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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Asst. Commissioner of Income Tax, Mr. Balasaheb S Tupe Circle 26(1) D 153/154 Solaris, I Opp L&T Vs. R.N. 508 C-10 5th Floor, BKC Gate Saki Vihar RD, Powai Bandra(E) Mumbai-51 Mumbai-400 072 Appellant .. Respondent PAN No. AACPT5952E Revenue by .. Shri Suman Kumar, DR .. Dr. K. Shivaram, Sr. Advocate Assessee by & Shri Rahul Hakani Date of hearing .. 08-03-2017 Date of pronouncement .. 08-03-2017 O R D E R PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of CIT(A)-38, Mumbai, in appeal No. CIT(A)-38/DCIT 21(3)/ IT-212/2013-14 dated 19-12- 2014. The Assessment was framed by DCIT Circle-21(3), Mumbai for the A.Y. 2010-11 vide order dated 25-03-2013 u/s 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by AO of deemed dividend under section 2(22)(e) of the Act. For this Revenue has raised following three grounds: -
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.75,48,975/- made u/s 2(22)(e) on the ground that the transactions were not a loan but on account of sundry creditor due to various transactions of sale and purchase carried out between the assessee's proprietory concern M/s B T Consultants and the company M/s B T Infosys P Ltd and purely current account transactions".
Mr. Balasaheb S Tupe; A.Y:10-11
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the case of Nagindas M Kapadia (177 ITR 393) relied on is distinguishable since in the case of the assessee the company had advanced goods of Rs. 75,48,975/- and there was opening debit balance also in the books of the company of Rs. 33,16,000/-."
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the decision of the Hon'ble Bombay High Court in the case of CIT v/s Jamnadas Khimji Kothari [(1973) 92 ITR 105 (Bom)] wherein it is held that where a shareholder has a business with the company and when his accounts with the company is always on debit side, the amount in question would be regarded as loan by the company to the shareholder and if there are accumulated profits to cover the debit balance, the amount in question would be regarded as deemed dividend u/s 2(22)(e).”
Briefly stated facts are that the assessee is engaged in the business of trading of computers etc. i.e. reselling of various computing networking and inter-networking products under the proprietary concern by the name of M/s B.T. Consultants. The assessee is also deriving income from rent under the head ‘Income from house property’, interest income under the head ‘Income from other sources’ by way of bank interest, capital gains and agriculture income. The AO during the course of assessment proceedings noticed that the assessee has received unsecured loan of Rs. 1,08,64,975/- from BT Infosys Private Ltd. and assessee being 50% shareholder in the company as on 31-03-2010, as to why the loans and other advances received from BT Infosys Private Ltd. should not be taxed as deemed dividend under section 2(22)(e) of the Act. The assessee before AO stated that this transactions reflected in the ledger account of BT Infosys Private Ltd. are in the nature of commercial transactions i.e. sale of goods on Mr. Balasaheb S Tupe; A.Y:10-11 credit. The assessee before AO filed a copy of ledger account and submission in the note as under: -
“'(Sales by & from B. T. Infosys 75,48,975/-)
The appellant and B. T. Infosys Pvt. Ltd., in their ordinary course of business have entered into various business transactions. The copies of purchase / sale bills are enclosed. The copy of the ledger account as appearing in the books of the company as also the appellant are also enclosed. It is submitted that all these transactions of purchase /sale are in the ordinary course of business. It might be clarified that in the Balance Sheet of the appellant, the net amount of As. 7548,975 has wrongly been reflected under the head 'unsecured loans' instead of 'Sundry Debtors' or 'Sundry Creditors'. Since the net amount of Rs. 75,48,975/- was a purely a current account transaction, the classification made in the annual accounts was wrong and erroneous. Necessary rectification entry has been passed in the subsequent year in the books of account of appellants proprietorship concern B. T. Consultants.”
The AO noted that the assessee has not furnished any documentary evidence to establish that the amount was of current account transactions between the assessee proprietor concerns M/s BT consultant. It was noted by the AO that even in the accounts, the amount is shown as loan amount of Rs.75,48,975/-. Accordingly, he treated the amount of Rs.65,32,232/- as deemed dividend under section 2(22)(e) of the Act. Aggrieved assessee preferred appeal before CIT(A), who after considering the submissions of assessee noted that the assessee is having regular business transactions with BT Infosys Private Ltd. and AO has also not denied that such transactions were carried on ordinary course of business. The CIT(A) relying on the decision of the Hon’ble Bombay High Court in the case of CIT v. Nagindas M. Kapadia 177 ITR 393 has held that Mr. Balasaheb S Tupe; A.Y:10-11 running account maintained by the parties for regular business transactions and any credit outstanding on that account cannot be treated as deemed dividend under section 2(22)(e) of the Act. Therefore, the CIT(A) deleted the addition of Rs.60,77,996/- and balance addition of Rs.4,54,236/-was confirmed. Aggrieved now Revenue is in appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, the learned Counsel for the assessee filed a copy of ledger account of BT Infosys Private Ltd. in the books of BT consultants, which is enclosed at Pages 162-167 of assessee’s paper book and the nature of entry clearly reveals that these are commercial transactions and the account is running account for commercial transactions. Apart from this, there is no transaction between BT consultant and BT Infosys private Ltd. We also find that the assessee in his final accounts has wrongly mentioned this amount of Rs.75,48,975/-under the head of unsecured loan instead of Sundry Debtors or Sundry Creditors. On facts of the case, since the amount of Rs.75,48,975/- was purely current transaction, the nomenclature made in the annual account cannot be taken for the purpose of computing the income of the assessee under the Income Tax Act rather real nature of transactions is to be find out. We are of the view that since the transactions is purely of purchase and sale as per ledger account, which is supported by bills and vouchers of purchase and sales, hence, it is purely current account transaction and it cannot given rise to deemed dividend within the purview of provisions of section 2(22)(e) of the Act. We find that the CIT(A) has rightly deleted the addition and we confirm the same.
In the result, the appeal of Revenue is dismissed. Order pronounced in the open court on 08-03-2017.