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TMI Blog2016 (11) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of ₹ 1 crore to M/s Roger Industries Ltd., i.e., 13.12.2007, the proprietorship concern stood already taken over by M/s Roger Industries Ltd. CIT(A) had specifically inquired of the AO, to show that the amount of ₹ 1 crore had been paid for the individual benefit of or on behalf of the assessee. Nothing to this effect was brought on record by the AO and the remand report of the AO is totally silent in this regard, but for making a bald assertion that the amount was paid to M/s Roger Industries Ltd. for the individual benefit of the assessee. CIT(A) has observed that later on in the remand report, the AO had himself stated that the amount taken by M/s Roger Industries Ltd. was utilized for payments made to cater for the need of M/s Roger Industries Ltd., i.e., for purchase of goods. On the basis of the above, it is seen that the ld. CIT(A) was well justified in holding that deemed dividend can be taxed only in the hands of the recipient, either being individual shareholder, or the concern in which the individual has a substantial interest, or if any payment is made on behalf of, or for the individual benefit of the individual shareholder, which is not the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee s business and as such, the provisions of section 36(1)(iii) of the Act were not applicable. The explanation offered by the assessee was not accepted by the AO, since he found that the proprietorship concern of the assessee was dissolved on 15.08.2007 and for the period ending on 15.08.2007, in the balance sheet of the assessee, apart from the amount of ₹ 34,81,347.67/-, there was debit balance of ₹ 88,69,168/- in the name of M/s Roger International Pvt. Ltd. and a debit balance of ₹ 17,03,953/- in the name of M/s Roger Construction Pvt. Ltd., for which, the AO concluded that the assessee had given these amounts without any business purpose. The AO, computed the interest on the loans/advances given by the assessee to Shri Deepak Budhiraja, Smt. Dalbir Kaur, M/s Roger International Pvt. Ltd., and M/s Roger Construction Pvt. Ltd., at ₹ 4,31,369/- and made disallowance out of interest claimed by the assessee u/s 36(1)(iii) of the Act. 5. The ld. CIT(A) deleted the addition. 6. The facts on record are that as per the assessee, the purpose of loans/advances given to each of the four parties stands duly explained. The loans to M/s Roger International P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) had also considered the loans/advances given by the assessee to Smt. Dalbir Kaur in the assessee s appeal for A.Y. 2007-08, vide order dated 29.03.2011. Therein, the ld. CIT(A) had affirmed that such loans/ advances had been given by the assessee to Smt. Dalbir Kaur for the purpose of construction business. As such, the ld. CIT(A) did not find any interest to be disallowable on the loans/advances given to Smt. Dalbir Kaur. So far as regards the loans/advances given by the assessee to Shri Deepak Budhiraja, the ld. CIT(A) observed that it was found that the assessee had already taken a sufficient amount of interest free loans from his wife. Accordingly, here also, no disallowance of interest was sustained. 9. In this manner, the ld. CIT(A) found that the loans and advances in question stood duly considered by him in the hands of M/s Roger Exports, i.e., the firm of the assessee and that these were the same loans and advances which had been considered by the AO in the hands of the assessee in his individual capacity. Following his decision dated 21.02.2013 for A.Y. 2008-09 in the case of M/s Roger Exports, the ld. CIT(A) has deleted the addition. 10. The above fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a show cause to the assessee as to why the amount of ₹ 69,91,127/- received from M/s Euro Safety Footwear Pvt. Ltd. as loan in the books of M/s Roger Industries Ltd. be not considered as per the provisions of section 2(22)(e) and necessary addition be not made to the assessee s income. The assessee responded by stating that the provisions of section 2(22)(e) of the Act were not applicable in respect of the advance received from M/s Euro Safety Footwear Pvt. Ltd., since the same was on account of commercial trade transaction between both the parties; that the purchase of shoes had been made from M/s Euro Safety Footwear Pvt. Ltd. in F.Ys. 2006-07 and 2007-08 and a copy of the account of M/s Euro Safety Footwear Pvt. Ltd. as appearing in the books of account of the company, M/s Roger Industries Ltd., had been provided. The AO took into account the information provided by the DCIT-4 (1) Agra, in the case of M/s Roger industries Pvt. Ltd., wherein, vide order dated 30.11.2010, the loan taken by the company had been held to be deemed dividend. The AO rejected the explanation offered by the assessee and considered the amount of ₹ 69,91,127/- as deemed dividend in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion and the provisions of section 2(22)(e) of the Act might be involved. 18. The assessee, in his rejoinder to the remand report, stated, inter alia, that while calculating the accumulated profits, the AO had ignored the fact that the accumulated profits included reserve and surplus, as well as current year profits and, as such, they would also include accumulated losses; that the accumulated losses of M/s Euro Safety Footwear Pvt. Ltd., as on 31.3.2007 were of ₹ 46,86,013.07/- and this was without including the brought forward depreciation losses of ₹ 2978934/-; that while calculating the accumulated profits, it was depreciation at the rate of mentioned in the Act that was taken into account and not depreciation as provided in the books of account; that therefore, the total accumulated profits as on 13.12.2007 stood at ₹ 21,24,721/-; that hence, even if the advances received from the sister concern were to be treated as deemed dividend, the same could only be to the extent of the accumulated profits of ₹ 21,24,721/-; that the AO having not made any comment in this regard in the remand report, he appeared to have agreed with the assessee s contention. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2(22)(e) of the Act. 19. All the above facts were duly taken into account by the ld. CIT(A) while deleting the addition made by the AO. Now, it remains undisputed, as correctly taken into account by ld. CIT(A), that no amount was received directly by the assessee from M/s Euro Safety Footwear Pvt. Ltd., wherein, the assessee was having more than 10% of shareholding. On the date of payment of ₹ 1 crore to M/s Roger Industries Ltd., i.e., 13.12.2007, the proprietorship concern stood already taken over by M/s Roger Industries Ltd. The ld. CIT(A) had specifically inquired of the AO, to show that the amount of ₹ 1 crore had been paid for the individual benefit of or on behalf of the assessee. However, nothing to this effect was brought on record by the AO and the remand report of the AO is totally silent in this regard, but for making a bald assertion that the amount was paid to M/s Roger Industries Ltd. for the individual benefit of the assessee. Rather, the ld. CIT(A) has observed at page 35 of the impugned order that later on in the remand report, the AO had himself stated that the amount taken by M/s Roger Industries Ltd. was utilized for payments made to cate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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