ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE - 2, NASHIK vs. VILAS RASIKLAL SHAH, NASHIK

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ITA 2097/PUN/2017Status: DisposedITAT Pune08 November 2019AY 2013-143 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the advance was not a gratuitous advance but was given to protect the business interests of the company. Therefore, Section 2(22)(e) was not applicable.

What were the facts?

The Revenue appealed against the deletion of an addition made on account of deemed dividend under Section 2(22)(e) of the Income Tax Act. The assessee had received an advance from his company, which was mortgaged as a guarantee for a higher bank loan for the company.

What were the issues?

Whether an advance given by a company to its shareholder, where the shareholder's property was mortgaged as a guarantee for a company loan, constitutes deemed dividend under Section 2(22)(e).

Which sections of the Income-tax Act were involved?

Section 2(22)(e)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE

Before: SHRI D. KARUNAKARA RAO, AM SHRI S.S. VISWANETHRA RAVI, JM

For Appellant: Shri Sanket Joshi
For Respondent: Shri Pankaj Garg

आदेश / ORDER

PER S.S. VISWANETHRA RAVI, JM :

This appeal is filed by the assessee against the order dated 02.06.2017 passed by CIT(A)-2, Nashik for A.Y. 2013-14.

2.

The only issue to be decided is whether the CIT(A) is justified in deleting the addition made on account of deemed dividend u/s 2(22)(e) of the Act in the facts and circumstances of the case.

3.

Heard both sides and perused the material available on record.

We find that the issue raised by the Revenue is covered in favour of

assessee by the orders of this Tribunal from A.Ys.2008-09, 2009-10,

2011-12 and latest being A.Y. 2012-13 vide order dated 12.05.2018 in

ITA No.1918/PUN/2016. For ready reference the relevant portion at

Para Nos.8 and 9 is reproduced herein below :

8.

We have heard both sides on this limited issue of invoking the provisions of section 2(22)(e) of the Act in respect of the loans/advances given by the company to the assessee, when the assessee mortgaged his property as a guarantee for the company to take loan of higher amount from the banks. In the process, the assessee gave up his rights on the property. Therefore, taking advance of Rs.2.35 crores from his company is not deemed dividend when the liability of the company of Rs.5 crores is on the asessee. On hearing both sides and perused the said judgement, we find the said judgement is relevant for the following legal proposition and held portion of the same is extracted as under :-

“Allowing the appeal, that for retaining the benefit of loan availed of from the bank if decision was taken to give advance to the assessee such decision was not to give gratuitous advance to its shareholder but to protect the business interest of the company. The sum of Rs.20,75,000 could not be treated as deemed dividend.”

9.

From the above, it is evident that in case of non-gratuitous advances, the provisions of section 2(22)(e) of the Act has no application. It is not the case of the Revenue that the loan taken by the assessee from the company constitutes gratuitous advances. The facts of the company taking loan from the Bank against the guarantee of property of the assessee and given loan of Rs.2.35 crore to the assessee are undisputed. Therefore, we are of the opinion that the decision given by the CIT(A) in his order is fair and reasonable and does not call for any interference.

4.

On perusal of the above, we find the issue decided by the

Tribunal in A.Y. 2012-13 is similar and on same identical facts to the

issue raised in the present appeal. Therefore, we are of the opinion

that the addition made by the AO does not attract the provisions u/s

2(22)(e) of the Act and the impugned order passed by CIT(A) is justified.

Thus, the grounds 1 to 4 involving the same issue raised by the Revenue are dismissed.

5.

In the result, the appeal of Revenue is dismissed.

Order pronounced on 8th day of November, 2019.

Sd/- Sd/- (D. KARNUKARA RAO) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER

पुणे Pune; �दनांक Dated : 8th November, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-2, Nashik. 4. Pr.CIT-2, Nashik. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी”/ DR, ITAT, “B” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER,स �या // / TRUE COPY / / // True Copy //

व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.

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