SMT. BHAVNABEN HITESH SHAH,AHMEDABAD vs. THE DY.CIT, AHMEDABAD CIRCLE-1, AHMEDABAD

This appeal by the Assessee is preferred against the order of the Ld. CIT(A)- III, Ahmedabad dated 13.08.2014 pertaining to A.Y. 2008-09.

The return for the year under consideration was filed on 30.07.2008 declaring total income of Rs. 7,08,050/- which was revised on 24.07.2009 declaring total income at Rs. 7,08,050/- The return was processed u/s. 143(1) of the Act on 06.08.2010.

The A.O. came to know that in one Aquafil Polymers Co. Pvt. Ltd. in which the assessee is holding 99.78% of shares, the assessee has taken an advance sum of Rs. 8,00,000/-. The A.O. was of the opinion that the provisions of Section 2(22)(e) of the Act squarely apply on such advance received by the assessee from Aquafil Polymers Co. Pvt. Ltd. in which she has substantial shareholding. Taking a leaf out of the facts found in the case of Aquafil Polymers Co. Pvt. Ltd., notice u/s. 148 of the Act was issued and served upon the assessee.

The assessee was confronted with the reasons for the reopening the assessment and was asked to explain why the provisions of Section 2(22)(e) of the Act should not be applied on advances received from Aquafil Polymers. It was explained that the assessee is the land lady of the premises where Aquafil Polymers is doing its business. It was explained that the said advance was received by the assessee to carry out repair works in the offices. It was explained that due to some technical reasons, the repair works could not be carried out and, therefore, the advance received was returned back. It was strongly contended that the provisions of Section 2(22)(e) of the Act do not apply on the facts of the case.

Assessee carried the matter before the ld. CIT(A) but without any success.

Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. It is the say of the ld. counsel that the advances given by Aquafil Polymers to the assessee were well supported by the board resolution of the company and it was meant for repairs and renovation purposes. The ld. counsel strongly contended that the transaction was of a commercial nature and, therefore cannot be treated as a deemed dividend u/s. 2(22)(e) of the Act.

Per contra, the ld. D.R. strongly supported the findings of the revenue authorities.

We have given a thoughtful consideration to the orders of authorities below. The undisputed fact is that the assessee is having substantial interest in the said company Aquafil Polymers Co. Pvt. Ltd.. It is also not in dispute that the assessee is owner of the premises from where the said company is doing its business. The provisions of Section 2(22)(e) reads as under:- “(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, 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 light to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has' a substantial interest (hereafter in this clause, referred to as the said concern)] or any payment by any such company on behalf,

As mentioned elsewhere, the assessee holds 99.78% shares in the said company and the assessee has received advance of Rs. 8,00,000/-. Except for the copy of the board resolution, the assessee could not furnish any documentary evidences to demonstrate that the said advance was taken for repair/renovation work. The assessee is holding 99.78% shares and is also a Director in Aquafil Polymers Co. Pvt. Ltd. This means that the assessee was judging for her own cause when the aforementioned board resolution was passed. Therefore, the said board resolution does not carry out any weightage.

In our considered opinion, in absence of any evidence to show that the said advance was meant for repair/renovation work, we do not find any reason why the said advance should not be treated as deemed dividend u/s. 2(22)(e) of the Act. We decline to interfere. Appeal filed by the Assessee is dismissed.