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TMI Blog2019 (1) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, 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 case herein. - Decided against revenue - ITA No.266/Agr/2014 - - - Dated:- 9-10-2018 - Shri A.D. Jain, Judicial Member And Shri Dr. Mitha Lal Meena, Accountant Member For the Appellant : Shri Deependra Mohan, Advocate For the Respondent : Shri Waseem Arshad, Sr. D.R. ORDER PER DR.MITHA LAL MEENA, A.M.: This is the Department s appeal filed against the order of the CIT(A)-II, Agra, in respect of Assessment Year 2008-09, raising following grounds of appeal: 1. That the Ld, CIT(A)-II, Agra has erred in law and on facts in deleting the addition of ₹ 69.91,127/- made by the AO u/s 2(22)(e) without appreciating the facts that there is no specific mention in section 2(22)(e) that the amount of deemed dividend will only by taxed in the hands of registered share holder. Further Ld. ClT(A)-ll, Agra ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revity. b) Admission of additional evidence in the form of collaboration agreement. 4. Briefly, the fact as per record are that the AO made addition of ₹ 69,91,127/-, on account of deemed dividend since he found that the assesse company had received certain amountsfrom M/s. Euro Safety Footwear (P) Ltd. and the same attracted the provisions contained in section 2(22)(e) of the Income Tax Act, 1961. The ld. CIT(A) deleted the addition holding that the assesse company has received the amount from M/S Euro Safety Footwear (P) Ltd. on account of commercial transaction and business expediency and it is also not registered shareholder of the payer company. 5. The ld. DR has contended that the ld. CIT(A) has erred in deleting the addition ignoring the actual nature of receipts and the relevant provisions of section 2(22)(e) i.e, any payments to any concern in which such shareholder is a member or a partner and in which he has a substantial interest is applicable in the case of assesse company. 6. On the other hand, the ld. Counsel for the assessee has placed strong reliance on the impugned order. 7. We have heard both the parties on this issue and have perused the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt term cash requirements. By virtue of offering personal guarantee and collateral security for the benefit of the company, the liquidity position of the assessee had gone down. In the strict sense if it is to be construed the amount forwarded by the company to the assessee was not in the shape of advances or loans. The arrangement between the assessee and the company was merely for the sake of convenience arising out of business expediency. In the facts and circumstances of the case, it is not appropriate to hold that the amount withdrawn by the assessee partakes the character of deemed dividend under the provisions of section 2(22)(e) of the Act. The case of the assessee is squarely covered by the Division Bench judgement of the Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra vs. CIT reported at 338 ITR 538 (Cal), wherein the facts were similar to the facts of the instant case. In Pradip Kumar's case assessee had substantial holding in private company. The assessee permitted his immovable property to be mortgaged to the bank for enabling the company to take the benefit of loan. The Board of Directors of the company passed a resolution to obtain inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court has held that only gratuitous loans advanced by company to shareholder can be treated as deemed dividend u/s 2(22)(e). 10. During the course of assessment proceedings, the assessee company was required to explain as to why the transactions of receipt of money by the assessee company may not be treated as deemed dividend u/s 2(22)(e). To which the assessee replied that since the assessee company has purchased shoes from M/S Euro Safety Footwear (P) Ltd., these are commercial transactions and the provisions of Section 2(22)(e) are not attracted. The assessee believed that the reply would be convincing and did not file any other evidence at that point of time. However, after the additions were made, the assessee during the course of appellate proceedings placed on record the evidences in the form of collaboration agreement, sanction letter of bank etc. These evidences alongwith the submissions of the assessee were forwarded to the AO for comments. The AO made inquiries from the Bank and has confirmed the genuineness of the documentary evidences in the form of bank letter, collaboration agreement and bank sanction letter. The CIT(A) has in his order at para 11.11 on pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct can be assessed only in the hands of any other person. 15. In the case of M/S India Casting Co., in ITA no.55/Agr/2012 wherein it was held As regards the judgement of Hon'ble Delhi High Court in the case of CIT vs. National Travel Services, 202 Taxman 327 (Delhi) cited by the ld. Departmental Representative, we noticed that in another judgement in the case of CIT vs. Ankitech (P) Ltd. , 199 Taxman 341 (Del), the Hon'ble Delhi High Court decided the issue in favour of the assessee considering the judgment of Hon'ble Bombay High Court in the case of CIT vs. Universal Medicare Pvt. Ltd. , 190 Taxman 144 (Mum) and judgment of Rajasthan High Court in the case of CIT vs. Hotel Hilltop (supra). In the case of CIT vs. Ankitech (P) Ltd. (supra), the Hon'ble Delhi High Court has affirmed the order of I.T.A.T., Special Bench, Mumbai in the in case of Bhaumik Colour (Supra). However, the Hon'ble Delhi High Court has taken a different view in the case of CIT vs. National Travel Services (supra) wherein it has been held that for the purpose of section 2(22)(e) of the Act the partnership firm is to be treated as the shareholder and it is not necessary that it is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of law is liable to interpretation, then interpretation in favour of the assessee should be adopted. 18. The accumulated profits include reserve and surplus as well as the current year profits and as a logical corollary would include accumulated losses as well. In the instant case the accumulated losses of M/S Euro Safety Footwear (P) Ltd. as on 31.03.2007 were ₹ 46,86,013.07 and this is without including the b/f depreciation loss as per Income Tax Act of ₹ 29,78,934/-.While calculating accumulated profits depreciation at the rate mentioned in the IT Act, 1961 shall be taken into account and not depreciation as provided in the books. The view has been upheld by the Hon ble Bombay High Court in the case of Navnit Lal C. Jhaveri vs. CIT reported at (1971) 80 ITR 582. The accumulated profits as on 16.09.2008 were ₹ 21,24,721/-. Therefore, even if the advances received from the sister concern are treated as deemed dividend the same can only be to the extent of accumulated profits i.e., ₹ 21,24,721/-. The AO having not made any comment in this regard in the remand report, he appeared to have agreed with the assessee s I.T.A No. 261/Agra/2013 12 content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.01.2012 is relevant in this regard wherein it was held In this regard Rule 46-A of the Income Tax Rules prescribed that an opportunity will have to be given to the A.O. before admitting fresh evidence. In the instant case, the CIT(A) vide his letter dated 08.10.2009 has called the remand report from the A.O., who in his report did not find any defect in the books of accounts produced before him by the assessee. Thus, the A.O. got the sufficient opportunity to examine the books of accounts. The CIT(A) has exercised his power mentioned in section 250 (4) of the Act, which provides that the CIT(A) may remand the case to the A.O. and call for the remand report on the assessment on certain points. Hence, there is no violation of Rule 46A. Needless to mention that the power of the Appellate Commissioner is co-terminus with the power of the Assessing Officer. Appellate authority has all the powers, which the original authority has subject to condition/restriction, if any, prescribed by law as per the ratio laid down in the following cases: 1. Jute Corp. of India Ltd. vs. CIT, 187 ITR 688,693 SC; and 2. CIT vs. NirbheramDaluram, (1997) 224 ITR 610 (SC). I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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