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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri M.Balaganesh, AM & Shri S.S.Viswanethra Ravi, JM]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-8, Kolkata [in short the ld CIT(A)] in Appeal No.106/CIT(A)- 8/Ward-29(4)/Kol/14-15 dated 30.03.2015 against the order passed by the ITO, Ward- 29(4), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 28.12.2010 for the Assessment Year 2008-09.
The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the addition made in the sum of Rs. 43,50,000/- towards deemed dividend u/s 2(22)(e) of the Act, in the facts and circumstances of the case.
The brief facts of this issue is that the assessee is an individual and had received a sum of Rs. 43,50,000/- from M/s Shruti Trade and Enterprises Pvt. Ltd. as advance. The assessee is holding more than 10% share in the said company. The said company is 2 Tripta Banka A.Yr.2008-09 having accumulated profits to the tune of Rs. 1,32,97,306/-. Hence, the Ld. AO sought to invoke the provisions of Section 2(22)(e) in the hands of the assessee shareholder. The assessee explained that the two properties belonging to mother of the assessee Smt. Uma Banka were offered as collateral security to the bank to enable the bank to give the credit facility to M/s Shruti Trade and Enterprises Pvt. Ltd. to the tune of Rs. 12.5 crores. The said company i.e. M/s Shruti Trade and Enterprises Pvt Ltd. had passed a resolution in its board meeting enabling the assessee as well as family members to receive an interest free advance of Rs. 3 crores in toto pursuant to their family properties being given as collateral security for and on behalf of the company. Based on this resolution, the assessee submitted that, she had received a sum of Rs. 43,50,000/- from the said company and accordingly pleaded that the said receipt does not partake the character of loan or advance within the meaning of Section 2(22)(e) of the Act. It was pleaded that pursuant to this transaction (i.e. by offering of family properties being given as collateral to the bank for and on behalf of the assessee company) both the parties i.e. the company as well as the assessee were duly benefited. Hence when both the parties are benefited in a transaction, the provisions of Section 2(22)(e) of the Act would not be applicable. These contentions of the assessee were rejected by the Ld. AO and addition in the sum of Rs. 43,50,000/- was made towards deemed dividend u/s 2(22)(e) of the Act in the assessment.
4. The Ld. CIT(A) by placing reliance on the order of his predecessor in Appeal no. 29/CIT(A)-XVI/Wd-29(4)/10-11 dated 30.08.2011 in the case of Rajendra Kumar Banka i.e. father of the assessee deleted the addition made towards deemed dividend under similar circumstances. Aggrieved, the revenue is in appeal before us on the following grounds: 1. That the assessee had taken loan of Rs. 43,50,000/- from Shruti Trade and Enterprises Pvt. Ltd. Where the assessee had a shareholding of more than 10% throughout the year.
3 Tripta Banka A.Yr.2008-09 2. That the assessee had a holding of 59968 shares of Shruti Trade and Enterprises Pvt. Ltd. out of Rs. 547616/- no. of issued, subscribed and paid up shares.
3. That the company, Shruti Trade and Enterprises Pvt. Ltd. had an accumulated profit of Rs. 13297306/- and money lending was not a substantial part of its business activity.
In a nutshell Provision of section 2(22)(e) was attracted as the assessee had taken a loan from a company which is not engaged in a business of money lending and where the assessee has a share holding of more than 10% throughout the year.
Accordingly, a notice dated 11.11.2010 was issued to the assessee asking him to show cause as to why the entire loan will not be added back as deemed dividend as per provision of Section 2(22)(e) but no satisfactory reply has been received and hence the loan amount of Rs. 43,50,000/-was added to the total income of the assessee.
5. We have heard the rival submissions. We find that the Ld. CIT(A) had placed reliance on the order of his predecessor passed in the hands of father of the assessee i.e. Rajendra Kumar Banka, who had also received similar advances from M/s Shruti Trade and Enterprises Pvt. Ltd. for the very same reason based on the very same board resolution passed by the said company. In that case, the Ld. CIT(A) placed reliance on the decision of Hon’ble Jurisdictional High Court in the case of Pradip Kumar Malhotra vs. CIT reported in 338 ITR 538 (Kol) wherein it was held as under:
We therefore, find that the authorities below erred in law in treating the advance given by the company to the assessee by way of compensation to the assessee for keeping his property as mortgage on behalf of company to reap the benefit of loan as deemed dividend within the meaning of Section 2(22)(e) of the Act.
Against the said order of the Ld. CIT(A) dated 30.08.2011 passed in the case of Rajendra Kumar Banka (father of the assessee ), the Ld. AR informed from the Bar that no appeal was preferred by the revenue before this Tribunal. This fact was not controverted by the ld. DR before us. We also find that the Bank of India had indeed 3
4 Tripta Banka A.Yr.2008-09 sanctioned credit facility to M/s Shruti Trade and Enterprises Pvt. Ltd. (in the form of Letter of Credit Limit) to the tune of Rs. 12.5 crores on the basis of collateral security of two properties namely Flat No. 20, 5th Floor, 8A, Alipore Road, Kolkata owned by guarantor M/s Uma Banka and office Flat Nos. 212 & 214 at A.J.C. Bose Road, Kolkata in the name of Uma Banka. The basic ingredients of section 2(22)(e) of the Act i.e the assessee holding more than 10% share holding in M/s Shruti Trade and Enterprises Pvt. Ltd. and Shruti Trade and Enterprises Pvt Ltd having accumulated profits to the tune of Rs. 1.32 crores are not in dispute. We find that the assessee before us is squarely covered by the decision of Hon’ble Jurisdictional High Court in Pradip Kumar Malhatra reported in 338 ITR 538 as reproduced hereinabove and also in view of the fact that the Revenue had not preferred further appeal before us this Tribunal in the case of father of the assessee i.e. Rajendra Kumar Banka on the similar set of facts, we hold that there is no justifiable reason to interfere with the order of the Ld. CIT(A) in this regard. Hence, the grounds raised by the Revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 08.11.2017