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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: MS. SUSHMA CHOWLA & DR.B.R.R.KUMAR, AM
आदेश / ORDER PER SUSHMA CHOWLA,VP The present appeals filed by Revenue are against order of CIT(A)-17, New Delhi dated 01.09.2016 relating to assessment years 2011-12 & 2012-13 against the order passed under section 143(3)/147 of the Income-tax Act, 1961 (in short ‘the Act’).
Both these appeals are relating to same assessee on similar issues, were heard together and are being disposed off by this consolidated order for the sake of convenience.
The Ld.AR for the assessee pointed out that the issue stands covered in favour of the assessee by the order of the Tribunal in the case of husband of the assessee, Sh. Deven Chachra vs DCIT in & 4210/Del/2017 relating to AYs 2011-12 & 2012-13, order dated 02.11.2017.
The issue which arises in both the appeals is against the deletion of addition made u/s 2(22)(e) of the Act. In the facts of the case, the Assessing Officer found that the assessee was the shareholder of M/s. Suprerior Films Pvt.Ltd. as well as M/s. Superior Clothing Pvt.Ltd. Both the companies related to one group of companies. There were four shareholders in both the companies and the assessee was one of the shareholders in both the companies having 16.35% and 49% shareholding in M/s. Superior Films Pvt.Ltd. and M/s. Superior Clothing Pvt.Ltd. respectively. M/s. Superior Films Pvt.Ltd. had given unsecured loan of Rs11,20,40,194/- during the Assessment Year 2011-12 and Rs.23,93,41,428/- for the Assessment Year 2012-13. Since the assessee was having substantial shareholding in both the companies, which was more than 10% and lender company possessed accumulated profits during the years under consideration, therefore, the Assessing Officer invoked section 2(22)(e) of the Act and made addition accordingly.
The CIT(A) deleted the addition made u/s 2(22)(e) of the Act observing as under:-
2.3. “I have considered the facts and circumstances of the case, submission of the appellant and also perused the assessment order. I find that the appellant was one of the shareholders in both the companies and having more than 10% shareholding. There was accumulated profit available with the lender company i.e. M/s. Superior Films Pvt. Ltd. for both the years, however, it is observed that the loan of Rs.11,20,40,194/- given during the AY-2011-12 was repaid by M/s. Superior Clothing Pvt. Ltd. during the year itself to the extent of Rs. 10,42,55,000/-. During the AY-2012-13 a loan of Rs.23,93,41,428/- was given out of which Rs.8,94,36,000/- was repaid during the year itself. The balances amount of loans was repaid in the subsequent years. It was argued by the appellant that the nature of loans was a normal business accommodation provided to the group company, Which cannot be termed as deemed dividend. There was only a current account maintained between the group companies to facilitate a business need and to fulfill commercial expediency, therefore, the same does not come under the purview of the section 2(22)(e) of the Act. It was further submitted that it was not interest free loan but it was interest bearing loan on which interest @ 12% was charged, which was calculated on day to day basis, and the same can be seen from the financial statement of both the companies for both the years. During the FY-2010-11 interest of Rs.78,51,725/- was paid and for the FY- 2011-12 the same was paid of Rs.2,62,90,476/- to M/s. Superior Films Pvt. Ltd. by M/s. Superior Clothing Pvt. Ltd. The same was reflected in the P & L account of both the companies for both the years. The fact remains that M/s. Superior Clothing Pvt. Ltd. was not shareholder of M/s. Superior Films Pvt. Ltd. Though, the appellant was shareholder in both the companies but there was no direct or indirect benefit received by her from any of the companies. Thereby, though the appellant was registered shareholder but she was not beneficial shareholder of the company. In this regard, reliance was placed by the appellant on the judgement of Special Bench of ITAT, Mumbai, in the case of ACIT Vs. Bhaumik Color Pvt. Ltd. reported T: 120 TTJ 865 (SB). In the instant case also, though, both the companies were pertaining to one group of companies but M/s. Superior Clothing Pvt. Ltd. was neither registered nor beneficial shareholder of M/s. Superior Films Pvt. Ltd. as interest was received on the loan amount. Similarly, though the appellant was registered shareholder of M/s. Superior films Pvt. Ltd. but she was not beneficial shareholder as she had not received any loan, money or any other benefit from M/s. Superior Films Pvt. Ltd. In the same way, she had also not received any benefit directly or indirectly from M/s. Superior Clothing Pvt. Ltd., therefore, the facts of the judgement of Special Bench of ITAT (supra) are identical with the facts of the present case. Further, in the case of Mehul Pratap Asnarii Vs. ITO, Ward-1(2), Ahmedabad, the ITAT Ahmedabad 'A' Bench in & ITA no.245/Ahd/2011 and also in the case of ACIT, Circle-14 Ahmedabad Vs. Bharat J. Patel, the Ahmedabad ITAT 'C' Bench in ITA no.l371/Ahd/2Qll the judgement of Special Bench was followed on similar facts.”
We find that the Tribunal has also appreciated the aforesaid facts in the case of Shri Deven Chachra vs DCIT (supra) and deleted the addition observing as under:-
We have carefully considered the contentions of both the sides and perused the material placed before us. We find that at page 4 of the assessee’s written submissions, he has given a chart pointing out the interest income received by M/s Superior Films (P) Ltd. in the years under appeal as well as in the preceding and subsequent years. This chart gives the details of interest received from the group concern as well as others. For ready reference, the same is reproduced below :-
Interest Interest received received Interest Revenue Gross Other Assessment Sr.No. A.Y. from from received from from Interest income u/s Superior Superior other parties operations Clothing Craft 2007- i) 5,99,135 10,71,186 4,18,192 20,88,513 2,28,01,673 2,48,90,186 143(1) O8 2008- ii) 47,78,479 7,25,342 13,79,730 68,83,551 10,45,77,420 11,14,60,971 143(1) 09 2009- iii) 7,21,01,18 9,089 10,45,446 82,64,653 6,33,29,416 7,15,94,069 143(1) 10 2010- iv) 8,61,190 8,61,190 13,88,227 22,49,417 143(1) 11
143(3) Pages 2011- 78,51,725 29,650 1,51,46,542 2,23,03,697 188- 190 of v> (124.131G) 72,65,167 74,05,288 12 (124.131G) (124) (131) paper book for AY 2011-12
143(3) 5,00,35,474 2012- 2,62,90,476 33,11,489 Page 104 of Vi) 85,83,797 3,81,85,762 1,18,49,712 (91 read with 13 (101) (101) paper book for 99) AY 2012-13
143(3) Pages 2013- 191- 192 of vii) 3,91,85,297 2,53,643 88,69,752 4,83,08,692 1,83,37,728 6,66,46,420 14 paper book for AY 2011-12 3,66,45,585 2014- viii) 1,09,86,305 4,76,31,890 1,20,66,381 5,96,98,271 143(3) 15
2015- ix) 16 4,39,68,508 2,24,02,759 6,63,71,267 1,53,01,200 8,16,72,467 143(1) 2,86,31,756 2016- X) 2,57,26,625 5,43,58,381 1,76,47,588 7,20,05,969 143(1) 17
8. From the above, it is evident that M/s Superior Films (P) Ltd. is receiving substantial interest from the group concerns as well as others right from assessment year 2007-08 to 2016-17. From page 6 onwards of the written submissions, the assessee has given the transactions between M/s Superior Films (P) Ltd. and other group concerns, from which, it is evident that there were several transactions of the payment and receipt of the money during the years under appeal. Considering the totality of above facts, we have no hesitation to hold that M/s Superior Films (P) Ltd. used to advance the money for earning interest income to various concerns which included group concerns also. The advancing of money was a regular course of business for M/s Superior Films (P) Ltd., not only in the years under appeal but also in the preceding as well as subsequent years. In view of the above, we have no hesitation to hold that advancing of money by M/s Superior Films (P) Ltd. to the group concerns was during the course of normal course of advancing money for the purpose of earning interest.
In the case of Pradip Kumar Malhotra (supra), Hon'ble High Court of Calcutta has held as under :-
“Held, 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.”
In Circular No.19/2017, paragraph 3, the CBDT has also held that trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word ‘advance’ in Section 2(22)(e) of the Act. No contrary decision was brought to our knowledge.
In the case under consideration, the addition u/s 2(22)(e) is made in the case of an assessee who is an individual. Admittedly, no advance or borrowed money is received by the assessee from the concerns in which the assessee is a shareholder. There is a transaction of advancing of money by M/s Superior Films (P) Ltd. to the group concerns in the normal course of business. In view of the above decision of Hon’ble High Court of Calcutta as well as CBDT’s Circular, Section 2(22)(e) is not applicable in the facts of the case under appeal before us. We, therefore, respectfully following the above decision of Hon’ble High Court of Calcutta as well as CBDT’s Circular, delete the addition made u/s 2(22)(e) of the Act.”
7. Following the same parity of reasoning, we find no merit in the grounds of appeal raised by the Revenue. Accordingly, we uphold the order of CIT(A) in deleting the aforesaid addition made u/s 2(22)(e) of the Act.
In the result, both appeals of the Revenue are dismissed.
Order pronounced in the open court on 28th February, 2020.