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2021 (5) TMI 721

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..... justify the name of assessee in the said property, the contention of the assessee has been that, under the RBI guidelines, housing loan can be granted only to the individual and not to the company, and therefore, instead of buying the property in company s name, it was decided to buy the property in the individual name of the Directors on behalf of the company. In support of this contention, it has been shown before us that the Builder of the flat where the assessee company intended to purchase the flat had written a letter dated 04.02.2015 to register the property in the joint name of the company as well as the Directors. Even the housing loan sanctioned by the HDFC Bank shows the company as a co-borrower. Thus, as culled out from the records placed, the property was jointly purchased by the assessee and M/s. Enrich Agro Foods Products Pvt. Ltd. We are remanding this issue to the file of the Assessing Officer only for the purpose of examining, firstly whether the company had given the advance to the assessee for the purpose of acquisition of an asset/ property to be used for the purpose of company and; secondly, in whose name property has been finally registered. The Assessing .....

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..... ound that advance for property is covered u/s 2(22)(e). He has rejected the submissions of the assessee on the ground that no such explanation was ever offered by the assessee during the course of search and survey proceedings. The Ld. AO should have considered the explanation given during the course of assessment proceedings instead of outright rejecting the same. M/s Enrich Agro Food Products Pvt. Ltd is maintaining three ledger accounts in the name of the assessee as under: i. Loan Account which has an opening credit balance of ₹ 1,05,10,980/- and closing balance at ₹ 1,33,00,746/-. There is credit balance through out the year which means that it is the assessee who has given money to the company. It is the company which has derived the benefit because of the transactions in this account and not the assessee. ii. Advance for property account which was initiated on 23/04/2014. It has a closing debit balance of ₹ 3,31,00,000/- iii. Salary account which has nil opening as well as closing balance. The appellant has filed consolidated ledger account by amalgamating the above three accounts. It is noticed that the consolidated ledger account .....

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..... t. Neena Kandhari for the specific purpose of purchase of residential property in Gurgaon, Haryana for the purpose of company s business. Balance amount was to be invested by the appellant through her own sources. The property was to be used for the residence of the directors. It was explained that under the given circumstances and availability of the funds, the investment was not feasible without taking housing loan which was the only economical option. Under the RBI guidelines, housing loan can be granted only to the individual and not to the company. Therefore, It was decided to buy property in the individual name of the Directors on behalf of the company which can be used as rent free accommodation by them. I have seen that the builder has been requested vide letter dt. 04/02.2015 to register the property in the joint name of the Director and the company, if possible. Even the housing loan was sanctioned by the HDFC bank with the company as co- borrower. Under the circumstances, amount was given for acquiring the property on behalf of the company and not for the personal use of the directors. Therefore, section 2(22)(e) cannot be invoked. The Ld. AR has placed reliance on .....

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..... erusal of company s account in assessee's books notes that it was a running account with regular receipt / payment of money between the assessee and the company; CIT (TDS) VsSchutzDishman Bio-Tech Pvt. Ltd., 2016-TIOL-09- HC-AHM ++ it is seen that the CIT(A) as a matter of fact found that the payments were not in the nature of current adjustment. There was movement of fund both ways on need basis. The transactions in the nature of loans and advances are usually very few in number whereas in the present case, such transactions are in the form of current accommodation adjustment entries. The CIT(A) therefore, held that the transactions were not in the nature of loans and advances. The Revenue carried the matter in appeal. The Tribunal concurred with the view of the CIT(A) and held that the amounts were not in the nature of Inter Corporate Deposits and were therefore, not to be treated as loans or advances as contemplated u/s 2(22)(e). The issue is substantially one of appreciation of facts. When the CIT(A) as well as Tribunal concurrently held that looking to large number of adjustment entries in the accounts between two entities, the amounts were not in .....

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..... between the Assessee and BAPL are in the nature of current account and provisions of Sec 2(22)(e) will not be applicable to the case of the Assessee. 5. Without prejudice to the above, he further submitted that the Ld. AO has mentioned that M/s Enrich Agro Food Products Pvt. Ltd. has given loan of ₹ 1,97,99,254/- to the assessee. The assessee is holding 14.57% of shares in the company. It was explained to the Ld. AO that the company had decided to invest in a residential property at Gurgaon. Even the builder has been requested to register the property in the joint name of the Director and the company and not in the single name of the assessee; because part payment was made by the company and remaining amount was paid by the assessee through housing loan. Under the circumstances, amount was given for acquiring the property on behalf of the company and not for the ownership of the directors. Hence, it is a commercial transfer. Therefore, section 2(22)(e) cannot be invoked. 6. Ld. Counsel further drew our attention to board resolution passed on 12/03/2014 by M/s Enrich Agro Food Products Pvt. Ltd. for making payment up to ₹ 5 crore to Smt. Neena Kandhari for t .....

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..... profits of M/s. ABP Pvt. Ltd as an advance and not as dividend in order to save payment of tax on dividend distribution. In view of the above, we find no infirmity in the impugned order of the CIT (A) in deleting the addition made by the AO u/s 2(22)(e); 8. We have heard the rival submissions and also perused the relevant finding given in the impugned orders as well as the material referred to before us at the time of hearing. The Assessing Officer has taxed amount received from M/s. Enrich Agro Foods Products Pvt. Ltd. amounting to ₹ 1,97,99,254/- as unexplained deemed dividend u/s 2(22)(e). The company as noted by the ld. CIT(A) has maintained three ledger accounts in the name of the assessee, wherein loan Account which had an opening credit balance of ₹ 1,05,10,980/- and closing balance at ₹ 1,33,00,746/-. Ld. CIT(A) further noted that, there was credit balance throughout the year which means that it is the assessee who has given money to the company. It is the company which has derived the benefit because of the transactions in this account and not the assessee. However, when advance for property account was given on 23/04/2014, there was a closing debit .....

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..... oods Products Pvt. Ltd., Thru. Mr. Taran Pal Singh Kandari (Director) . However, this letter has been filed before us for the first time and therefore the veracity of the said letter needs to be examined by the Assessing Officer. Looking to the facts and circumstances and new evidence brought on record, we think it proper to set-aside the matter to the Assessing Officer for limited purpose, keeping in mind that:- The provision of deemed dividend u/s. 2(22)(e) can be invoked only when any loan and advance has been given to the shareholder which is not for the purpose of the business of the company or otherwise for the company itself, but as advance solely to the shareholders which is in the nature of loan. If the advance has been given for the purchase of property which is ultimately being allotted or belongs to the company and only name of the shareholder has been put on record, then ostensibly it is in the nature of advance for the purpose of company s business or for the purpose of company and in such a case it cannot be taxed as deemed dividend u/s.2(22)(e) in the hands of shareholder. Now that, later on the entire allotment has been made in the name of the company, .....

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