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TMI Blog2016 (10) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... amount of ₹ 50 Lakhs confirmed by the CIT(A) will come within the purview of Section 2(22)(e) of the Income Tax Act [Act]. Assessee has raised the following grounds: 1. On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the order of re-assessment passed u/s. 143(3) r.w.s. 147 of the I.T. Act, 1961. 2. The invocation of jurisdiction u/s. 147 of the Act was wrong and erroneous in as much as the requisite conditions were not fulfilled. Therefore the entire re-assessment proceedings are vitiated. 3. The learned CIT(A) erred in not accepting the plea of the appellant that ₹ 50.00 lakhs was paid by M/s. Amit Cottons Pvt. Ltd. It was a transfer entry in the books of M/s. K.G.F. Cottons Pvt. Ltd., for the payment made by M/s. Amit Cottons Pvt. Ltd., hence not coming under the purview of section 2(22)(e) of the I.T. Act, 1961. As the said amount was not paid by or there was no outgoing or flow of money from M/s. K.G.F. Cottons Pvt. Ltd., transfer entry by making book entries cannot be treated as payment by way of loan by the company to the appellant for the purpose of mulcting the appellant with tax liability. 4. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards land transaction to regularise Emam lands in the hands of the partnership firm whose assets were taken over by the company on lease basis. Ld. CIT(A) however, confirmed the amount of ₹ 50 Lakhs as deemed dividend by stating as under: The second additional ground is relating to ₹ 50 lakhs received by the company M/s. KGF from another company M/s. Amit Cottons Pvt Ltd., the argument of the appellant that this loan was received by the company from other company, therefore, Sec. 2(22)(e) is not applicable and not acceptable because the company has received loan from another company or from bank, does not change the impact of Sec. 2(22)(e). As per the provisions of Sec. 2(22)(e), the loan advanced by the company to the shareholders having more than 10% share holding then the provisions of Sec. 2(22)(e) are applicable. In the present case, the assessee has received loan from M/s.KGF Cottons Pvt. Ltd., thus, the question that the company M/s.KGF has received loan from another company or from any bank is immaterial. The concerned question is that the company M/s.KGF Cottons Pvt. Ltd. has advanced loan to. the assessee, therefore, this argument of the appellant is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prescribed. 6. We have considered the rival submissions. There is no doubt that the company has advanced moneys to assessee. Part of it which was opening balance was deleted by the CIT(A) and he has confirmed the amount of ₹ 42,92,164/- out of ₹ 50 Lakhs advanced by M/s. Amit Cottons Pvt. Ltd., transferred as a liability to M/s. K.G.F. Cottons Pvt. Ltd. As seen from the submissions before the CIT(A), placed on record, assessee has drawn an amount of ₹ 50 Lakhs from M/s. Amit Cottons Pvt. Ltd., on the following dates: Dates Amount (Rs.) 06.04.05 7,50,000 18.04.05 10,00,000 04.05.05 12,50,000 15.02.06 20,00,000 6.1. Even though he is having voting power of less than 10% in the said M/s. Amit Cottons Pvt. Ltd., however, the said outstanding balance in the books of M/s. Amit Cottons Pvt. Ltd., has been transferred by way of journal entries in the books of M/s. K.G.F. Cottons Pvt. Ltd. Even though, it was contended that these were only transfer entries, we can not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in either case possesses accumulated profits ; but dividend does not include- (i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets ; (ia) a distribution made in accordance with sub-clause (c) or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965 ; (ii) any advance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ; (iii) any dividend paid by a company which is set off by the company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause (e), to the extent to which it is so set off; (iv) any payment made by a company on purchase of its own shares from a shareholder in accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Sam [236 ITR 1003] (Mad) (supra) to submit that transfer entries cannot be considered as payment by company . The facts in the above said case are entirely different wherein assessee s husband Shri G.N. Sam was also a shareholder in the company and her husband withdrew sums of money from the said company. On the death of her husband the debit balance of ₹ 4,73,241/- in the Estate of Late G.N. Sam was transferred to the account of assessee in the books of the said company, and by such transfer, the said amount in the hands of assessee were shown as debit balance in assessee s account. On those facts, it was considered that a further fiction cannot be introduced when the provisions of Section 2(22)(e) itself is a fiction created by the Statute. The facts in the above said case are entirely different from the facts in assessee s case. In this case, assessee directly withdrew the money from another company and said outstanding amount to M/s. Amit Cottons Pvt. Ltd., was settled by way of transfer entries between the two companies but ultimately, as per the provisions of Section 2(22)(e), it is paid on behalf of assessee by such company. Therefore, it is within the purview of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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