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TMI Blog2021 (9) TMI 539X X X X Extracts X X X X X X X X Extracts X X X X ..... ilities paid by the assessee company on behalf of the sister concern would tantamount to a commercial transaction thereby not attracting the provisions of section 2(22)(e) of the I.TAct. 1961. 4) The learned CIT(A) has erred in law in not considering the following judgements of the Hon'ble Supreme Court: (a) In Kantilal Manilal Vs. CIT [1961] cited in 41 ITR 275 (SC), the Supreme Court held that section 2(22) deals with various types of cases and creates a fiction by which certain receipts or parts thereof are treated as dividend for the purpose of levy of income-tax. (b) In Tarulata Shyam vs. CIT [1977] cited in 108 ITR 345 (SC), the Hon'ble Supreme Court held that under section 2(22) the liability to tax attaches to any amount taken as loan by the shareholder from a controlled company to the extent it possesses accumulated profits at the moment the loan is borrowed and it is immaterial whether the loan is repaid before the end of the accounting year or not. 5) The learned CIT(A) erred in law by allowing the assessee's appeal on the issue of disallowance of belated payment of employee's contribution of ESI and PF amount by merely relying on the decision rendered by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of additions made towards loans & advances u/s.2(22)(e) of the Income Tax Act, 1961. The facts with regard to impugned dispute are that assessee company and M/s. Indo Shell Mould Ltd. are related concerns. The assessee company has paid a sum of Rs. 4,75,00,481/- towards various expenses including excise duty and service tax, salaries & wages, TDS payment and bank charges on behalf of M/s. Indo Shell Mould Ltd. and debited to their account. The Assessing Officer has treated debit balance in the name of M/s. Indo Shell Mould Ltd. as loans & advances by a company to shareholder and invoked provisions of section 2(22)(e) of the I.T.Act, 1961, and made additions towards advances in the name of M/s. Indo Shell Mould Ltd. as deemed dividend u/s.2(22)(e) of the Act. 5. The learned DR submitted that the learned CIT(A) has erred in deleting additions made by the Assessing Officer towards advances u/s.2(22)(e) of the Act, without appreciating fact that liabilities paid by the assessee company on behalf of sister concern would tantamount to loans or advances, which attracts provisions of section 2(22)(e) of the Act. The DR further referring to the decision of Hon'ble Supreme Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been adjusted against receivables from them. If at all, transaction between assessee and M/s. Indo Shell Mould Ltd. is in the nature of loans or advances, then same needs to be considered in the hands of M/s. Indo Shell Mould Ltd. as deemed dividend u/s.2(22)(e) of the Act. In this case, the Assessing Officer has invoked provisions of section 2(22)(e) of the Act, in the hands of company, but not in the hands of shareholder. Therefore, on this count, additions made by the Assessing Officer cannot be sustained. 8. Be that as it may, fact remains that the assessee is having exclusive contract manufacturing agreement with M/s. Indo Shell Mould Ltd. As per agreement between the parties dated 25.07.2011 M/s. Indo Shell Mould Ltd. has paid a sum of Rs. 20 crores as interest free advance for utilizing entire capacity to fulfill its needs. Since there is a commercial understanding between the assessee and M/s. Indo Shell Mould Ltd., the assessee has paid certain expenses of M/s. Indo Shell Mould Ltd. on their behalf and debited same to the account of M/s. Indo Shell Mould Ltd. Further, said amount has been adjusted against receivables from them. From the above, it is very clear that transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of filing of return of income under Income Tax Act is allowable as deduction. 11. The learned DR fairly agreed that this issue is covered by the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs. M/s. Industrial Security & Intelligence India Pvt. Ltd (supra). However, he strongly supported order of the Assessing Officer in light of circular No.22 of 2015 dated 17.12.2015 and submitted that decision of the Hon'ble High Court of Madras is prior to issue of circular issued by CBDT and the Hon'ble High Court has no occasion to consider same and therefore, he submitted that issue is not squarely covered in favor of the assessee by the decision of the Hon'ble High Court of Madras and hence, there is no merit in the arguments of the assessee that issue is squarely covered in favour of the assessee. 12. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The issue of deduction towards belated payment of employees contribution to PF & ESI is no longer res integra. The various High Courts including the Hon'ble High Court of Madras in the case of CIT Vs. M/s. Industrial Security & Intelligence I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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