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TMI Blog2015 (10) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... lete the addition made under section 2(22)(e) following the decision of Bhaumik Colours (supra). As the assessee is not shareholder of the company, who has advanced money, therefore, we are of the view that the CIT(A) is justified in his action and our interference is not required - Decided in favour of assessee. Addition on account of suppression of the value of concrete sleepers by the assessee - CIT(A) deleted the addition - Held that:- The assessee has shown the value of 2884 numbers at Nil. The assessee admitted that this rejected sleepers occasionally sold to private parties. The company sales the PSC sleepers to Indian Railways and when the sleepers are found to be defected after testing, they are rejected by the railway authoriti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO in violation of Rule 46A, of the IT Rules, 2. The short facts of the case are that the assessee company is engaged in the business of manufacturing of PSC (Pre-stressed concrete) railway sleepers, PSC polls and execution construction contracts. During the course of assessment proceedings, the Assessing Officer noticed that assessee received unsecured loan from M/s. Rungta Agencies Pvt Ltd., where Bhanu Prakash Rungta is the common Director and registered share holder of both the companies having more than 10% of shares and having substantial interest in both the companies. During the year, the assessee company took unsecured loan of ₹ 40,50,000 from M/s. Rungta Agencies Private Limited. The Assessing Officer was of the vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in RAPL. iv) RAPL is not a company in which public are substantially interested. v) As the conditions stipulated in section 2(22)(e) of the I.T.Act are not satisfied, the loan of ₹ 40,50,000/- given by RAPL to the assessee company does not attract the provisions of section deemed dividend u/s.2(22)(e) of the Act. 4. Before ld CIT(A), assessee relied upon various decisions including the decision of the ITAT (SB) in the case of ACIT vs. Bhaumik Colur Pvt. Ltd., 118 ITD 1(Mum)(SB), wherein, the Special Bench held that deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. 5. After considering the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall in the ambit of Sec 2(22)(3). Accordingly, the AO is directed to delete the addition. 6. Not satisfied by the reliefs so granted by the CIT (A), the Assessing officer is in appeal before us. 7. Having heard the rival contentions and having perused the material on record, we find from the written submission filed by the assessee, wherein, assessee contended that Rungta Agencies Pvt Ltd., has given loan or advance in the nature of loan to the assessee i.e. OCP Ltd. The assessee does not hold any share in Rungta Agencies Pvt Ltd., and assessee is not a shareholder or member in Rungta Agencies Pvt Ltd. Therefore, provisions of section 2(22)(e) of the Act is not applicable. We find that the facts of the assessee's case are simila ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for on realization basis in their books of account. The above contention was not accepted by the AO and he held that assessee has sold rejected PSC sleepers 7390 pcs for value of ₹ 50,84,200/- at an average rate of ₹ 688/-. Therefore, he has taken the value of closing stock of 2844 pcs of PSC sleeper for ₹ 19,84,192/- and added back the same to the total income of the assessee. 9. The assessee carried the matter in appeal and ld CIT(A) deleted the addition of ₹ 19,84,192/-., inter alia, observing as under: As regards the valuation of rejected concrete sleepers, essentially speaking, this addition remains revenue neutral so far as tax calculation is concerned because addition to closing stock in the year un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has shown the value of 2884 numbers at Nil. The assessee admitted that this rejected sleepers occasionally sold to private parties. The company sales the PSC sleepers to Indian Railways and when the sleepers are found to be defected after testing, they are rejected by the railway authorities. The assessee company has been consistently following the accounting practice of valuing the rejected railways sleepers as nil and accounted for on realization basis and the department has accepted this method. Therefore, for the year under consideration, the assessee is following same method and if this valuation is rejected, it will not affect the book results. Therefore, in our opinion, the CIT(A) is justified in his action and our ..... X X X X Extracts X X X X X X X X Extracts X X X X
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