GURBINDER SINGH vs. THE ASSISTANT COMMISSIONER O

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TCA/187/2019HC Madras16 February 2021Bench: Hon`ble Mr Justice T. S. SIVAGNANAM5 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the assessees had filed declarations under the Vivad Se Vishwas Scheme, and orders had been passed in Form No.3 for the respective assessment years. Consequently, the appeals were disposed of with liberty granted to the assessees to restore them if the ultimate decision under the Vivad Se Vishwas Scheme was not in their favour. In light of this subsequent event and the liberty granted, the substantial questions of law framed were expressly left undecided by the High Court. The operative direction was to dispose of the appeals with the aforementioned liberty, without costs.

What were the facts?

These appeals were filed by the assessees (Gurbinder Singh, Harbinder Singh, and Harinder Singh) under Section 260A of the Income Tax Act, 1961, challenging a common order dated July 22, 2016, passed by the Income Tax Appellate Tribunal (ITAT), Chennai. The ITAT's order pertained to assessment years 2005-06, 2006-07, and 2007-08. The appeals were admitted by the High Court on October 8, 2020, based on three substantial questions of law concerning the applicability of Section 2(22)(e) of the Act to current account transactions and business obligations, and the method of calculating 'deemed dividend'. Subsequently, the assessees filed declarations under the Vivad Se Vishwas Scheme.

What were the issues?

The High Court had to decide three substantial questions of law: 1. Whether the Tribunal was correct in holding that Section 2(22)(e) of the Income Tax Act, 1961, which treats a loan or advance as a deemed dividend, applies to current account transactions in the ordinary course of business between the assessee and closely held companies (RHCPL, ROCPL, and RACPL). 2. Whether the Tribunal was correct in holding that Section 2(22)(e) applies when the amount advanced by a company is part of a business obligation. 3. Whether the Tribunal was correct in holding that the calculation of peak debit/credit balance of loans in the company's books of accounts is not applicable in determining 'deemed dividend' under Section 2(22)(e). Assessee's Contentions: The assessees' counsel submitted that declarations under the Vivad Se Vishwas Scheme had been filed, and orders were passed in Form No.3. The assessees were granted liberty to restore the appeals if the ultimate decision under the scheme was not in their favour. Revenue's Contentions: The judgment does not record any specific contentions made by the Revenue on the substantial questions of law.

Which sections of the Income-tax Act were involved?

Section 260A,Section 2(22)(e),Section 4

AI-generated summary — verify with the full judgment below

TCA.Nos.187 to 195 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 16.2.2021 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MS.JUSTICE R.N.MANJULA Tax Case Appeal Nos.187 to 195 of 2019

Gurbinder Singh ...Appellant in TCA.Nos.187, 190 and 192/ 2019 Harbinder Singh ...Appellant in TCA.Nos.188, 191 and 193/ 2019 Harinder Singh ...Appellant in TCA.Nos.189, 194 and 195/ 2019 Vs The Assistant Commissioner of Income Tax, Company Circle V(3), Chennai-34 ...Respondent in all the TCAs APPEALS under Section 260A of the Income Tax Act, 1961 against the common order dated 22.7.2016 passed by the Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai made respectively in 1/5 https://www.mhc.tn.gov.in/judis/ TCA.Nos.187 to 195 of 2019 I.T.A.Nos.599, 601, 604, 598, 603, 600, 602, 605 and 606/Mds/2016 respectively for the assessment years 2006-07, 2005-06, 2005-06, 2005-06, 2007-08, 2007-08, 2006-07, 2006-07 and 2007-08. For Appellants : Mr.R.Sivaraman For Respondent: Mrs.R.Hemalatha, SSC COMMON JUDGMENT (Judgment was delivered by

T.S.SIVAGNANAM

,J)

These appeals have been filed by the respective assessee under Section 260A of the Income Tax Act, 1961 ('the Act' for brevity) challenging the common order dated 22.7.2016 made respectively in I.T.A.Nos.599, 601, 604, 598, 603, 600, 602, 605 and 606/Mds/2016 on the file of the Income Tax Appellate Tribunal, Chennai, 'A' Bench ('the Tribunal' for brevity) respectively for the assessment years 2006- 07, 2005-06, 2005-06, 2005-06, 2007-08, 2007-08, 2006-07, 2006- 07 and 2007-08. 2. The appeals were admitted on 08.10.2020 on the following substantial questions of law : “1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the provisions of Section 2(22)(e) of the Act treating a loan or advance as a deemed dividend shall apply in a case of current account transactions in the ordinary 2/5 https://www.mhc.tn.gov.in/judis/ TCA.Nos.187 to 195 of 2019 course of business between the Appellant and the closely held companies namely RHCPL, ROCPL and RACPL? 2. Whether on the facts and circumstances of the case, the Tribunal was right in holding that the provisions of Section 2(22)(e) of the Act treating a loan or advance as a deemed dividend shall apply in a case where the amount advanced by the company is part of a business obligation? 3. Whether on the facts and circumstances of the case, the Tribunal was right in holding that calculation of peak debit/ credit balance of the loans of the Appellant in the company's books of accounts shall not apply in determination of 'deemed dividend' under Section 2(22)(e) of the Act?” 3. We have heard Mr.R.Sivaraman, learned counsel for the appellants/assessees and Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for the respondent/Revenue. 4. The learned counsel on behalf of the assessees submits that the assessees already filed the declaration/undertaking under the Vivad Se Vishwas Scheme in the respective cases and orders were passed in Form No.3., on 20.1.2021 in TCA.Nos.187, 191, 193, 194 and 195 of 2019, on 30.12.2020 in TCA.Nos.188 and 189 of 2019 and 3/5 https://www.mhc.tn.gov.in/judis/ TCA.Nos.187 to 195 of 2019 on 28.12.2020 in TCA.Nos.190 and 192 of 2019. 5. In the light of the subsequent events, the assessees are given liberty to restore these appeals in the event the ultimate decision taken in the respective cases on the declarations filed by the respective assessee under Section 4 of the said Act is not in favour of the assessees. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any petitions to be filed for condonation of delay in restoration of the appeals and on such request made by the respective assessee by filing miscellaneous petitions for restoration, the Registry shall place such petitions before the appropriate Division Bench for orders. 6. The tax case appeals stand disposed of with the aforementioned liberty. Consequently, the substantial questions of law framed are left open. No costs. 16.2.2021 To 1.The Income Tax Appellate Tribunal, 'A' Bench, Chennai. 2.The Assistant Commissioner of Income Tax, Company Circle V(3), Chennai-34 RS 4/5 https://www.mhc.tn.gov.in/judis/ TCA.Nos.187 to 195 of 2019 T.S.SIVAGNANAM,J AND R.N.MANJULA,J RS TCA.Nos.187 to 195 of 2019 16.2.2021 5/5 https://www.mhc.tn.gov.in/judis/

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