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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
आदेश/ ORDER
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the Revenue against the order of CIT(A)-2, Nashik dated 30.06.2016 for the Assessment Year 2012-13.
The grounds raised by the Revenue are as under :- “i) Whether on the facts and in the circumstances of the case, the Ld. CIT(A)-2, Nashik was justified in deleting the addition of Rs.2,48,73,753/- on account of deemed dividend? ii) Whether the Ld. CIT(A) should have considered that the assessee himself is proffering various alternative arguments and propositions which show his vacillating stand? iii) The appellant prays that the order of the Ld. CIT(A)-2, Nashik may please be cancelled and the order of Assessing Officer may please be restored. iv) The appellant prays to adduce such further evidence to substantiate his case. v) The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands.”
ITA No.1918/PUN/2016
From the above, it is evident that the solitary issue raised in the
grounds of appeal relates to the addition of Rs.2,48,73,753/-. The brief
facts relate to the issue include that the assessee is engaged in the
business of land development. Assessee filed the return of income on
29.03.2013 declaring total income of Rs.6,35,00,717/-. In the scrutiny
assessment proceedings u/s 143(3) of the Act, the Assessing Officer made
the said addition of Rs.2,48,73,753/- u/s 2(22)(e) of the Act relating to
“deemed dividend”. In the assessment order, the Assessing Officer
mentioned that the assessee held 79.17% of shares of the company in M/s
Viraj Estates Private Limited. The company paid advances to the assessee
amounting to Rs.2.35 crores. Therefore, the Assessing Officer invoked the
provisions of section 2(22)(e) of the Act and taxed the same as “deemed
dividend” in the hands of the assessee. Assessee argued that the payment
of loan/advance was done in the context of giving the assets of the
assessee. High value assets of the assessee are mortgaged. However, the
Assessing Officer rejected the assessee’s submissions dated 23.02.2015
wherein assessee mentioned that the assessee mortgaged his property for
the benefit of the company for getting the loan of Rs.5 crores for the
company. As a guarantor, the liability to pay the loan is on the assessee
and the same constitutes the huge liability. This liability is much more
than the loans/advance taken by the assessee from the company.
During the first appellate proceedings, this issue was adjudicated by
the CIT(A) in favour of the assessee relying on the judgment of Hon’ble
Calcutta High Court in the case of Pradeep Kumar Malhotra vs. CIT, 338
ITR 538. The operational part given by the CIT(A) in para 10.2 of his order.
In the said judgement, the fact of the case is that a shareholder mortgaged
his property for acquiring loan from bank. The facts are similar to that of
ITA No.1918/PUN/2016
the assessee. Further, relying on the said judgement, the CIT(A) granted
relief to the assessee.
Aggrieved with the above decision of the CIT(A), the Revenue is in
appeal before the Tribunal with the grounds extracted above.
Before us, ld. Counsel for the assessee read out the relevant facts
narrated above and also the relevant paragraphs of the order of the CIT(A)
one side and the judgements cited by the CIT(A) on the other.
On the other hand, ld. DR for the Revenue relied on the order of the
Assessing Officer and submitted that the judgement of Hon’ble Calcutta
High Court (supra) is not binding on the office of the Pune jurisdiction.
Therefore, the CIT(A)’s order requires reversal. However, ld. DR could not
file any contrary judgement in force on this issue under consideration.
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
4 ITA No.1918/PUN/2016
business interest of the company. The sum of Rs.20,75,000 could not be treated as deemed dividend.”
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.
In the result, the appeal of the Revenue is dismissed.
Order pronounced on this 12th day of December, 2018.
Sd/- Sd/- (SUSHMA CHOWLA) (D.KARUNAKARA RAO) �या�यकसद�य/ JUDICIAL MEMBER लेखासद�य/ ACCOUNTANT MEMBER पुणे/ Pune; �दनांकDated : 12th December, 2018. Sujeet आदेशक���त�ल�पअ�े�षत/Copy of the Order is forwarded to : अपीलाथ�/ The Appellant; 1. ��यथ�/ The Respondent; 2. 3. The CIT(A)-2, Nashik; 4. The Chief CIT, Nashik; �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, पुणे“A” / DR ‘A’, 5. ITAT, Pune; गाड�फाईल/ Guard file. 6.
// True Copy // आदेशानुसार/ BY ORDER,
स�या�पत ��त//True Copy// Senior Private Secretary आयकरअपील�यअ�धकरण ,पुणे/ ITAT, Pune