Provisions of the Deemed dividend not applicable on the advancement of the loan in the ordinary course of business, the Pune Bench of the Income Tax Appellate Tribunal (ITAT) upheld the order pf CIT(A).
The revenue appealed against the order of Commissioner of Income Tax (Appeals)-5, Pune [‘CIT(A)’] dated 31.03.2017 for the assessment year 2007-08.
The respondent-assessee is an individual deriving income under the head “Income from salary” and “business”. The return of income for the assessment year 2007-08 was filed on 31.10.2007 declaring a total income of Rs.1,35,34,159/-. The Assessing Officer issued a notice u/s 148 after recording the reasons for reopening the assessment. The notice of reopening was issued seeking to reassess the income of the assessee.
The Assessing Officer found that M/s. Kumar Urban Developers Ltd. had given a loan of Rs.56,81,680/- to M/s. Shatrunjay Construction and Developers Pvt. Ltd. during the year under consideration.
The Assessing Officer thought that since the respondent-assessee was a common shareholder in both the companies holding more than 10% of shares, the loan given by M/s. Kumar Urban Developers Ltd. to M/s. Shatrunjay Construction and Developers Pvt. Ltd. constitutes a deemed dividend within the ambit of provisions of section 2(22)(e) in the hands of the respondent-assessee.
Shri Lalitkumar K. Jain, the respondent-assessee contended that the advance given by M/s. Kumar Urban Developers Ltd. to M/s. Shatrunjay Construction and Developers Pvt. Ltd. were like a business transaction which was rejected by the Assessing Officer by holding that there was no evidence in support of the contention that the loan was given during the ordinary course of the business transaction.
The CIT(A) concluded that on the relevant date i.e. date of advancing loan by M/s. Kumar Urban Developers Ltd. to M/s. Shatrunjay Construction and Developers Pvt. Ltd., the respondent-assessee was not a registered shareholder of said Shatrunjay Construction and Developers Pvt. Ltd and the provisions of section 2(22)(e) have no application.
A Coram of Shri Inturi Rama Rao, Accountant Member and Shri Partha Sarathi Chaudhury, Judicial Member observed that the order of CIT(A) is based on proper appreciation of facts and law and the appeal filed by the Revenue got dismissed.
The revenue was represented by Shri Hitendra B. Ninawe and the assessee was represented by Shri Kishor B. Phadke.
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