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TMI Blog2015 (4) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaipur has erred in law and on facts in holding that the amount advanced by M/s Manglam Multiplex Pvt. Ltd., to M/s Benchmark Infotech Pvt. Ltd., where the assessee was one of the directors holding more than 10% shares respectively do not fall within the purview of section 2(22)(e) and thereby deleting the addition of Rs. 7,85,559/- representing 50% of the accumulated profit of P&L a/c. Grounds in revenue's appeal ITA No. 611/JP/2012 "1(i) Whether on the facts and circumstances of the case of CIT(A) (Central), Jaipur has erred in law and on facts in holding that the amount advanced by M/s Mistry Meadows Pvt. Ltd. to M/s Martial Buildcon Pvt. Ltd., where the assessee was one of the directors holding more than 10% shares respectively do not fall within the purview of section 2(22)(e) and thereby deleting the addition of Rs. 13,76,629/-. 1(ii) Whether on the facts and circumstances of the case the CIT(A) (Central), Jaipur has erred in law and on facts in holding that the amount advanced by M/s Manglam Multiplex Pvt. Ltd., to M/s Martial Buildcon Pvt. Ltd. where the assessee was one of the directors holding more than 10% shares respectively do not fall within the purview of secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share premium account remained constant, therefore, there was no question of advancing any amount from this account. During the year, the assessee held sufficient profit of M/s Misty Meadows (P) Ltd. and from which it had advanced Rs. 25.25 lacs to M/s Benchmark Infotech Pvt. Ltd.. The assessee also relied before the Assessing Officer a decision of Hon'ble ITAT, Mumbai Bench in the case of ACIT vs. Bhaumik Colour Pvt. Ltd. (2009) 118 ITD 1 (Mum) (SB). As per the Assessing Officer's finding, the case law is not squarely applicable on the assessee's case as the assessee is a registered share holder in both the companies having minimum share holding as required by the law to be held deemed dividend U/s 2(22)(e) of the Act. He further relied on the decision in the case of CIT Vs. Hotel Hiltop, 313 ITR 116 of Hon'ble Rajasthan High Court wherein it has been held that deemed dividend would be deemed dividend in the hands of the beneficial owner and not the concern. The assessee's argument was also not found convincing to the Assessing Officer that so called loan and advance is not itself a loan but repayable on demand, the assessee's case is covered U/s 2(22)(e) of the Act. M/s Misty Mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had paid Rs. 8 crores to M/s Martial Buildcon Pvt. Ltd. on 08/3/2008, which has been paid back by M/s Martial Buildcon Pvt. Ltd. on 26/03/2008. Shri Basant Bansal held 34% of M/s Martial Buildcon Pvt. Ltd. and 18.80% shares of M/s Misty Meadows Pvt. Ltd. during the year 2007-08, which means that the assessee held more than 10% shares in M/s Misty Meadows Pvt. Ltd. which has extended the advance and held more than 20% shares of M/s Martial Buildcon Pvt. Ltd., the accumulated profit as on 31/3/2008 at Rs. 1,13,26,629.58/-. Accordingly, he treated the deemed dividend to the extent of accumulated profit in the hands of the assessee. A show cause notice was given by the Assessing Officer to the assessee, which has been replied by him and considered by the Assessing Officer. The assessee submitted before the Assessing Officer that 99.95 lacs was in the share premium account, which is not available for dividend. The ld Assessing Officer held that if the assessee's contention is accepted even after reducing share premium account from the accumulated profit, the remaining amount would be Rs. 13,76,629. The assessee's argument before the Assessing Officer that these transactions does not fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of being heard and assessee also replied in response to notice. After considering the assessee's reply, the ld Assessing Officer held that the assessee had relied upon the decision of ITAT, Mumbai Bench (SB) in case of ACIT Vs. Bhaumik Colour Pvt. Ltd. (supra), which is not squarely applicable in the case of assessee as the assessee is a registered share holder and beneficial owner of the share. In Bhaumiks colour Pvt. Ltd. case, the common share holder is a trust. Share certificates are in the name of the Trustees. Thus the registered holders are the trustees, whereas the beneficial owners are the beneficiaries of the Trust. Hence, the primary condition for invoking section 2(22)(e) is not fulfilled and consequently, section 2(22)(e) does not apply to the case of ACIT Vs. Bhaumik Colour Pvt. Ltd. (supra) as held by the Special Bench ITAT, Mumbai. In case of Basant Bansal (assessee), there is no ambiguity as he is the registered share holder of both the companies with share holding of 50% in M/s B&B Mercantile Pvt. Ltd. and 34% shares holding in M/s Martial Buildcom Pvt. Ltd.. He is also a beneficial owner. It has more than 20% shares in the advance recipient company i.e. M/s Mart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jurisdictional High Court in the case of CIT Vs. Hotel Hiltop (supra), deemed dividend would be added in the hands of beneficial owner and not in the hands of the concern. The Assessing Officer was justified in considering it in the hands of appellant. The Assessing Officer has also appreciated the fact of accumulated profit in remand report. The ld Assessing Officer considered the MOU between M/s Misty Meadows Pvt. Ltd. and M/s Benchmark Infotech Pvt. Ltd. and had not rebutted the submission of the assessee that these transactions were not made for business purposes. He further relied upon the following decisions:- (i) CIT Vs. Creative Dyeing and Printing P. Ltd. (2009) 318 ITR 476 (Del). (ii) CIT Vs. Ambassador Travels Pvt. Ltd. (2009) 318 ITR 376 (Del). (iii) CIT Vs. Raj Kumar (2009) 318 ITR 462 (Del) (iv) Pradeep Kumar Malhotra s. CIT (2011) 338 ITR 538 (Cal). The ld CIT(A) held that these payments were not loan or advances fallen within Section 2(22)(e) of the Act but payment for proposed purchase of land and are usual business transaction. Therefore, he deleted the addition made by the Assessing Officer to the extent of Rs. 25.25 lacs. Regarding deletion of additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm of agreement, on the argument of the A.R. that M/s Mangalam made initial payment of Rs. 8.4 crore for purchase of 100 kanals of land for total consideration of Rs. 42 crores as per the agreement filed (wherein as Rs. 33.42 lakhs was the accumulated profit of M/s Mangalam, Rs. 16.71 lakhs was added in the hands of both the assessees. 4.11 Similarly after examination of additional evidence being an MOU between M/s B.B. and M/s Martial by the A.O., the A.O. has not made any adverse comments on the argument of A.R. regarding payment being in furtherance of business transaction as per the MOU between the two A.O. has also mentioned that the case of M/s Martial was under scrutiny and no adverse inference was drawn by the then A.O. in regard to these payments. 4.12 Considering the facts and in the circumstances of the case as discussed hereinabove, material available on record including the additional evidence and also the remand report of the A.O., it is held that none of these three payments namely (i) payment made by M/s Misty to M/s Martial (leading to addition of Rs. 13,76,629/-), (ii) payment made by M/s Mangalam to M/s martial (leading to addition of Rs. 16,71,302/- in the c ..... 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