and the Ld. CIT(A) failed to examíne the matter in the light of the legislative intention of enacting Sec.2(22)(e) of the I.T. Act. 1 (d). That, since the Inter-corporate Deposit (ICD) was received by the assessee from M/s IFB Automotive Pvt. Ltd. not for its own benefit, no addition u/s.2(22)(e) of the I.T. Act was called for. 2. That, both the Ld. A.O. and the Ld. CIT(A) erred in omputing the expenses attributable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in deleting the addition made on account of excessive and unjustified business expenditure. 5. Whether on the facts and circumstances of the case, Ld. CIT(A) erred in law in deleting the addition made on account of notional loss due to foreign exchange fluctuation. 6. That the appellant craves for leave to add, delete or modify any of the grounds of appeal before or at the time of hearing." 4. First we take up ITA No. 1721/K/2012 (Assessee's appeal). In the assessee's appeal in regard to ground no. 1 to 1(d) the assessee has challenged the action of CIT(A in retaining the addition of the Intercorporate deposits of an amount of Rs.11.20 cr. received by the assessee from M/s. IFB Automotive Pvt. Ltd. ( M/s. IFB) out of the total addition of Rs.19 cr. made by AO by treating the same as deemed dividend u/s. 2(22)(e) of the Act. It was submitted by the Ld. AR that the assessee is a company which is doing the business of manufacture of rectified spirit and IMFL, marine products and trading of feed and beer. It was the submission that the assessee had received Inter-corporate deposits from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct to make it different from loans or advances held the same to be a loan for the purpose of invoking the provisions of section 2(22)(e) of the Act. It was the further submission by the Ld. AR that the decisions relied on by the Ld. CIT(A) were clearly in respect of those companies where a loan had been taken, it was not a case where Inter corporate deposits were taken. It was the further submission that the issue in the assessee's case was squarely covered by the decision of the Coordinate Bench of this Tribunal, Bombay Bench in the case of Bombay Oil Industries Ltd. reported in (2009) 28 SOT 383 (Bom), wherein it had been held that Intercorporate deposits were different from loans and advances and the same would not come within the purview of deemed dividend. It was the submission that the Ld. CIT(A) in para 23 of his order did refer to the decision in the case of Bombay Oil Industries Ltd. (supra), but, however, wrongly interpretated the said decision to be a case where the issue was whether interest on deposits representing investment of surplus fund would fall or not under the definition of Interest as given in section 2(7) of the Interest Tax Act, 1974. The Ld. AR further dre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd of Directors could be a fabricated document in so far as the documents were not serially numbered. It was the submission that the term Intercorporate Deposit had been rightly treated by the Ld. CIT(A) and the AO to be a loan or advance to which the provisions of section 2(22)(e) of the Act applied. The Ld. CIT(DR) vehemently supported the orders of the lower authorities and further relied on the decision of the Hon'ble Bombay High Court in the case of Star Chemicals Pvt. Ltd. reported in 203 ITR 11, wherein it has been held that a loan to a shareholder to the extent to which the company process accumulated profits was liable to be treated as deemed dividend. It was the submission that the assessee having taken the loan from M/s. IFB under whatever name called the same was liable to be treated as a deemed dividend u/s. 2(22)(e) of the Act. 5. We have considered the rival submissions. At the outset, a perusal of the facts in the assessee's case clearly show that the dispute in the appeal primarily revolves around the issue as to whether the Intercorporate Deposits received by the assesee from M/s. IFB is a 'loan' or 'advance' or is a 'deposit'. Admittedly, the provisions of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onship of a debtor and creditor must come into existence. The terms 'deposit' and 'loan' may not be mutually exclusive, but nonetheless in each case what must be considered is the intention of the parties and the circumstances. In the present case, barring the assertion of the respondent that the moneys advanced by the company to the Associated Cement Companies constitute a loan and offend s. 370 of the Companies Act, there is nothing else to show that moneys have been advanced as a loan. In the context of the statutory provisions, the word 'loan' may be used in the sense of a 'loan' not amounting to a deposit. The word loan in s. 370 must now be construed as dealing with loans not amounting to deposits, because, otherwise, if deposit of moneys with corporate bodies were to be treated as loans, then deposits with scheduled banks would also fall within the ambit of s. 370 of the Companies Act. Therefore, moneys given by the company to the other bodies corporate is a loan within the meaning of s. 370 of the Companies Act must be negatived. Therefore, the petitioners would well be entitled to the relief." Sec. 370 of the Companies Act, 1956 was subsequently amended to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. vs. Dy. CIT (2005) 96 TTJ (Mumbai) 856 : (2005) 95 ITD 356 (Mumbai). 70. We have heard the parties and considered the riva submissions. It might be true that assessee had offered it to tax initially but he claimed it as not taxable and therefore the matter has to be examined on merits and to determine as to whether it is taxable under the Act. We find it is not taxable in the light of the decision in the case of Utkarsh Fincap (P) Ltd. (supra) wherein Ahmedabad Bench of the Tribunal after considering the decision in the case of Federation of Andhra Pradesh Chambers of Commerce & Industry & Ors. vs. State of Andhra Pradesh & Ors. (2001) 165 CTR (SC) 672 : (2001) 247 ITR 36 (SC), CIT vs. Sahara India Savings & Investment Corporation Ltd. (2003) 185 CTR (All) 136 : (2003) 264 ITR 646 (All) and following the decisions in the case of Gujarat Industrial Investment Corpn. Ltd. (sic), Oriental Insurance Co, Ltd. vs. Dy. CIT (2004) 82 TTJ (Del) 1084 : (2004) 89 ITD 520 (Del) held that interest on ICDS are not chargeable to interest-tax, as the deposits are not in the nature of loans or advances. It held as under: &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... austive or inclusive. In holding that the ICD is not an advance the Ahmedabad Tribunal also noticed that the meaning of the term advance as understood in the commercial words and as stated under the title what is advance in the following words : "It was held in KM. Mohammed Abdul Kadir Rowther vs. S. Muthia Chettiar (1960) 2 Mad. LJ 13 at 15 that advance means literally a payment beforehand; in certain cases it may be a loan but it cannot be said that a sum paid by way of advance is necessarily a loan. In Raja of Venkatagiri vs. Krishnayya Rao Bahadur AIR 1948 PC 150 at p. 155, it was observed that ordinarily and advance does not connote any idea of repayment. It is, therefore, clear that the word advanced used in s. 296 means an advance in the nature of a loan and not merely an advance as is understood in the common parlance in the sense of payment of money beforehand and which is likely to become due at some future time." 72. It has also referred to s. 296 of Companies Act regulating loans to directors for book debt which was in the nature of loans or advances from its inception. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that payment must be by way of loan or advances. Since there is a clear distinction between the ICDs vis-a-vis loans/advances, according to us the authorities below were not right in treating the same as deemed dividend under s. 2(22)(e) of the Act. Since we hold that ICDs do not come within the purview of deemed dividend under s. 2(22)(e) of the Act, the alternative contention of the assessee namely by virtue of s. 2(22)(e)(ii) of the Act, the unsecured loans received by the assessee is not dividend is not adjudicated." We are of the view that the Intercorporate deposits cannot be treated as a loan falling within the purview of section 2(22)(e) of the Act. 6. Admittedly, the Ld. CIT(A) has also accepted the fact that what the assessee has received is Intercorporate deposits, this fact remains unchallenged. The Ld. CIT(A) has, after accepting that this is intercorporate deposit proceeded to hold that the term intercorporate deposit was synonymous of loan. At this point, the Ld. CIT(A) fell into error as an intercorporate deposit is not a loan but a deposit which has a meaning different from the term loan. The decisions as relied on by the Ld. CIT(A) as also by the Ld. CIT(DR), ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cee Mfg. Co. Ltd., referred to supra, shows that this is not what the said decision directs. Under these circumstances, this issue is restored to the file of the AO for readjudication in line with the decision of the Hon'ble Bombay High Court in the case of Godrej & Boycee Mfg. Co. Ltd., referred to supra. 9. In regard to ground no.3 of assessee's appeal, which was against the action of the Ld. CIT(A) in disallowing the loss of Rs.10,84,000/- arising to the assessee on account of the fluctuation of foreign exchange rate, it was submitted by the Ld. AR that the issue was squarely covered by the decision of the Hon'ble Supreme Court in the case of CIT Vs. Woodward Governor India (P) Ltd. reported in 312 ITR 254. It was the submission that the assessee had taken a working capital loan. It was the submission that this issue can be restored to the file of the AO for readjudication in line with the decision of the Hon'ble Supreme Court in the case of Woodward Governor India (P) Ltd., referred to supra. It was the further submission that in the immediately subsequent assessment year the assessee had shown a profit of Rs.4,93,000/- and the same had also been offered to tax. In reply, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess. It was the submission that the copies of the ledger account of M/s. Satya Sai Sea Food and M/s. Amriteesh Enterprises were not also sent to the AO by CIT(A) and it was only after verifying the same, the addition as made by AO have been deleted. 15.We have considered the rival submissions. A perusal of the order of the Ld. CIT(A) in para 58 of his order clearly shows that the ledger account of M/s. Satya Sai See Food and M/s. Amriteesh Enterprises was sent by the Ld. CIT(A) to the AO. No defect in the same had been pointed out. Further, a perusal of the ground as raised by the revenue clearly shows that the revenue is against the action of the ld. CIT(A) in deleting the addition by accepting a claim of bad debt whereas Ld. CIT(A has categorically held that it was a business loss having nexus with the business dealing with the assessee. Consequently, here also, it is noticed that the ground as raised by the revenue is misconcieved as the Ld. CIT(A) has not held that the bad debt is allowable but the loss is allowable as a trading loss. Consequently, the said ground stands dismissed. 16. In regard to ground no. 3 of revenue's appeal, which is against the action of Ld. CIT(A) in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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