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TMI Blog2018 (12) TMI 522X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 2(22) (e) of the Income Tax Act, 1961 (in short ''the Act''). 4. As against the above, appeal of the Revenue assails the relief given by the ld. Commissioner of Income Tax (Appeals) on the addition made by the ld. Assessing Officer u/s.2(22) (e) of the Act, 1961. 5. Since the issue regarding deemed dividend appear in both the appeals, this is considered first. 6. Facts apropos are that assessee engaged in the business of providing software services for telecommunication sector, had filed its return of income for the impugned assessment year disclosing income of Rs. 2,37,51,370/-. Assessee firm consisted of three partners namely one Shri. T. Padmakumar, one Shri. V. Sundaramoorthy and one Shri. J. Selvakumar with 33% share in the profits. Assessee had received advance aggregating to Rs. 7,54,00,000/- from a Company called M/s. Symbiotic Infotech P. Ltd. Share holders of this company were the same as the partners of the assessee firm. Each of them held 33.33% of the shares. Ld. Assessing Officer was of the opinion that advances received by the assessee, from M/s. Symbiotic Infotech P. Ltd, fell within the meaning of deemed dividend u/s.2(22)(e) of the Act. As per the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of shareholder. The deeming provisions as it applies to the case of loans or advances by a company to a concern in which it's shareholder has substantial interest, is based on the presumption that the loan or advances would ultimately be made available to the shareholders of the company giving the loan or . advance. The intention of the legislature is, therefore, to tax the dividend only in the hands of the shareholder and not in the hands of the concern. The appellant submit that the company Mls Symbiotic lnfotech pvt. Ltd. had in fact distributed dividend of Rs. 1,80,00,000/- during the year after payment of dividend distribution tax' The said company had distributed similar dividend in the earlier financial years also as per the details below: Financial vear Dividend distributed 2010-2011 Rs.2,70,00,000 2009-2010 Rs.1,44,00,000 Thus, the company had no intention to avoid tax on distribution of dividend and the loan was not given in lieu of distribution of dividend as envisaged in the above intention of the legislature white enacting the provisions of Section 2(22) (e). (ii). lt was further submitted that out of the amounts of Rs. 3,30,00,000/- received by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l interest. ln the present case, the assesse is not the beneficial or registered owner at the shareholdings in the company. 9. ln the tight of the above said provision, the findings of the Commissioner of lncome-tax (Appeals) as well as the Tribunal that the assessee, not being a registered or beneficial shareholder, is not liable to pay tax, are correct. We find no reason to interfere with the order of the Tribunal." Ld. Commissioner of Income Tax (Appeals) after going through the submissions of the assessee, held that the business dealings between the assessee and the company were far and few. However, according to him, out of Rs. 7,54,00,000/- received by the assessee, from M/s. Symbiotic Infotech P. Ltd, a sum of Rs. 3,00,00,000/- was given by the assessee as loan to a third party, which was returned in March, 2012. As per the ld. Commissioner of Income Tax (Appeals), assessee immediately on receiving the amount had repaid it to M/s. Symbiotic Infotech P. Ltd. Thus, according to the ld. Commissioner of Income Tax (Appeals) the sum of Rs. 3,00,00,000/- out of Rs. 7,54,00,000/- could not be considered as deemed dividend. As per the ld. Commissioner of Income Tax (Appeals), th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enefit was received by the partners of the assessee firm. Thus, as per the ld. Authorised Representative, ld. Commissioner of Income Tax (Appeals) was fair in giving relief to the assessee. 13. We have considered the rival contentions and perused the orders of the authorities below. There is no dispute that a sum of Rs. 7,54,00,000/- was received by the assessee as advance from M/s. Symbiotic Infotech P. Ltd. There is also no dispute that the said Company had two different accounts in the books of the assessee, one for trading advances and other for non-trading loans/ advances, and the sum of Rs. 7,54,00,000/- was not a trading advance. It is also not disputed that M/s. Symbiotic Infotech P. Ltd. had accumulated profits of Rs. 28,09,06,827/- as on 31.03.2012. Assessee had relied on a judgment of Hon'ble Jurisdictional High Court in the case of Printwave Services P. Ltd (supra). Lower authorities had taken a view that the said judgment applied only to Companies and not to partnership firms, who were the recipients of loans/advances. We are of the opinion that this view taken by the ld. Commissioner of Income Tax (Appeals) cannot be faulted. Hon'ble Supreme Court in the case of Nati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income Tax (Appeals). Argument of the assessee was that there were two loans raised by it from M/s. Indian Bank, one of which was a cash credit and the other a term loan. In so for as cash credit account was concerned, assessee agreed before the ld. Commissioner of Income Tax (Appeals) for disallowance of interest of Rs. 8,48,081/- thereon. However, with regard to balance interest of Rs. 22,44,408/-, contention of the assessee was that this was incurred on a term loan which was utilized for acquiring land at plot No.W-485, Second Avenue, Sector C, Anna Nagar West Extension, Chennai for a cost of Rs. 5,05,00,000/-. As per the assessee, the term loan having been fully utilized for acquiring immovable property in the name of assessee firm for its business purposes, interest relatable to such loan had to be allowed u/s.36(1) (iii) of the Act. However, ld. Commissioner of Income Tax (Appeals) was not impressed by the above arguments. According to him, partners of the assessee firm had two separate accounts in each of their name in the books of the firm. One was ''Capital Account'' and the other was ''Current Account''. If the aggregate of the balances in the current and ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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