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TMI Blog2021 (9) TMI 132X X X X Extracts X X X X X X X X Extracts X X X X ..... hri R.R. Makwana, Sr. D.R. For the Assessee : Shri Bandish Soparkar, A.R. ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This revenue s appeal for A.Y. 2013-14, arises from order of the CIT(A)-1, Ahmedabad dated 29-06-2016, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The solitary ground of appeal of the revenue is directed against the order of ld. CIT(A)-1 Ahmedabad in deleting the addition of ₹ 2,06,53,898/- made on account of deemed dividend u/s. 2(22)(e) of the Act. 3. The fact in brief is that return of income declaring total income of ₹ 3,79,13,200/- was filed on 17th Feb, 2014. The case was subject to scrutiny assessment and notice u/s. 143(2) of the Act was issued on 8th Sep, 2014. 3.1 During the course of assessment, Assessing Officer noticed that assessee has shown in his return of income salary income in the capacity of directors of two companies namely Biotech Vision Clear Pvt. Ltd. and Biotech Opthalmics Pvt. Ltd. as under:- Nature of income Amount Name of the Company Name of the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon determination of salaries at year end. It is also submitted that the Company has also deducted lDS on the salaries while adjusting against advance and the assessee has also paid tax by offering this Income in Return Of Income(ROI). 2. Vide Point 3 your good selves have asked the assessee to provide explanation for entries regarding reduction in debit balance shown in Mehul Asnani WIP Account to NIL by journal entries under the narration 'PGEN-JV/1213/00969'. In relation to this the assessee would like to state that during the year Bio-Tech Vision Care Private Limited has made payment to the assessee in relation to purchase of Building the amount paid to the assessee has at the end of the year transferred to CWIP Building A/c as the transfer could not get completed at the year end. The assessee would like to attach J. V. of the same vide Annexure 2. 3. Vide Point 4 your good self have asked the assessee to clarify whether any of the loan amount of ₹ 52,50,274/- shown in Balance Sheet of Biotech Ophthalmic Private Limited relates to the assessee. In relation to the same the assessee would like to state that no portion of amount relates to the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treating it as an afterthought. The Assessing Officer a/so observed that even though on identical facts CIT (Appeals) in A. Y. 2010-11 has decided the issue in favour of Appellant, Department is in appeal before Hon'ble I.T.A.T., addition of ₹ 1,47,89,965/- was made. On the other hand, Appellant has argued that he was having current account with the Company and such advances were adjusted against salary as well as incentive payable by said Company^ It was also argued by Appellant that said Company has deducted TDS on aforesaid payment made to Appellant and this being advance against incentive/salary, same is out of the purview of Section 2(22)(e) of the Act. the Appellant has also stated that incentive and salary received from Company is already offered to tax while filing Return of Income hence advance received against such salary and considered while making addition under Section 2(22)(e)has resulted into double addition in the case of Appellant. On careful consideration of entire facts, it is observed that Appellant is receiving incentive along with salary from A. Y. 2010-11 hence contention of Assessing Officer that advance was against salary and same aftertho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of ₹ 83.1 lacs advanced by the company totaling to ₹ 1,41,22,154/- was being added as deemed dividend u/s 2(22)(e). 4.4 The contentions of the Id. A.R. are that in lieu of services rendered by the appellant in the capacity of director to the company, it was agreed between the parties that the director shall receive certain incentive over and above salary; certain expenses of the appellant were directly paid by the company on behalf of the appellant; such payments were adjusted against incentive and salary payable to him; for this purpose a running current account of the appellant was kept by the company; ~on the salary and incentive, fax was duly deducted by the company; the running account represented interest account which was adjusted before the end of the financial year; since it was a running account, the debit balance at some point got converted into credit balance later, the amount advanced by the company was not in the nature of loan; advance in lieu of salary cannot be treated as deemed dividend in the light of the judicial pronouncements; there was no liability on the part of the appellant to repay the advances; the appellant had paid tax on the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor's report in Form 3CD, it was stated that the tax deducted was remaining unpaid at the end of the year. The outstanding TDS was reflected in the balance sheet under 'current liabilities'. In the light of these facts, it has to be held that the advances given by the company to the appellant came to adjusted against the salary/incentive paid to him. At the end of the year appellant was to receive over ₹ 10 lacs from the company indicating thereby that the salary and incentive totaling to ₹ 2.77 crores received by the appellant were such more than the amount of addition made by the AO of ₹ 1.41 crores (being the peak amount of the credit received and the payment made by the company on behalf of the appellant for the purchase of immovable property in his name). Further it is seen that incentive was paid in succeeding two years also. 4.6 In view of the above discussion, the issue for consideration is whether the provisions of Section 2(22)(e) can be invoked in a case where the advances are adjusted against salary/incentive. In view a number of decisions relied on by the Id. A.R. (as reproduced at para 4.2 above), this issue has to be answered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... similar addition was deleted by~TJn3ersigned. It is also observed that Appellant has received salary income of ₹ 60,00,000/- and incentive income of ₹ 2,98,31,964/- from Biotech Vision Care Pvt. Limited. The Assessing Officer has observed that said company has maintained three accounts of Appellant which, inter alia, include salary account, expenses account and capital WIP. The Assessing Officer has considered that debit balance in such accounts are for ₹ 1,67,53,246/- in salary account, ₹ 29,29,006/- in expenses account and ₹ 69,71,646/- in capital WIP account The aggregate debit balance of such advances is for ₹ 2,66,53,898/- and salary paid by said company to Appellant is ₹ 60,00,000/-.Assessing Officer made net addition of ₹ 2,06,53,893/-. However, the Appellant has also received incentive income of ₹ 2,98,31,964/- and same is part of total income shown in Return of Income and such incentive income is a/so adjusted against debit balance in above three accounts. Thus, the aggregate income received by Appellant from Biotech Vision Care Pvt. Limited is in excess of advances referred by Assessing Officer and when Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred copies of documents placed in the paper book filed in support of his contention and stated that nature of debit balance as well as the amount received by the assessee was in the nature of salary and incentive only and the same cannot be brought to tax u/s. 2(22)(e) of the act. 6. Heard both the sides and perused the material on record. Without reiterating the facts as elaborated above in this order, during the course of assessment, the Assessing Officer had not accepted the contention of the assessee that advances were against salary as well as incentive payable by the Biotech Vision Case Pvt. Ltd., and held that assessee has earned deemed dividend to the tune of ₹ 2,06,53,898/-. The assessee has submitted that he was having current account with the company and such advances were adjusted against salary as well as incentive paid by the said company. The assessee has also brought to the notice of the Assessing Officer that the said company has deducted TDS on the aforesaid payment made to the assessee. The assessee has also brought to the notice of the Assessing Officer that he has already filed the return of income and offered the amount received to tax against sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that assessee has paid taxes on the salary and incentive received by him. It is further noticed from the detail of taxes paid on the aforesaid amount was paid in the form of TDS deducted by the companies which have paid salary and incentive to the assessee. The details of payment of taxes in the form of TDS shown in the return of income are as under:- Total Income 37913203 Round off u/s 288A 37913200 Income Exempt u/s. 10 2581271 Deduction u/s. 10AA, 80H to 80RRB(except sec. 80p) not claimed hence Amt no applicable. Tax Due 11203960 Education Cess 336119 11540079 T.D.S. 12443751 -963972 Refundable (Round off u/s. 288B) 963670 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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