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TMI Blog2021 (10) TMI 1164X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 143(3) r.w.s. 153A of the Act. 4. The first issue relates to addition made u/s 2(22)(e) of the Act as deemed dividend. The A.O. noticed that the assessee held 33% of shares in CAPL and 65% of shares in BBPL. Thus, the assessee herein is a shareholder having substantial interest in both the above said companies. The A.O. noticed that M/s. BBPL has received loan of Rs. 1.00 crore from M/s. CAPL in the financial year relevant to the assessment year 2007-08. Since the loan was received by a concern, in which the assessee is substantially interested, the A.O. took the view that the loan received by the BBPL from CAPL shall be assessable as "deemed dividend" in the hands of the assessee, being a shareholder having substantial interest, in terms of sec. 2(22)(e) of the Act. 5. The assessee submitted before AO that M/s. CAPL has given funds to M/s. BBPL for business purposes and hence the provisions of sec. 2(22)(e) are not attracted. It was explained that M/s. CAPL had entered into an agreement with M/s. BBPL, as per which, both the companies have agreed to make investments jointly in property development projects of M/s. Embassy Group. It was submitted that the payments were made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment, which has been paid by the assignors to the developers. The Ld D.R contended that there was no necessity to make further payments, when the loans given by CAPL to BBPL is more than the assigned value. 8. The Ld D.R submitted that the assignment agreements do not specifically mention that the loans and advances paid by M/s Cauvery Aqua P Ltd were adjusted in assignment agreement. Accordingly, the Ld DR contended that the loans and advances were not adjusted against acquisition of property by way of assignment agreements dated 28-03-2015. Accordingly, the Ld DR contended that the loans given by CAPL to BBPL were separate transactions and hence the assessment of deemed dividend made u/s 2(22)(e) of the Act should be upheld. 9. The Ld. A.R., however, submitted that there were trading transactions between CAPL & BBPL in the past. The trading operations were suspended and from the year 2002 onwards BBPL owed a sum of Rs. 1.97 crores to M/s. CAPL. At that point of time, an agreement dated 14.11.2005 was entered between both the companies with the objective of making investment in property development activities. As per the agreement, CAPL shall give further money to BBPL for bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Group upon the request made by BBPL from time to time and any such investment shall not carry any interest. ..... 9. The amount invested by CAPL in BBPL from time to time shall be proportionately adjusted as and when developed properties are transferred into CAPL. The agreement dated 14.11.2005 entered between both the companies makes it clear that BBPL has made investments in various projects of The Embassy Group and CAPL is involved in these ventures. It is further mentioned that CAPL shall pay money to BBPL as and when required to support the real estate investment activities It has also been mentioned that the amount invested by CAPL shall be adjusted against the properties. 12. It is an undisputed fact that the amounts invested by CAPL has been adjusted against the properties assigned to CAPL by BBPL, vide assignment agreements dated 28.03.2015. Thus the original agreement dated 14.11.2005 stands corroborated by the assignment agreements dated 28-03-2015. These uncontroverted documents supports the submissions of the assessee that the amounts given by CAPL to BBPL are not loans or advances contemplated in sec.2(22)(e) of the Act. 13. The Ld DR contended that the assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l estate development projects of Embassy Group with whom M/s. Brindavan Beverages Pvt. Ltd., was already having substantial investments. This claim of the appellant is not shown to be incorrect in the assessment order with regard to any materials that shows a different picture. Rather, the A.O. has simply disbelieved the explanation of the appellant that the transactions between these companies were business transactions and has held that the explanation was not a satisfactory one by observing that M/s. Cauvery Aqua Pvt. Ltd., need not have made investments through M/s. Brindavan Beverages Pvt. Ltd., and could have directly gone to Embassy Group. The A.O. has also mentioned that there was no acknowledgment from Embassy Group showing payments from Mi.s. Cauvery Aqua Pvt. Ltd., for any project and A.O. regarded the explanation of the appellant as giving a colour of business transactions to loans that were advanced. 7.6 I find the above basis stated by the A.O. to disbelieve the explanation of the appellant in the assessment order is not correct. The fact that M/s. Brindavan Beverages had already made substantial investments with Embassy Group and that M/s. Cauvery Aqua Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not business advances. The A.O. has submitted in the remand report that there is no difference between an advance and business advance and once the parameters mentioned in sec. 2(22)(e) are fulfilled, the liability to tax as deemed dividend arises. However, this stand of the A.O. is contrary to the ruling of the Hon'ble jurisdictional High Court in the case of Bagmane Constructions Pvt. Ltd., in 119 DTR 49 (Kar.) where it has been held as under:- "27. In this background when we look at the aforesaid provision, it is clear that any payment made by a company by way of advance or loan has to be understood in the context of the object with which the said provision is introduced Though the legislature has introduced `advance' as well as 'loan' which are two different works, the meaning of each of those works have to be understood in the context in which they are used Each work takes its colour from the other. The meaning of the word 'advance ' is to be understood by the meaning of the word loan which is used immediately thereafter. Associated words taken their meaning from one another under the doctrine of noscitur a socits, the philosophy of which is that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07-08, 2008-09, 2010-11, 2011-12, 2012-13 and 2013-14 are deleted." 15. In view of the foregoing discussions, in our considered view, the findings arrived at by Ld CIT(A) do not call for any interference. Accordingly, we confirm the order of Ld CIT(A) in deleting the additions made u/s 2(22)(e) of the Act in this year. 16. The next issue contested by the revenue relates to the addition of unexplained investment of Rs. 3,13,69,040/-. Out of the three additions relating to unexplained investment aggregating to Rs. 3,13,69,040/- made by the AO, the Ld CIT(A) has granted relief to the extent of Rs. 2,60,00,000/- and confirmed addition of balance amount of Rs. 53.69,040/-. Hence the revenue should be aggrieved only to the extent of Rs. 2,60,00,000/-. 17. The facts relating to the addition of the above said amount of Rs. 2,60,00,000/- are stated in brief. During the course of search proceedings, two loose papers were found from a bank locker belonging to the assessee. Those papers contained certain transactions entered by M/s Brindavan Beverages P Ltd in connection with purchase of a property. The cheque payments were found to have been shown as "Advance" in the books of above sa ..... 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