The income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the provisions of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961 would not be applicable to loans and advances out of commercial consideration and business expediency.
assessee is an individual and derived income from house property, remuneration from the partnership firm and income from other sources. During search, it was found that six companies of the group have received loans from Wind Word (India) Limited amounting to Rs. 1,64,85,313/-. which is a related concern of Wind World (India) Ltd. It was also found that the assessee along with his mother is holding more than 10% shares of Wind World (India) Ltd. and also holding shares more than 20% in the said 6 related concerns. Therefore, provisions of Section 2(22)(e) of the Act are applicable.
The Tribunal bench comprising Shri Prashant Maharishi, AM and Shri Sandeep Singh Karhail, JM has held that the Co-ordinate Bench has given a categorical finding that all these loans and advances given to different companies by other companies are in the nature of loans and advances out of commercial consideration and business expediency.
“The co-ordinate Bench has given detailed reasons which stated that the company has purchased land in the name of related companies for the purpose of setting up Windfarm and therefore, there is loan and advances in the landholder companies for business purposes. While holding so, the co-ordinate Bench also relied on several judicial precedents as well as CBDT Circular No. 19/2017 dated 12.06.2017,” the Tribunal said.
Concluding the order, the Tribunal held that “The learned Departmental Representative could not show us any reason how those decisions are not applicable in the case of the assessee for this year. Further, the CBDT has also taken a view vide CBDT Circular No. 19/2017 dated 12.06.2017 stating that where loans and advances are in the nature of commercial transactions, would not fall within the ambit of word ‘advance’ in section 2(22) (e) of the Act. In view of the above facts, respectfully following the decision of the co-ordinate bench in the assessee’s own case for earlier years as well as circular of CBDT, we hold that the addition made of Rs. 1,60,50,281/- in the hands of the assessee on the substantive basis is not sustainable. Therefore, the orders of the lower authorities are reversed, and Assessing Officer is directed to delete the deemed dividend under section 2(22)(e) of the Act.”
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