PERCEPT FINSERVE P. LTD,MUMBAI vs. ACIT CIR 7(1), MUMBAI

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ITA 8585/MUM/2011Status: DisposedITAT Mumbai26 October 2016AY 2003-043 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal confirmed the order of the CIT(A) as the assessee failed to substantiate its claim of acting as a mediator or that the transactions were in the normal course of business. No material was placed before the Tribunal to support the assessee's contentions.

What were the facts?

The assessee received unsecured loans from two companies in which it held significant shareholding. The Assessing Officer treated these loans as deemed dividend under Section 2(22)(e). The CIT(A) restricted the addition to the extent of accumulated profits of the lender companies.

What were the issues?

Whether loans received from closely held companies can be treated as deemed dividend under Section 2(22)(e) and whether the assessee could prove its role as a mediator to avoid such classification.

Which sections of the Income-tax Act were involved?

Section 2(22)(e)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” Bench, Mumbai

Before: Shri B.R. Baskaran (AM) & Shri Pawan Singh (JM)

For Respondent: Smt. Bharati Singh
Hearing: 24.10.2016Pronounced: 24.10.2016

O R D E R Per B.R. Baskaran (AM) :-

The appeal filed by the assessee is directed against the order dated 30.8.2011 passed by the learned CIT(A)-13, Mumbai and it relates to A.Y. 2003-04.

2.

None appeared on behalf of the assessee even though notice of hearing was sent by RPAD on more than one occasion and the assessee was present on earlier occasions. Hence, we proceed to dispose of the appeal ex-parte, without presence of the assessee.

3.

We heard learned Departmental Representative and perused the record. The assessee is challenging the decision of the learned CIT(A) in confirming the addition made u/s. 2(22)(e) of the Act to the extent of ` 37,56,256/-.

4.

The assessee has received unsecured loans from M/s. Infinity Communications (P) Ltd. in which it held 56.04% shares and also from M/s.

2 Percept Finserve P. Ltd.

Percept Holdings (P) Ltd., wherein it held 72.72% of loan. The assessee received ` 30 lakhs and ` 20 lakhs respectively from the above said concerns. The Assessing Officer assessed the same as deemed dividend u/s. 2(22)(e) of the Act. When the matter reached to the Tribunal, the Tribunal restored the matter to the file of the Assessing Officer for considering the matter afresh, vide its order dated 24.11.2009 passed in ITA No. 2468/Mum/2007. In the set aside proceedings the assessee took the plea that it has acted as mediator in transferring the funds received from the above said companies to other concerns i.e. the assessee had transferred funds received from M/s. Infinity Communication (P) Ltd. to SSG Realtors and Developers (P) Ltd. Similarly it had transferred the funds received from Percept Holdings (P) Ltd. to M/s Chaitanya Developers. The assessee also took the plea that accumulated profit available with M/s. Infinity Communications Pvt. Ltd. was ` 17,66,256/- and hence addition u/s. 2(22)(e) of the Act can be made to the extent of accumulated reserve only. The Assessing Officer however assessed the entire loan amount as deemed dividend u/s. 2(22)(e) of the Act. In the appellate proceedings, the learned CIT(A) restricted the addition to ` 37,66,256/-. Hence the assessee has filed this appeal before us.

5.

We noticed that the assessee could not substantiate its explanation before the Assessing Officer as well as Ld CIT(A) and hence the learned CIT(A) confirmed the addition, however, to the extent of accumulated profit available with the lender companies. Before us also, no material was placed by the assessee to substantiate its contention that it had acted as mediator or the transactions were in the normal course of business. Under these set of facts, we have no other option but to confirm the order passed by the learned CIT(A).

6.

In the result, appeal filed by the assessee is dismissed. Order has been pronounced in the Court on 24.10.2016

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