Income Tax Appellate Tribunal - Ahmedabad
Income Tax Officer,Ward-4(2),, ... vs Mehulbhai D.Zaveri, Ahmedabad on 23 December, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "C" BENCH
(BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER
& SHRI MAHAVIR PRASAD, JUDICIAL MEMBER)
ITA. No: 102/AHD/2012
(Assessment Year: 2008-09)
The ITO, Ward (2), V/S Mehulbhai D Zhaveri,
Ahmedabad F/101 Asavari Tower, B/h.
Fun Republic Cinema,
Satellite Ahmedabad
(Appellant) (Respondent)
PAN: AACPZ0796J
Appellant by : Shri Prasoon Kabra, Sr. D.R.
Respondent by : Shri P. B. Parmar , A.R.
(आदे श)/ORDER
Date of hearing : 21 -12-2016
Date of Pronouncement : 23 -12-2016
PER N.K. BILLAIYA, ACCOUNTANT MEMBER
1. This appeal by the Revenue is preferred against the order of Ld. CIT(A)-VIII, Ahmedabad dated 20.10.2011 pertaining to A.Y. 2008-09.
2 ITA No. 102/Ahd/2012. A.Y. 2008-09
2. The sole grievance of the revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 45,00,000/- made u/s. 2(22)(e) of the Act.
3. Briefly stated the facts of the case are that the assessee is deriving income from salaries and capital gains and the return for the year under consideration was filed on 29.07.2008 at total income of Rs. 1,98,760/-. The return was selected for scrutiny under CASS and accordingly statutory notices were issued and served upon the assessee.
4. During the course of the assessment proceedings of one M/s. Kadam Exports (P) Ltd, it was noticed that the assessee was the major share holder/director of the company and also had entered into financial transaction with Kadam Exports (P) Ltd. On perusal of the copy of account in respect of the assessee in the books of accounts of Kadam Exports (P) Ltd., it was noticed that the said company had advanced funds to the assessee which was not during the ordinary course of its business. The A.O. noticed that the said company has advanced a total sum of Rs. 45,00,000/-. The A.O. further noticed that the assessee was having a share holding in the Kadam Exports Pvt. Ltd. to the extent of 61.82%. The A.O. was of the firm belief that provisions of section 2(22)(e) of the Act was attracted.
5. The A.O. asked the assessee why the advance from M/s. Kadam Exports (P) Ltd. should not be treated as deemed dividend in the hands of the assessee as the provisions of section 2(22)(e) of the Act are squarely attracted. Assessee filed a detailed reply, the relevant parts read as under:-
3 ITA No. 102/Ahd/2012. A.Y. 2008-09 "I am enclosing herewith copy of my account from the books of accounts of Kadam Exports Pvt. Ltd. From this account, you will observe that I had given approximately Rs. 1 crore to the company. I have taken Rs. 45 lacs from company which I had repaid in less than 2 months time.
2. Please note that, I am maintaining current Account with company. Company has never Paid or charged interest in my account.
3. Kadam Exports Pvt. Ltd. is dividend paying company. Therefore there is no intention to take advance from company instead of dividend.
4. Further your honor will observe that I have taken money for very short duration.
Keeping above in view, I request your honor not to treat above amount as dividend u/s. 2(22)(e). "
6. The aforementioned submissions of the assessee did not find any favour with the A.O. who proceeded by making an addition of Rs. 56,58,034/- which included the sum of Rs. 45,00,000/- as deemed dividend.
7. Assessee carried the matter before the ld. CIT(A) and challenged the additions so made.
8. After considering the facts and the submissions, the ld. CIT(A) held as under:-
6. I have considered the facts of the case, assessment order and written submission submitted by the authorized representative of the Appellant. It was the case of the assessing officer that Kadam Exports Pvt. Ltd. has provided loan amounting to Rs.45,00,000/- to the Appellant and therefore, he added an amount of Rs.45,00,000/- u/s 2(22)(e) of the Act, whereas during the course of appellate proceedings, it was the argument of A.R. of the Appellant that the Appellant was maintaining mutual, open and current accommodation 4 ITA No. 102/Ahd/2012 . A.Y. 2008-09 adjustment account with the Company and on need basis the fund was transferred from the Appellant to Company and vice-versa and as it was not in the nature of loan and advances, the provisions of S.2(22)(e) of the Act cannot be invoked. During the course of appellate proceedings, the A.R. of the Appellant also placed on record CIT(A) orders in the case of M/s Schutz Dishman Biotech Pvt. Ltd. bearing Appeal Nos. 188/189/190/191/ITO.TDS(1)/10-11 and Dishman Pharmaceutical Ltd. bearing Appeal No.DCIT.(OSD)R.1/226/10-11, wherein under the identical facts of the case, both the CIT(A)s have held that when the assessee has maintained mutual, open and current accommodation adjustment account with the sister concerns, then the transactions entered into with the sister concerns cannot be treated as loan or advances and therefore provisions of S.2(22)(e) of the Act cannot be invoked.
6.1. I have perused the copy of ledger account furnished alongwith the written submission. It can be seen that there are large number of debit and credit transactions. Meaning thereby, the appellant has given and received funds as and when required to and from the Company. It is not an account whereby loans and advances have been given to the Appellant. It is an account which is in the nature of mutual, open and current accommodation adjustment account wherein there is a movement of funds both ways, on need basis. Unlike transactions of loans and advances, in this kind of mutual, open and current accommodation adjustment account, the movement of funds is both ways and the same is more in the nature of current account rather than a loan account. Transactions in the nature of loans and advances are usually very few and for a longer duration carrying interest. In the facts of the present case, the nature of transaction is in the form of mutual, open and current accommodation adjustment account and therefore, the same is not a transaction in the nature of loans and advances. I have also perused the orders of CIT(A) in the case of Schutz and Dishman (supra) placed before me and in the both the cases, under identical facts of the case, both the CIT(A)s have also held that when the assessee has maintained mutual, open and current accommodation adjustment accounts, provisions of S.2(22)(e) of the Act cannot be invoked. This view is also supported by the following direct decisions- CIT vs. Creative Dyeing & Printing (P) Ltd. 318ITR 476 (Del.)],CIT vs. RajKumar 318 ITR 462 (Del),NH SECURITIES LTD. v. DCIT (2007) 11 SOT 302 (BOM) .ACIT v. Global Agencies (P) Ltd. (2005) 87 TTJ 1086 (DEL) CIT v. NAGINDAS M. KAPADIA.(1989)177ITR393(BOM). Therefore, in my opinion, in the absence of loans and advances, the provisions of S.2(22)(e) of the Act in respect of deemed 5 ITA No. 102/Ahd/2012 . A.Y. 2008-09 dividend are not attracted and therefore addition made by the assessing officer is hereby deleted.
9. Aggrieved by this, the revenue is before us. The ld. D.R. strongly supported the findings of the A.O. and in support relied upon the decision of the Hon'ble Supreme Court in the case of Smt. Tarulata Shyam 108 ITR 345, Hon'ble High Court of Madras in the case of P.K. Abubucker 135 taxmann.com 77, Hon'ble High Court of Allahabad in the case of Surendra Kumar 65 taxmann.com 80, Hon'ble High Court of Allahabad in the case of Krishna Gopal Maheshwari 44 taxmann.com 127, Hon'ble High Court of Allahabad in the case of Shashi Pal Agarwal 54 taxmann.com 289.
10.Per contra the ld. counsel for the assessee reiterated what has been stated before the lower authorities and placed strong reliance on the decision of the Hon'ble Jurisdictional High Court of Gujarat in the case of Schutz Dishman Bio-Tech Pvt. Ltd. in Tax Appeal No. 958 & 959 of 2015 and also relied upon the decision of the Co-ordinate Bench in the case of Dishaman Pharmaceuticals & Chemicals Ltd. in ITA No. 2105 & 2125/Ahd/2012.
11.We have given a thoughtful consideration to the orders of the authorities below. We have also carefully gone through the decisions relied upon by the rival parties. There is no dispute that the assessee is holding substantial interest in Kadam Exports (P) Ltd., the relevant extract of the copy of the ledger account of the assessee in the books of accounts of M/s. Kadam Exports (P). Ltd. is as under:-
6 ITA No. 102/Ahd/2012. A.Y. 2008-09
Date Particulars Vch Type Vch No. Debit Credit
30.05.2007 By HDFC Bank Receipt 89 9,50,000.00
Ch. NO. 300195 BOI Rec.
M.D. Zaveri
04.06.2007 To HDFC Bank Payment 216 9,50,000.00
Ch. No. 721890 PAID TO M.D.
Zaveri
05.07.2007 By HDFC Bank Receipt 153 29,10,000.00
Ch. No. 353578 HDFC Bank
REC. M.D. Zaveri
By HDFC Bank
Receipt 154 20,90,000.00
Ch. No. 300197 BOI Rec. M.D.
Zaveri
26.07.2007 By HDFC Bank Receipt 182 40,00,000.00
Ch. No. 300199
31.07.2007 To HDFC Bank Payment 534 15,00,000.00
Ch. No. 816791 Paid To M.D.
Zaveri
11.09.2007 To HDFC Bank Payment 753 20,00,000.00
Ch. No. 817102 Paid To M.D.
Zaveri
23.10.2007 To HDFC Bank Payment 951 25,00,000.00
Ch. No.
30.10.2007 To HDFC Bank Payment 991 5,00,000.00
Ch. No. 817106
02.11.2007 To HDFC Bank Payment 1018 25,00,000.00
Ch. No. 817108
11.01.2008 To CITI Bank Current A/C. Payment 1266 35,00,000.00
Ch. No. 89402
30.01.2008 To CITI Bank Currect A/C. Payment 1336 3,00,000.00
Ch. No. 89403
To HDFC Bank Payment 1337 7,00,000.00
Ch. No. 817112
13.02.2008 By HDFC Bank Receipt 573 25,00,000.00
Ch. No. 941377
15.03.2008 By HDFC Bank Receipt 621 3,00,000.00
31.03.2008 By HDFC Bank Receipt 642 17,00,000.00
Ch. No. 941393 HDFC Bank
1,44,50,000.00 1,44,50,000.00
7 ITA No. 102/Ahd/2012
. A.Y. 2008-09
12.A perusal of the afore-stated copy of the account clearly shows that the assessee was having a current account with the said company. It can be seen that there are several debits and credits entries in the said account. The Hon'ble Jurisdictional High Court in the case of Schutz Dishman Bio- Tech Pvt. Ltd. (supra) was seized with the following question of law:-
"Whether on facts and in law the ITAT was right in cancelling the order passed u/s 201(1) and 201(A) of the Act, without appreciating that the amount advanced was in the nature of deemed dividend u/s 2(22)(e) of the Act?"
13.And the relevant findings of the Hon'ble High Court reads as under:-
4. It can thus be seen that the Commissioner as a matter of fact found that the payments were not in the nature of current adjustment. There was movement of fund both ways on need basis. The transactions in the nature of loans and advances are usually very few in numbers whereas in the present case, such transactions are in the form of current accommodation adjustment entries. The Commissioner therefore, held that the transactions were not in the nature of loans and advances.
The Revenue carried the matter in appeal. The Tribunal concurred with the view of the CIT (Appeals) and held that the amounts were not in the nature of Inter Corporate Deposits and were therefore, not to be treated as loans or advances as contemplated in section 2(22)(e) of the Act.
5. The issue is substantially one of appreciation of facts. When the CIT(Appeals) as well as Tribunal concurrently held that looking to large number of adjustment entries in the accounts between two entities, the amounts were not in the nature of loan or deposit, but merely adjustments, application of section 2(22)(e) of the Act would not arise. Consequently, no question of law arises. Tax appeals are dismissed.
8 ITA No. 102/Ahd/2012. A.Y. 2008-09
14.If the aforementioned copy of accounts is considered in the light of the decision of the Hon'ble Jurisdictional High Court (supra), we find that facts are similar debits and credits to the facts considered by the Hon'ble Jurisdictional High Court. Respectfully following the findings of the Hon'ble Jurisdictional High Court, we decline to interfere with the findings of the First Appellate Authority.
15.Before parting, as mentioned elsewhere, the ld. D.R. has relied upon several decisions. In our considered opinion, none of the decisions relied upon by the ld. D.R. The Hon'ble Courts had considered a transaction which was in the nature of current account where there were several debits and credits. Therefore, the facts of the case in hand are clearly distinguishable from the facts of the cases relied upon by the ld. D.R.
16.Since the facts of the case decided by the Hon'ble Jurisdictional High Court squarely apply to the facts of the case in hand, we have respectfully followed the same.
17.In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in Open Court on 23- 12- 2016.
Sd/- Sd/-
(MAHAVIR PRASAD) (N. K. BILLAIYA)
JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER
Ahmedabad: Dated 23 /12/2016