Indian Kanoon - Search engine for Indian Law

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH, MUMBAI Bef ore Shri D.K. Agarwal and Shri Pramod Kumar Assessment year : 2004-05 Income Tax Officer Wd.4(1)(2) GSB Capital Markets Ltd. R.No.636, 6 th Flr., 815, 8 th Flr., Stock Exchange Tower, Aayakar Bhavan, Dalal Street, Mumbai - 400 023.

M.K. Rd., Mumbai - 400 020.           Vs.

           (Appellant)                                 (Respondent)


                         Assessment year : 2004-05

GSB Capital Markets Ltd.                    Income Tax Officer Wd.4(1)(2)
815, 8 th Flr., Stock Exchange              R.No.636, 6 th Flr.,
Tower,                                      Aayakar Bhavan,

Dalal Street, Mumbai - 400 023. Vs. M.K. Rd., Mumbai - 400 020.

           (Appellant)                                 (Respondent)



                         Assessment year : 2005-06

DCIT 4(1),                                  GSB Capital Markets Ltd.
R.No.640, 6 th Flr.,                        815, 8 th Flr., Stock Exchange Tower,
Aayakar Bhavan,                             Dalal Street, Mumbai - 400 023.
M.K. Rd., Mumbai - 400 020.           Vs.

           (Appellant)                                 (Respondent)


                         Assessment year : 2005-06

GSB Capital Markets Ltd.                    DCIT 4(1)
815, 8 th Flr., Stock Exchange              R.No.640, 6 th Floor.,
Tower,                                      Aayakar Bhavan,

42. The Assessing Officer also noted that the assessee held 25.90% of shareholding of GSB Securities Pvt Ltd., and, that the above transaction was covered by the scope of deemed dividend under section 2(22)(e) of the Act. The assessee'e explanation that the transaction with GSB Securities were in the nature of business transactions, and, accordingly, not hit by section 2(22)(e) was rejected. It was so done mainly on the ground that auditor has termed the same, as evident from note no.15 to notes to Accounts in Schedule J, as loan transaction. The Assessing officer also noted that the GSB Securities had sufficient accumulated reserves and surplus so as to attract the above loan as deemed dividend. An addition of `.48,87,150 was accordingly made to the returned income. Aggrieved, the assessee carried the matter in appeal before the CIT (A) but without any success.

43. The assessee is not satisfied and is in further appeal before us.

44. We have heard the rival contentions, perused the material on record and duly considered the factual matrix of the case as also the applicable legal position.

45. We find that the authorities below have treated the assessee's transaction with GSP Securities as loan transaction primarily on the ground that it was so treated by the auditors in their remark. However, neither there any such mention in the auditor's remark nor is there any doubt, after perusing the ledger account with GSB securities, that all these transactions on account of which the balance was shown in the name of GSP securities and the assessee in the nature of business transaction of shares. There is no dispute on the fundamental legal provision that it is only when payment is made "by way of advance or loan to a shareholder" that the provisions of section 2(22)(e) are attracted. Not only that there is no payment in the present case as transactions are in respect of purchase of shares and securities, and amounts due to the assessee are reflected by net of such debits, the transactions are not in the nature of payments for loans and advances. We have perused the ledger account of GSB Securities and we are satisfied that there are no payments by way of loans and advances to the assessee. In fact, we did ask the learned Departmental Representative, during the course of hearing, to point out such payments by way of loans and advances to the assessee, and even he could not identify such transactions. His plea was that even dues on account of sales should be covered by section 2(220(e), but this plea is clearly contrary to unambiguous legal provisions. The very foundation of the impugned addition is therefore devoid of legally sustainable merits inasmuch as what has been treated as loan transaction by the authorities below is clearly business transaction in nature. We, therefore, deem it fit and proper to uphold the grievance of the assessee and direct the Assessing Officer to delete the impugned addition.