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TMI Blog2015 (11) TMI 1282X X X X Extracts X X X X X X X X Extracts X X X X ..... per Schedule-G: under the head "loans & advances", 'Advance recoverable in cash or for kind' has been shown at Rs. 1,01,8767-only. 3. That on the facts and circumstances of the case and in law the Ld. CIT(A) erred in accepting the contention of the assessee that the "amount of Rs. 20,40,0007-was security towards rent" without appreciating the facts of the case and without verifying from the Balance-sheet M/s Overseas Connexion Ltd. that as per Schedule-G- under the head "Loans & Advances" the amount of Rs. 35,13,939.26 has been shown as loans to directors. 4. That on the facts and circumstances of the case and in law the Ld. CIT(A) has erred in accepting the contention of the assessee that Rs. 2,27,9977- was advance against salary and in deleting the addition made u/s "2(22)(e) without' appreciation the facts and more particularly this amount was not included in the addition of Rs. 38,60,000/- u/s 2(22)(e) but the addition was made only in respect of amount received by the assessee as per copy of ledger account i.e. "Sandeep Sabharwal Advance A/c" 2. The facts in brief as culled out from the orders of lower authorities are that during the year under consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing officer observed that the so called security deposit in respect of the property and advance salary were only afterthought of the assessee and accordingly, he held that the payments received by the assessee in 'Sandeep Sabharwal Advance Account' were in the nature of loans/ advances received by the assessee and were liable for deemed dividend under section 2(22) of the Act. The relevant para of the order of the AO is reproduced as under:- "To summarize the facts and circumstances of the case against the conditions as laid down in section 2(22) (e) and the case law on the subject, it is clear that the above overdrawals and advances are hit by the mischief of section 2(22)(e) ;- (i) The assessee is the beneficial owner of shares of M/s Overseas Connextion Ltd., holding 18% of equity shares issued by the assessee company. (ii) The above company is having accumulated profits amounting to Rs. 1,14,55,867/- as on 1-4-2006 and Rs. 61,52,890/- as on 31-3-2007 (iii) Lending of money is not the substantial part of the business of M/s Overseas Connextion Ltd. (iv) It is well- settled that it is not the closing balance alone at (lie end of (lie year that becomes taxable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curity deposit and advance against salary and remaining amount in 'Sandeep Sabharwal Advances Account' could be set off against due amount lying in other accounts of the assessee. In view of the above findings, the learned Commissioner of Income-tax (Appeals) directed the learned Assessing officer to delete the entire addition made as deemed dividend u/s 2(22)(e) of the Act. Aggrieved, the Revenue is before us. 4. The grounds Nos.1 to 4 of the appeal of the Revenue are in respect of deletion of addition of Rs. 38,60,000/- for deemed dividend and therefore all the four grounds are disposed off together 5. At the time of hearing, the learned Senior Departmental Representative (in short 'Sr. D R') relied on the order of the learned Assessing Officer and further submitted that in normal circumstances, security deposit against property are not received in installments., Further, he argued that amount of Rs. 2,27,997/- was in not the nature of advance against salary or advance salary and but only an advance to the assessee by the company. Further, he argued that had it been salary in advance, then it should have been reflected in the return of the assessee and TDS should have been dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said premises on rent to M/s Overseas Connextion Ltd. and has received rent thereon, which has been duly disclosed in the computation. The said company has also deducted TDS while making the payment to the assessee. It is a settled law that the payments made against the business transactions are outside the purview of section 2(22)(e) of the Act. This issue has recently been decided by the co-ordinate Bench of this Hon'ble Tribunal in the case of ACIT Vs. Sh. Ashok Kumar Garg in ITA No. 2917/Del/2013 dated 23.09.2015, wherein the Hon'ble Tribunal has held as under: "5. We heard the rival submission and perused the material on record. On perusal of the copy of ledger account of the assessee with M/s A.K.J. Industries Ltd. extracted in the assessment order, it is clear that there were continuous transactions of receipt and payment of money to the assessee by the said company. There are some debit balance and after some time it was converted into credit balance and finally at the end of accounting year, there was a debit balance of Rs. 53,28,853/-. Out of this, there were entry made on 31st March, 2009 towards TDS payable of Rs. 29,51,460/-. Thus, there are mutual transacti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rival parties and have gone through the material placed on record. From the facts and circumstances of the case, we have observed that the debit balance in the account of assessee at a given point of time is not in the nature of loan or advance. But, it is a running account wherein the assessee had taken the amount as adjustable against future salaries which were being credited to his account monthly. Therefore, following various judicial pronouncements as relied upon by Ld. AR, we are of the view that advance was not in the nature of loan and hence cannot be treated as deemed dividend u/s 2(22)(e) of the Act. In view of the above, the appeal filed by assessee is allowed." 11. Further reliance is placed on the following judgments: Ishwar Chand Jindal, New Delhi Versus ACIT, Central Circle -16. New Delhi [ITA No. 2967/Del/2012, ITA No. 2002/Del/2013 Dated - May 29,2015 ITAT Delhi] Mr. Purushottam Das Mimani Versus Dy. Commissioner of Income Tax, Central Circle-V Kolkata [IT (SS) A Nos. 60 to 62/Kol/2011, IT (SS) A Nos. 73 to 76/Kol/2011 Dated - October 17. 2014 ITAT Kolkata] HIGH COURT OF ALLAHABAD Commissioner of Income-tax, Agra v. Atul Engineering Udyog [2014] 51 ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons with two companies, namely, 'H' Ltd. and 'A' Ltd. - Assessing Officer took a view that because of shareholding pattern, financial transactions entered into between assessee and said companies would fall in category of 'deemed dividend' -Commissioner (Appeals) upheld order of Assessing Officer - On further appeal, Tribunal opined that being a travel agency, assessee had regular business dealings with above two concerns dealing with holiday resorts and tourism industry and, thus, transactions-in-question could not be described as advances or loans forming distinct category of financial transactions -Accordingly, Tribunal concluded that provisions of section 2(22)(e) were not at all applicable - Whether since assessee was involved in booking of resorts for customers of these companies and had entered into normal business transactions with companies as a part of its day-to-day business activities, Tribunal was right in holding that provisions of section 2(22)(e) were not applicable - Held, yes. HIGH COURT OF DELHI Commissioner of Income-tax v. Arvind Kumar Jain [2012] 18 taxmann.com 132 (Delhi) Section 2(22) of the Income-tax Act, 1961 - Deemed dividend - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vance Account'. He has held that in 'Salary Account' and 'Rent Account opening and credit balances were credit balances and therefore, being no advances no deemed dividend was assessable in respect those two accounts. Further, the day to day business transactions related to the affairs of company, which were executed though the assessee, were recorded in the Current Account and therefore any payment of loan and advances in that account was also not held by the learned Assessing Officer as deemed dividend. The learned Assessing Officer has held that the transactions in Advance Account were only loans and advances given by the company to the assessee, so the controversy between the assessee and the Revenue is in respect of the payment made by the company to assessee and recorded in Advance Account. The learned Assessing Officer has held that those payments as loan and advances whereas, the assessee is contending those payments as security deposits and advance salary. 11. For the purpose of having clarity of the transactions in 'Sandeep sabharwal Advance Account, we would like to reproduce the relevant Advance Account as under: Overseas Connexion Ltd. 8/19, West Extension Area, Sm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial year 2005-06, there is no mention of any security deposit in respect of the property, given by the company to the assessee, who is director and covered by the persons in respect of whom entries are to be made in register maintained u/s 301 of the Companies Act. 14. We also don't agree with the contention of the learned AR that Rs. 2,27,997 was advance against salary because firstly, there was no such advance given by the company , which can be confirmed from the fact that no such advance was mentioned in Annual statement of the company, secondly, the amount was derived merely after subtraction of Rs. 20,40,000/- claimed by the assessee as security deposit and credit balance of Rs. 4,52,003 out of Rs. 27,18,692 claimed as peak of 'Sandeep sabharwal Advance Account'. Further, even if amount was advance against salary , transaction between an employee and company cannot acquire character of business transaction. 15. In the case of Percy Peshotan baltivala Vs. ITO (Supra) relied by the learned AR, the payments were in running account, where in the instant case , the running account is separate and payments in that accounts have not been held as deemed dividend, hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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