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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI & SHRI SANDEEP SINGH KARHAIL
The present appeals have been filed by the Revenue challenging the separate impugned orders of even date 29/03/2019 passed under section 250 of the Income Tax Act, 1961 (‘the Act’) by learned Commissioner of Income Tax (Appeals)-51, Mumbai [‘learned CIT(A)’], for the assessment years 2007–08 and 2009-10.
Since both the appeals pertain to the same assessee and the issue involved is also common, therefore these appeals were heard together as a Shri Yogesh J. Mehra ITA No.3583/Mum./2019 matter of convenience and are being adjudicated by way of this consolidated order. With the consent of the parties, the appeal by the Revenue for the assessment year 2007-08 is taken up as a lead case and the decision rendered therein would apply mutatis mutandis to the appeal for the assessment year 2009-10 as well.
./2019 Revenue’s Appeal – A.Y. 2007–08
The only grievance of the Revenue is against deletion of addition made on account of deemed dividend under section 2(22)(e) of the Act.
The brief facts of the case as emanating from the record are: The assessee is an individual and is director in various companies. For the year under consideration, the assessee filed its return of income on 30/07/2017 declaring a total income of Rs. 1,02,90,409. During the year, the assessee derived income from salary, house property and income from other sources. On 14/03/2013, a search and seizure action under section 132 of the Act was carried out on Wind World (India) Ltd. In the said search, the assessee, his family members and all the group companies were covered. During the course of search operation, it was noticed that loans and advances have been made by Wind World (India) Ltd. to the associated concern of the group. It was also found that the assessee and his brother are holding more than 20% share of the associated concern and are registered shareholders and directors of Wind World (India) Ltd. Accordingly, the Assessing Officer (‘AO’) vide order dated 28/06/2017, passed under section 143(3) r/w section 153A of the Act held
Shri Yogesh J. Mehra ITA No.3583/Mum./2019 that provision of section 2(22)(e) of the Act are attracted in the present case and made the addition amounting to Rs. 4,44,93,133 as deemed dividend.
The learned CIT(A) vide impugned order directed the AO to verify the ledger accounts of Wind World (India) Ltd. in the books of associated concern for ascertaining the claim of the assessee that there are no actual payments made/received and only journal entries have been passed. The learned CIT(A) also directed the AO to delete the addition on account of deemed dividend in respect of the transaction of Wind World (India) Ltd. with associated concern if the assessee’s claim is found to be correct. Being aggrieved, the Revenue is in appeal before us.
During the hearing, the learned Departmental Representative vehemently relied upon the order passed by the AO. On the other hand, the learned Authorised Representative submitted that this issue has already been decided in favour of the assessee by the coordinate bench of the Tribunal.
We have considered the rival submissions and perused the material available on record. We find that while deciding similar issue the coordinate bench of the Tribunal in the assessee’s own case in Yogesh Mehra vs DCIT, in ITA No.656/Mum./2020, for the assessment year 2012–13, vide order dated 19/04/2022 observed as under:
“10. We have carefully considered the rival contentions and perused the order of the lower authorities. We find that in assessee's own case for AY 2007-08 and 2009-10 in & 4008/Mum/2019 dated 22.07.2021 [2021 (8) TMI 894 - ITAT MUMBAI) wherein vide Para No. 12, the issue is decided as under :-
Shri Yogesh J. Mehra ITA No.3583/Mum./2019
"12. The facts qua the loans and advances given by M/s. Wind World India Ltd. have already been discussed in the ground no 1 and are not being repeated here. After hearing the rival parties and perusing the material on records, we find that even on merits, the assessee has a very strong case in his favour. We note that these loans and advances were given out of commercial considerations and expediency. The Wind Word (India) Ltd. is engaged in the business of installing wind Mills and sales thereof. In order to install the windmills it needs land. The Wind Word (India) Ltd. purchases land in the name of these related companies in order to overcome the land ceiling conditions imposed by Land Ceiling Act in vogue in various States. For the said purpose, The Wind Word (India) Ltd. advances loans to these companies and thereafter the necessary adjustments are made upon purchase of land. We note that the Wind Word (India) Ltd. has to buy land in the name of related entities/companies and it is only that purpose the loans were advanced to the related companies. In our opinion the money was advanced out of business and commercial consideration and therefore not covered by the provisions of section 2(22)(e) of the Act. The case of the assessee is supported by the following decisions namely (1) Chandrashekhar Maruti vs. ACIT 47 CCH 0783, 183 TTJ 0459, (ii). Ackruti City Ltd. vs. DCIT [ITA No. 4869/Mum/2009(iii) CIT vs. Suraj Dev Dada [(2014) 46 taxmann.com 402 (Punjab & Haryana)]. In the case of Chandrasekhar Maruti vs. ACIT (supra) the co-ordinate bench of the Tribunal has held that where there is a running account between the two sister concerns wherein there is a continuous exchange of transactions and the account was squared up during the year, no part of the said amounts could be treated as being attributed to the shareholders. We find that in the case of the assessee, the facts are exactly same as the funds were transferred to various entities inter se out of commercial expediency in order to purchase land in the name of these entities in various states in view of the Land Ceiling Act in vogue in those states. As the installation of windmills and sales thereof is the business of the assessee and the necessary adjustments are made after purchase of land by these entities and therefore the advancing of loans is out of business and commercial consideration. Similarly, in the case of Akruti City Ltd. vs. DCIT (supra) the identical issue was decided in favour of the assessee by holding that financial transactions out of business expediency between two sister concerns can not be called as loans or advances for the purpose of invoking section 2(22) (e) of the Act. The same view as held by the Hon'ble High Court of Punjab & Haryana in the case of CIT vs. Suraj Dev Dada (supra) wherein it has been held that it will be a travesty of law to apply the provision of section 2(22) (e) of the Act where the assessee had running account with the company with whom the assessee advanced money to the company as and when required for the purpose of business and also in real sense the assessee has not derived any benefit from the funds of the company. The issue is also clarified by CBDT in its circular No.19/2017 dated 12.06.2017 wherein it has been clarified that trade advances in the nature of commercial transactions would not fall within the ambit of words "loans/advances within the meaning of section 2(22)(e) of the Act. Considering the facts and circumstances of the case in the light of various decisions as discussed above, we are of the considered view that the money advanced is used for the purpose of business of the former and therefore can not a loan/deposit to be treated as deemed dividend. Accordingly, we are not in agreement with the conclusion drawn by the Ld. CIT(A) on this issue. Thus we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition."
11. Co-ordinate Bench has given categorical finding that all these loans and advances given to different companies by other companies are in the nature of loans and advances out of commercial consideration and business expediency. Page | 4
Shri Yogesh J. Mehra ITA No.3583/Mum./2019 The co-ordinate Bench has given detailed reasons which stated that company has purchased land in the name of related companies for the purpose of setting up Wind farm and therefore, there is loan and advances in the land holder companies for business purposes. While holding so, the co-ordinate Bench also relied on several judicial precedents as well as CBDT Circular No. 19/2017 dated 12.06.2017.
12. Further, following the same decision of co-ordinate Bench in assessee's own case for AY 2012-13, ITAT has also deleted the identical addition.
The learned Departmental Representative could not show us any reason that how those decisions are not applicable in case of assessee for this year. Further, the CBDT has also taken a view vide CBDT Circular No. 19/2017 dated 12.06.2017 stating that where loans and advances are in the nature of commercial transactions, would not fall within the ambit of word advance' in section 2(22) (e) of the Act. In view of the above facts, respectfully following the decision of co-ordinate bench in assessee's own case for earlier years as well as circular of CBDT, we hold that the addition made of Rs. 1,60,50,281/- in the hands of the assessee on substantive basis is not sustainable. Therefore, the orders of the lower authorities are reversed and Assessing Officer is directed to delete the deemed dividend under section 2(22)(e) of the Act. Accordingly, the grounds no. 1 to 3 of the appeal are dismissed.”
The issue arising in the present appeal is recurring in nature and has been decided in favour of the assessee by the decisions of the coordinate bench of Tribunal in other assessment years. The learned Departmental Representative could not show us any reason to deviate from the aforesaid decision and no change in facts and law was alleged in the relevant assessment year. Thus, respectfully following the order passed by the coordinate bench of the Tribunal in the assessee’s own case cited supra, the plea of the assessee is upheld and the grounds raised by the Revenue are dismissed.
In the result, the appeal by the Revenue is dismissed.
Shri Yogesh J. Mehra ITA No.3583/Mum./2019 ./2019 Revenue’s Appeal – A.Y. 2009–10
Since similar issue is arising in this appeal, therefore, our findings/conclusions in Revenue’s appeal for the assessment year 2007-08 shall apply mutatis mutandis to this appeal as well.
In the result, the appeal by the Revenue is dismissed.
To sum up, both the appeals by the Revenue are dismissed. Order pronounced in the open Court on 01/11/2022