9911796707
TMI Blog2018 (10) TMI 914X X X X Extracts X X X X X X X X Extracts X X X X ..... on 28.09.2014 admitting total income of Rs. 2,78,36,670/-. The case was selected for scrutiny under CASS and notice U/s.143(2) of the Act was issued on 31.08.2015. Finally the assessment order was passed U/s.143(3) of the Act on 20.12.2016 wherein the Ld.AO made addition of Rs. 2,77,98,670/- towards deemed dividend U/s.2(22)(e) of the Act and Rs. 3,20,842/- towards disallowance of sales promotion expenses. 4. Addition of Rs. 2,77,98,930/- on account of deemed dividend U/s.2(22)(e) of the Act:- During the course of scrutiny assessment proceedings, it was observed by the Ld.AO that the assessee is a substantial shareholder in the company M/s. Samba Publishing Co. Pvt. Ltd., holding 77.5% of the shares. It was also noticed that the assessee owes the company an amount of Rs. 15,47,28,852/- as on 31.03.2014 whereas the opening balance as on 01.04.2013 was Rs. 12,69,39,922/-. It was also observed that the assessee's proprietary concern M/s. Samba Publishing Company procures book published by M/s. Samba Publishing Company Pvt. Ltd., and sells them to various schools. Thereafter the assessee's proprietor concern remits the sale proceeds to M/s. Samba Publishing Company Pvt. Ltd. From thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s. Samba Publishing Company Pvt. Ltd., declined, therefore the assessee had waived printing charges for utilizing her printing machines. (v) The assessee had also canvassed printing jobs for M/s. Samba Publishing Co. Pvt. Ltd., to improve its revenue stream. (vi) There was a strong nexus between the assessee's proprietary concern and M/s. Samba Publishing Company Pvt. Ltd., because all the assets of the assessee's proprietary concern was transferred to the company for various reasons discussed in the order of the Ld.CIT(A). (vii) The premise of the assessee was utilized by the company by paying a nominal rent. (viii) Thereafter the Ld.CIT(A) relied in the following decisions:- "(1) The Jurisdictional bench of the ITAT, in the case reported in 32 CCH 308 approved the concept of the management control while deleting the assessment. of deemed dividend presumed based on the transaction between the related entities. The said decision of the ITAT is now confirmed by the Jurisdictional High Court reported in 94 CCH 320. (2) The jurisdictional bench of the ITAT, in the case reported in 33 CCH496 approved the non application of deemed provisions under consideration in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Additional CIT, the AO has brought to tax the outstanding payable by the appellant to the company, MI s Samba Publishing Company (P) Ltd without going into the nature of business transactions between the two business entities - MI s Samba Publishing Company (P) Ltd. and Samba Publishing Company, in which the appellant is a proprietress. Both the concerns are in similar line of business and there have been continuous transactions through a running account. The appellant's AR has submitted a paper book containing the following ledger accounts in which the AR has analysed the nature of transactions. These accounts have been already submitted before the Additional CIT and the AO during the assessment proceedings. No. Particulars 1 Ledger A/c - Abstract of Samba Publishing Company in the books of Samba Publishing Company (P) Ltd. 2 Ledger A/c Abstract of the Appellant m the books of Samba Publishing Company (P) Ltd. 3 Turnover Ration of Samba Publishing Company m the books of Samba Publishing Company (P) Ltd. 4 Ledger A/c - Abstract of Samba Publishing Company (P) Ltd., in the books of Samba Publishing company. 5 Ledger A/c - Abstract of Samba Publishing Company (P) Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurity for funding of company and at time of extending guarantee/ security she had sought liberty to withdraw funds from company as and when required by her for personal purposes - It was thus in this background, she had withdrawn certain amount from company periodically and had also repaid same - Whether on facts it could be said that arrangement between assessee and company was merely for sake of convenience arising out of business expediency, which could not partake character of deemed dividend - Held, yes [In favour of assessee]" C) The Hon'ble Madras High Court, in the case of CIT Vs. C.Subba Reddy [97 CCH 157 (2016)] has held as under: "Section 2(22) of the Income-tax Act, 1961 - Deemed dividend (Loans and advances to shareholders) - Assessment year 2001-02 - Assessee, proprietor of CPD, entered into an agreement with CHPL sub-contracting construction work to it - CPD was a shareholder in CHPL, a closely held company, holding substantial voting rights - CHPL gave credit to assessee by virtue of contractual obligation and business transaction which was settled in very next year - No individual benefit accrued to assessee - Whether amount having been given by CHPL as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove, it has been held that where there is unity of management and control between the two similar concerns, the provisions of Section 2(22)(e) of the Act cannot apply, more particularly, to the running account between the two entities which is in the ordinary course of business transactions. Besides, the AR has also relied on the CBDT circular No.19/2017 dated 12-06-2017 which it is mentioned that in view of certain courts decisions in the recent past, the trade advances in the nature of commercial transactions would not fall within the ambit of Section 2(22)(e) of the Act. In the said circular, it is further mentioned that, appeals may not be filed on this ground by the department as trade advances which are in the nature of commercial transactions would not fall within the ambit of the word, "advances" mentioned under Section 2(22)(e) of the Act. 4.3.7. After analysis of the accounts submitted by the appellant and after perusing the case laws relied on by the AR including that of jurisdictional High Court and ITAT and the CBDT's circular mentioned above, I am of the considered opinion that the outstanding liability payable by the appellant to the company, M/s Samba Publish ..... X X X X Extracts X X X X X X X X Extracts X X X X
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