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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI VIKRAM SINGH YADAV
आदेश / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER:
This is an appeal filed by the assessee against the Order of the Commissioner of Income Tax (Appeals)-1, Coimbatore, in Appeal No.155/16-17 dated 27.08.2018 for the AY 2011-12.
Mrs.M.Subashri, JCIT, represented on behalf of the Revenue and Mr.R.Kumar, Adv., represented on behalf of the assessee.
It was submitted by the Ld.AR that the only issue in the assessee’s appeal was against the action of the Ld.CIT(A) in confirming the addition on account of the deemed dividend made by the AO by invoking the provisions of Sec.2(22)(e) of the Act. It was a submission that the assessee is a Managing Director of M/s.Chroma Print India Pvt. Ltd. The assessee was receiving remuneration of Rs.1.50 lakhs p.m. and rent of Rs.1,87,500/- p.m. It was a submission that the assessee had also earned profit commission of Rs.21,22,347/- during the year. It was a submission that the AO in the course of the assessment noticed that the assessee had received amounts from M/s.Chroma Print India Pvt. Ltd., when he was having debit balances, to the extent of Rs.14,48,685/- on various dates. Consequently, the AO had invoked the provisions of Sec.2(22)(e) of the Act and brought the same to tax as the assessee was shareholder and was having controlling interest in the company also. It was a submission that the Ld.CIT(A) had followed the decision of the Hon’ble Bombay High Court in the case of CIT vs. P.K.Badiani reported in 76 ITR 369 (Bom) and upheld the findings of the AO. It was a submission that for the immediately preceding assessment year being the AY 2010- 11, the co-ordinate Bench of this Tribunal in the assessee’s own case in & 3409/Mds/2016 for the AY 2010-11 dated 12.04.2017, wherein, it has held the issue against the assessee as follows:
“………7. We have heard both the parties and perused the material on record. In this case, admitted fact that the AO only considered the debt balance in the name of assessee in the books of account of the company to consider the deemed dividend under section 2(22)(e) of the Act at Rs.52,64,846/- and he cannot doubt the credit towards the amount received by the assessee in respect of Rs.11,51,373/- on account of rent and Rs.9,33,600/- on account of salary from M/s.Chroma Print India Pvt Ltd., Rs.2,98,180/- on account of commission payments; out of gross amount received at Rs.76,47,999/-. Now the contention of assessee is that the assessee received money on account of commercial expediency for mortgaging the assessee’s property to bank for enabling the company, M/s.Chroma Print India Pvt Ltd., to avail loan from State Bank of India(SBI). However, the lower authorities clearly brought on record that there was no authority by way of Board Resolution from M/s.Chroma Print India Pvt Ltd. to give the said amount of Rs.52,64,846/- . When there is no resolution or authority from the Board of Directors of the said company, to give the said amount to the assessee, it cannot be said that there exist in commercial expedience to grant such a huge amount to the assessee. In such circumstances, in our opinion, the provisions section 2(22)(e) of the Act is applicable to the amount received by the assessee from the said company and in this regard, we do not find any infirmity in the order of the CIT(Appeals) . The various case laws relying by the ld.A.R have no application to the facts of the case. As in this case, there is no Board Resolution passed by the company to give money to the assessee. Further, ld.A.R made a plea that under the scheme of amalgamation M/s.Mind Ware Pvt Ltd., was amalgamated with M/s.Chroma Print India Pvt Ltd. appointment date was 01.04.2009. The balance in the name of assessee on the said date in the books of account of M/s.Mind Ware Pvt Ltd., was to be considered as balance in the books of account of the amalgamated company on the appointed date. However, it is observed that Board of Directors of the amalgamated company had a Board meeting on 30.06.2010 approving the scheme of amalgamation. The petition of amalgamation was dated 23.07.2010. Hence, the statement of the assessee is that the balance in the books of account of M/s.Mind Ware Pvt Ltd., was to be considered have no merit. More so, the balance appeared in the books of account of M/s.Chroma Print India Pvt Ltd. was before filing the amalgamation petition dt.23.07.2010. Being so, this argument cannot hold any merit. This argument is also rejected.
Further, ld.A.R argued that day to day cumulative balance to be considered to determine the deemed dividend. We have no dispute regarding this argument. However, the AO only considered the day to day debit balance in the books of account of the company, M/s.Chroma Print India Pvt Ltd. in the name of assessee and he has already excluded the other amount payable to the assessee. Being so, we do not find any merit in this argument. Hence, this ground raised by the assessee stands dismissed”.
It was a submission that the co-ordinate Bench of this Tribunal had not considered the decision of the Hon’ble Kolkatta High Court in the case of Shri Pradip Kumar Malhotra reported in [2011] 15 taxmann.com 66 (Cal.), wherein, in Para No.10, it has been held as follows:
“……10. After hearing the learned Counsel for the parties and after going through the aforesaid provisions of the Act, we are of the opinion that the phrase "by way of advance or loan" appearing in sub-clause (e) must be / construed to mean those advances or loans which a share holder enjoys for simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power; but if such loan or advance is given to such share holder as a consequence of any further consideration which is beneficial to the company received from such a share holder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, for gratuitous loan or advance given by a company to those classes of share holders would come within the purview of Section 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such share holder”.
It was a submission that the addition made was liable to be deleted.
In reply, the Ld.DR vehemently supported the order of the Ld.CIT(A). It was a submission that the Tribunal had already held the issue against the assessee in the earlier assessment years and no new facts have been brought out to distinguish the said order. It was a further submission that the decision in the case of Shri Pradip Kumar Malhotra was not applicable and the facts have also not been brought out to show as to how the decision applied.
We have considered the rival submissions.
8. A perusal of the Hon’ble Calcutta High Court in the case of Shri Pradip Kumar Malhotra shows that in the said decision, it was held that if the advance given by the company to the assessee shareholder by way of compensation, was for keeping his property on mortgage on behalf of the company to reap the benefit of a loan, it could not be treated as deemed dividend within the meaning of Sec.2(22)(e) of the Act. In the present case, nothing has been brought on record to show that the amounts received by the assessee was compensation for keeping his property on mortgage on behalf of the company to reap the benefit of a loan. In fact, the facts in the present case clearly show that the assessee has been drawing funds in the form of loans for earlier years also. This being so, clearly, the decision of the Hon’ble Calcutta High Court has no application in the facts of the assessee’s case. Further, no fresh facts have been brought out by the assessee to dislodge the findings arrived at by the co- ordinate Bench of this Tribunal in the assessee’s own case for the AY 2010-11. This being so, respectfully following the decision of the co- ordinate Bench of this Tribunal in the assessee’s own case for the immediately preceding assessment year, referred to supra, the findings of the Ld.CIT(A) on this issue stands confirmed.
In the result, the appeal filed by the assessee is dismissed.