DCIT Vs Futurz Next Services (Private) Limited (ITAT Delhi)
On careful consideration, the fact that emerges that during the year the assessee has received the total sale consideration of ₹ 2 crores only 11/7/2012 and five shares of that society has also been transferred prior to execution of the sale deed. The sale deed was executed on 12/7/2012. Thus it is apparent that full value of the consideration was received by the assessee before executing sale deed on 12/7/2012. Merely because the seller agreed to pay and discharge the outstanding dues and liabilities in respect of the share in the premises , it does not amount that the assessee has not transferred/sold the property during the year. Now issue here is the claim of the depreciation on the block of the „building‟ owned by the assessee and used for the purposes of the business of the assessee on which depreciation is claimed. Depreciation is allowable to the assessee on the written down value which is defined under section 43 (6) of the act. According to the subsection 43(6)( C ) (i)(b) the block of the assets is to be reduced by the monies payable in respect of any asset falling within that block which is sold or discarded or demolished or destroyed during the previous year. Therefore, definitely assessee has sold during the year this immovable property by which the written down value of the block of the asset should be reduced. Now the question is whether it should be reduced by the value as determined under section 50C of the act or actual money received by the assessee. The provisions of section 50C cannot be incorporated in the computation of block of the assets for the simple reason that it only substitutes the full value of the consideration received or accruing as a result of transfer for the purposes of section 48 only. Therefore, we direct the learned assessing officer to reduce the written down value of the asset only by Rs 2 crores, which has been received by the assessee on sale of the above property. Accordingly ground number 2 and 3 are disposed off holding that assessee has requested to reduce Written down value of Building block by ₹ 2 crores being the actual sale consideration instead of ₹ 28714500 being the Stamp duty value of the property is acceded to. Thus, opening double DVD of the block building stood at ₹ 3 5197290/– is required to be reduced by ₹ 2 crores only, thereby the WDV remains of ₹ 1, 51,97,290/- on which the assessee would be entitled to the depreciation @ 10 % amounting to Rs. 15,19,729/–, against which the assessee has claimed depreciation of Rs. 35,19,729/– therefore difference of the depreciation excess claimed by the assessee is Rs. 20 lakhs instead of Rs 2963061/–. Thus excess depreciation disallowance of Rs 20 lakhs is confirmed. Accordingly ground number two and three of the appeal of the assessee is partly allowed.
FULL TEXT OF THE ITAT JUDGEMENT
01. These are cross appeals filed by the assessee and the Revenue against the order of The Commissioner of Income Tax (Appeals)-30, New Delhi,[ the Ld CIT (A)] dated 25.01.2017. The assessee has raised the following 3 grounds in its appeal No. 1383/Del/2017 and the Revenue has raised the following 7 grounds in its appeal No. 2396/Del/2017:-
ITA No. 1383/Del/2017 :
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
2. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming addition of an amount of Rs.29,63,061/- on account of claim of depreciation on building.
(ii) That the disallowance has been confirmed rejecting the contention of the assessee that the building has not been transferred during the year, therefore the depreciation on the same is allowable during the year.
(iii) That the disallowance has been confirmed misinterpreting the Sale Deed made on transfer of property.
3. Without prejudice to the above and in the alternative, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the value of the block of building taken at Rs.2,87,14,500/-by the AO is wrong as the sale consideration of the property was agreed upon at Rs.2,00,00,000/- only. “
ITA No. 2396/Del/2017 :
“1. Whether on the facts & circumstances of the case, the Ld. CIT(A) has erred in law & on facts in deleting the disallowance u/s 14A read with rule 8D of the Income Tax Rules amounting to 2,12,74,766/- made by the AO ignoring the fact that the provisions of section 14A are mandatory.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts by deleting the addition of Rs. 94,32,600/- made on account of deemed dividend u/s 2(22)(e) of the Act.
3. On the facts and in the circumstances of the case, the Ld. CIT( A) had erred in law and on facts by holding that recasting of ledger account of assessee in the books of JCSL by the AO is not correct.
4. On the facts and in the circumstances of the case, the Ld. CIT(A) had erred in law and on facts in holding that all the transactions with JCPL are business transaction, thus, ignoring the fact that assessee company is a client of JCPL and it w as obliged to pay only the profit earned by the assessee company.
5. That the order of the CIT (A) is perverse, erroneous and is not tenable on facts and in law.
6. That the grounds of appeal are without prejudice to each other.
7. The appellant craves leave to add, alter or amend any/ all of the ground(s) of appeal before or during the course of the hearing of the appeal.”
02. Brief facts of the case shows that assessee is a company engaged in the business of on-line trading in various commodities, shares and securities and trading in physical commodities like silver and gold. It filed its return of income on 30.09.2013 at Rs.58,39,990/-. The case of the assessee was picked up for scrutiny and the ld. Assessing Officer made a disallowance of
a. Rs.5,90,843/- being loss on sale of fixed assets, which was not added back in the computation.
b. Disallowance under Rule 14A of the Income Tax Rules of Rs.2,12,74,766/- was also made.
c. Addition of Rs.94,32,600/- as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961 (the Act).
d. Disallowed excess claim of depreciation of Rs.29,63,061/-.
Total income of assessee was assessed at Rs. 4,01,01,260/- vide order dated 23.03.2016 passed under Section 143(3) of the Act.
03. Assessee aggrieved with the order of the ld. Assessing Officer preferred an appeal before the ld. CIT (Appeals). The ld. CIT (Appeals) deleted the disallowance u/s 14A of the Act holding that assessee has not earned any exempt income and, therefore, there cannot be any disallowance u/s 14A. He confirmed the addition of excess depreciation claimed by the assessee of Rs.29,63,061/-. He deleted the addition made by the Assessing Officer on account of deemed dividend of Rs.94,32,600/-. Thus appeal of the assessee was partly allowed.
04. Therefore, assessee is in appeal against the confirmation of the addition of Rs.29,63,061/- on excess claim of depreciation on building. The ld. Assessing Officer is in appeal before us on deletion of the disallowance u/s 14A of the Act of Rs.2,12,74,766/- and against the deletion of addition of Rs.94,32,600/- on account of deemed dividend under Section 2(22)(e) of the Act.
05. We first come to the ground No. 1 of the appeal of the Assessing Officer against deletion of disallowance u/s 14A of the Act of Rs.2,12,74,766/-. The ld. Assessing Officer noted that assessee has substantial amount of investment in the shares of the companies, which can have tax-free dividend income. The assessee was asked about details of exempt income and other expenditure for disallowance u/s 14A of the Act. Assessee submitted that it has not received any exempt income during the year and, therefore disallowance u/s 14A of the Act cannot be made. The ld. Assessing Officer rejected the contentions of the assessee and computed disallowance u/s 14A of the Act applying the provisions of Rule 8D of the Income Tax Rules. The learned CIT (Appeals) deleted the same for the reason that during the year the assessee has not earned any exempt income there cannot be any disallowance u/s 14A of the Act.
06. The learned Departmental Representative relied upon the order of the Assessing Officer and the learned Authorized Representative relied upon the order of the Hon’ble Delhi High Court to support his case.
07. We have carefully perused the contentions. It has been categorically held by the Assessing Officer that no exempt income is earned by the assessee during the year. Thus issue is squarely concluded in favour of the assessee by the decision of the Hon’ble Delhi High Court in Cheminvest Limited Vs. CIT 378 ITR 33 (Del.) wherein it has been held that Section 14A envisages that there has to be an actual receipt of exempt income during the relevant previous year for purpose of making any disallowance u/s 14A of the Act. Thus, following the decision of the Hon’ble Delhi High Court in 378 ITR 33 (Del.) (supra) we hold that the learned CIT (Appeals) has correctly deleted the addition. Thus, ground No. 1 of the appeal of the ld. Assessing Officer is dismissed.
08. The second ground of appeal relates to an addition of Rs.94,32,600/- on account of deemed dividend under Section 2(22)(e) of the Act. The learned CIT (Appeals) has dealt with this issue as per para No. 8 of his order, which is as under:-
“8. Ground No. 8. is relating to the addition of Rs. 94,32,600/- on account of deemed dividend us 2(22)(e) of the Act.
8.1 The A.O. has made the above addition in the assessment order u/s 143(3) of the Act dated 23.3.2016 and relevant portion is reproduced as undcr:-
“6. Income treated as deemed dividend ids 2(22) (e) of the Act
6.1 During the concerned assessment year, Assessee Company held more than 40% shareholding in M/s. Jaypee Capital Services Ltd. As JCSL is a private company in which public arc not substantially interested, had given a loan or advances to Assessee Company on various dates during the year under consideration. The assessee submitted that it had made share currency trading transactions as a client, of the company JCSL. During the year under consideration, the assessee company has made business transactions of Rs. 87.95 crore (net purchased value) and Rs. 92.26 crore (net sale value). Therefore, the payment has been made by JCSL to the assessee company against the business transaction. Accordingly, the payments made by JCSL to the assessee were not in the nature of loan and advance but it was in the nature of business transactions. Along with that reply a copy of ledger from F.Y. and the net summarized position was submitted. It was further submitted that the word “advance” has to be read in conjunction with the word „loan’ The word loan involves positive act of lending coupled with acceptance by the other side as loan. On the other hand meaning of the term, “advances” may or may not include lending. Trade advances are in the nature of money transacted to give effect to a commercial transaction, therefore, it is not covered u/s 2(22)(e) of the Act.
6.2 The reply of the assessee is carefully considered. From the copy of account filed along with the above reply, it is found that there are many transactions of payment by company JCSL to the assessee. There are some entries of cheque payment and cheque receipt. The accounts also includes the entries having narration of settlement posting” which indicates that the relevant debit and credit entry is the result of said transaction at that day. Since, the share / F & O / Currency transactions done by the assessee as a client of JCSL are in the normal course of business activity as done by the assessee company for any other client, the debits (payment )resulting from such transactions is not covered u/s 2(22)(e). However, in the case of cheque payment, it has to be considered for the purpose of that section, it is also seen from the copy of account that on the different dates the running balance is negative for most part of the year. The negative balance indicates that the company JCSL has made payment to the assesses and it has to receive that much amount from the assesses. On the other hand, positive balance shows that the company owns that amount to the assessee. Therefore, any cheque payment made by the company JCSL on the date when there is zero or negative balance has to be treated as loan and advance because on that day no amount is payable In the company, it has to rather receive some amount to the assessee. However, any payment made on a date when there is positive balance will not be considered as deemed dividend because that payment is towards the amount company due to the assessee. On the above principals payments as per chart enclosed as Ann A to this Order are to be treated as deemed dividend us 2(22)(e). This issue has been discussed in detail in the assessment order of Jaypee capital Services Ltd. o f . A Y 2013-14. Wherein, it is held that the payment amounting Rs 94,32,600/ – is deemed dividend m the hand of assessee company. The relevant extract of the finding in the order of Jaypee Capital Services ltd. IY 2013- 14 are as under:-
” 12.6 The reply of assessee is carefully considered.
(i) The provision of section 2(22ttet applies to closely held company the assessee company is a private company in which the public is not substantially interested. Section 2(22)(e) of the Income Tax Act. 1961 plainly seeks to bring within the tax net accumulated profits which are distributed by closely held companies to its shareholders in the form of loans or advances The purpose being that persons who manage such closely held companies should not arrange the affairs of company in such a manner that they assist the major shareholders in utilizing the fund of company in the form of advance or loan for personal use and avoid the payment of taxes on dividends Adl v. Raj Kumar (21)09/ 161 Taxman 155 (Delhi).
(ii) The provision of section 2{22)(e> make it clear that payment should he of the nature was advance OR loan. Thus, the intent of legislation in disjointing the words is clear i.e. the transfer of fund may be as advance or as a loan Therefore, there is no force on the argument of the assessee that the word loan and advance should he read in conjunction and advance should be of the nature of loan.
(iii) Section 2(22)(e) does not say that in order to come in the category of deemed dividend, loan or advances should he of a particular minimum duration. A loan for a few days would be within its ambit. Thus, duration of loan is not material [Walchand & Co. Vs. CIT (1975) 100 ITR 598 (Bom)]. The withdrawal over and above credit balance is to be treated as deemed dividend. For example, when company has accumulated profits, withdrawal by a shareholder over and above the credit which he has with the company would be deemed dividend when the shareholder had no credit balance in any other account [CIT Vs. P. Sarada (1985) 46 ITR (Mad) 326 : (1985) 154 ITR 387 (Mad) : TC A1R 306].
(iv) The assessee company is a share and currency broker. Its business dealing either in share and in commodities own behalf re in “PRO” account or on behalf of clients. In respect of PRO trading, it gets the direct benefit of profit and loss whereas, in respect of trading on behalf of them, it can only earn the brokerage and commission. The advances are not been given for the purpose of trade as the client did not have the obligation to provide any goods or services to the assessee company. The trade undertaken by M/s Future Next Services L t d . , who in his dealing with the assessee company as a client . gain profit or loss to himself. There is no profit sharing agreement between the company and the client Ms Futurz Next Services Ltd. in respect of shares currencies traded out of funds advanced by the company. There is also no agreement executed by the company in respect of the advance and loan granted to Ms Futurz Next Services Ltd. The assessee company in no way have any control on the flow of fund so advanced, from the accounts of the recipient for their use. The company is itself in the business of share trading and it could have done the transactions in the FRO account by using its fund in place of using the fund fur the business of itself, it diverted the fund therefore, provisions of section 2(22)(e) is applicable on the asses see.
(v) The other argument of assessee that the account with M v Future Text Services Ltd. is a pure business account in which only the business transactions have been entered is not correct, , as per the copy of account, it was found that Ms Futurz Next Services Ltd was already have debit balance of Rs 71.57 crore in the opening. Thereafter, many transactions of the nature of trade has been undertaken The trade transactions of shares, future option and currency segment has both buy and safes. However, the profit and repayment was not exceeding the opening debit balance till 25-1)3-2013, Therefore, the company was not required to made any payment to Ms Futurz Next Services Lid. However, it continued to make advances at regular interval. Thus the assessee advanced amounts, over and above the balance of Ms Future Next Services Ltd. The chart of fund flow From between the assessee company and Ms Futurz Next Services Ltd. examined. For the purpose of determining dividend under section 2(22)(e). only the payments that resulted in the debit balances to M s Futurz Next Services Ltd. Where ever the payment i.\ made on account on trade profit the same have not been taken in to account for the purpose of determining deemed dividend it‟s 2(22)(e).
(vi) There are various judicial pronouncements for the proposition that the fiscal laws should be strictly construed and (he true test is always the language used.
In the ease of Gurudev Datta VKSSS Maryadit v. State of Maharashtra.. AIR 2001 SC 1980). their Lordships of the apex court held as under (head-note).
“It is a cardinal principle of interpretation of statute that the words of statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is some-thing in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words‟ of a statute, must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the courts are bound to give effect to that meaning irrespective of consequences. It is said that the words themselves best declare the intention of the law giver. The courts have adhered to the principle that effort should he made to give meaning to each and every word used by the Legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses if that can have a proper application in circumstances conceivable within the contemplation of the statute ?
In the case of Keshavji Ravji and Co. Vs. CIT [1990} 183 ITR 1 (SC), the apex court observed as under (head note):
“As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then he appealed to whittle down the statutory language, which is otherwise unambiguous. If the intendment is not in the words, it is nowhere else. The need for interpretation arises when the words used in the statute are. on their own terms, ambivalent and do not manifest the intention of the Legislature. “
The Hon?ble Supreme Court, in the case of Smt. Tarulata Shyam v.CIT [1977] 108 ITR 345 (SC) approved the observations in the case of Cape Brandy Syndicate Vs. IRC [1921] 1 KB 64 observing as under (page 357}:
To us, there appears no justification to depart from the normal rule of construction according to which the intention of the Legislature is primarily to he gathered from the words used tit the statue. It will be well to recall the words of Rowlatt J. in Cape Brandy Syndicate v. IRC [ 1921] 1 KB 64 (KB) at page 71, that:
‟ ……in a taxing Act one has to look merely at what is clearly said There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in. nothing is to be implied. One can only look fairly at the language used. ‟
Once it is shown that the case of the assessee comes within the letter of the law. he must be taxed, however, great the hardship may appear to the judicial mind to be. “
Similarly in the case of Prakash Nath Khanna v. CIT (2004) 266 ITR 1 (SC), their Lordships have observed as under:
“ It is a well-settled principle in law that the court cannot read anything into a statutory provision which is plain and unambiguous. .1 statute is an edict of the Legislature. The language employed in a statute is the determinative factor of legislative intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself. The question is not what may be supposed and has been intended hut what has been said.’ Statutes should be construed, not as theorems of Euclid‟ Judge Learned Hand said, hut words must be construed with some imagination of the purposes which he behind them While interpreting a provision the court only interprets the law and cannot legislate it. If a provision of law is misused and subjected to the abuse of process of law, it is for the Legislature to amend, modify or repeal it, if deemed necessary, to see Rishuhh Agro Industries Ltd. v. P.N.B. Capital Services Ltd. [2000] 101 Comp Cas 2S4 (SC): [2000] 5 SCC 515. The legislative causus omissus cannot be supplied by judicial interpretative process. Two principles of construction one relating to casus omissus and the other in regard to reading the statute as a whole appear to be well-settled. Under the first principle a casus omissus cannot be supplied by the court except in the ease of clear necessity and when reason for it is found in the four corners of the statute itself but at the same time a casus omissus should not be readily inferred and for that purpose all the parts of a statute or section must be construed together and every clause of a section should be construed with reference to the context and other clauses thereof so that the construction to he put on a particular provision makes a consistent enactment of the whole statute. “
(vi) The above judgments made it clear beyond doubt that courts are not required to look into the object or intention of the Legislature by resorting to aids to interpretation where the language of the provision is dear and unambiguous Consequently, the inclining of each word used by the Legislature is to be given its plain and natural meaning and no word should be ignored while interpreting a provision of a statute. Thus, it is clear that where the assess does not fulfill the conditions laid down in plain and clear language in a section, the assessee shall be subjected to provisions of section. The liberal interpretation cannot be construed to the plain & unambiguous’ words.
12.7 In view of facts and judicial decisions discussed above, that the payment made by the assessee company by way of loan and advances to Ms futurz Next Services Ltd. during the year is treated as deemed dividend in the hand of M/s futurz Next Services Ltd. The chart of transactions of the nature of loans and advances given to M/s futurz Next Services Ltd. is enclosed as Annexure-A. As per which the amount of Its. 94.32,000.’- was advanced by way of cheque or fund transfer on the dates on which there was existing running balances. The complete chart of transactions with M/s futurz Next Services Ltd. is also enclosed as Annexure-H. The comparison of chart proves that the transactions as per Annexure-A are of the nature of loans and advances. M/s futurz Next Services Ltd. have more than 40„”I shareholding in the assessee company. Therefore, the amount of Rs. 94.32.0(10 – loan and advances given by assessee company to M/s futurz Next Services Ltd. will he treated us deemed dividend in the hand of M/s futurz Next Services Ltd. ”
6.3 In view ofabove discussion, amount of Rs. 94.32.600/- is added to the income ofthe assessee company as deemed dividend u s 2(22)(e) of the Act.
(Addition Rs. 94.32,600/-)”
8.2 During the appellate proceedings, the Ld.AR has filed written submissions/objections vide letter dated 09.01.2017 and the relevant portion is reproduced as under:-
“8.1. The Id. AO has made an addition of Rs 94.32.600 – on account of business transactions with M/s. Jaypee Capital Services P. Ltd. treating the same to deemed dividend under the provisions of section 2(22 (e). The assessee company is a shareholder in M s Jay pee Capital Services P. Ltd. with a shareholding of 40.85% shares. Along with being a shareholder the assessee company ‘was also a client of the above mentioned company The assess company through M s day pee Capital Services Ltd. had engaged in trading of shares and securities and has a current account running for the same.
8.2 On perusalof the account of the company with the assessee n is very much clear that the amount which has been credited and debited m the account of the assessee in association with the said two parties is on the account of business transactions and transacted by the as if it being a client and not as a director shareholder of the company
8.3. While drafting the assessment the Ul.AO has basically confused himself with the two capacity of the assessee i.e. the assessee is sure!) the shareholder in such companies hut at the same point he is their client also Consequently there are 2 types of transactions, one business transaction and other transactions, which are done in the capacity of shareholder. But over here the Id.AO has wrongly treated the business transactions as loans and advances for the purpose of section 2(22)(e).
8.4. Your honor from the perusal of ledger account, you will also appreciate the very fact that, the account of assessee is a running account, that is on every day there are transactions of receipt and payment. Your honor you will also agree that a company is not going to grant advance or loan to assessee on even day l’as is and receive it back on same day or other hence such a frequency of transactions cannot he At any stretch of imagination he included in the purview of loan or advances, by simple common sense such transactions are to be termed as business transaction In this regard, it is submitted that, there is no bar by any provision of Law. that a shareholder cannot be a client to the company and transact business. Hence before calling tor any allegation the ld. AO should scrupulously examine the nature of transaction rather than sticking to his contention without any basis.
8.5. Your honor. It is a settled law that the payments made against the business transactions are outside the purview of section 2:22n’e> of the Act. However the AO without applying his mind applied the provisions of Section 2(22)(e).
8.6 In this regard reliance is placed on following judicial precedents, which differentiates business transactions from loans and advance as per provisions of Section 2(22)(e)
8.7 In light of above observations, regular routine transactions cannot be termed as loan and advances in pursuance of Section 2(22)(e), the same are to be held as business transaction, hence the action of AO in the instant ease in treating the regular business transactions as loan and advances is incorrect.
8.8 In this regard, it is hereby submitted that, every day it company will not grant loan or advance to a person and recover the same on the same day itself in fact the person will pay off an excessive amount. Your honor, as can be observed from the ledger account each and every day there are 2-3 transactions and hem e this simply constitute business transaction and not at all as loan or advances Your honor it is apparently visible from the ledger account and frequency of transaction itself, that these transactions are regular business transactions.
8.9 Your honor, none of the provision of Act bars the substantial shareholder to transact am business with the related company Hence there is no doubt that a shareholder can enter into a business transaction with a company and theses transactions are not covered under the provisions of Sec.2(22)(e). That is the tax authorities cannot blindly deem every payment by company to shareholder as loan and advance for the purpose of deemed dividend u/s 2(22)(e). The AO should first try to understand the nature of transactions executed between the same before forming any opinion.
8.10 In the ease under consideration, despiteof all material bought on record and providing every relevant explanation, the ld. AO has not given any weight to the nature of transactions and the nature of business relationship shared between the shareholder and company in order to evaluate the transaction in terms of normal business transaction or loan and advances for deemed dividend. Hence the action of AO of making an addition even with/nit giving any regard to its nature is unjust and not tenable in law.
8.11 Moreover, your Honor will also agree to the fuel that nowhere the assessee has shown the amount transacted with the Ms Jay pee Capital Services P. Ltd. as loan and advances, intact /ram the perusal of ledger account, jour honor will observe that there are various transactions of receipt and payment throughout the year. Even there are same entries having narration of ‘settlement posting” all these things even more strengthens the contention of assessor and indicates that all these transactions are simply routine or regular business transaction only Therefore there is no basis to form an opinion that these transactions are in the nature of loan and advances.
8.12 Your honor, the AO in the instant case is grossly ignoring the facts which apparently establish that these transactions are in the nature of business transaction and is sticking to his vague contention that these transactions are loans to shareholder. It ‘s a very common sense question that a company will not advance a loan to its shareholder for a day or even receive hack on the same day itself moreover such a scenario is running throughout the year, hence by any stretch of imagination such transactions cannot be construed as loan and advance for the purpose of sec. 2(22)(e).
8.13 Your honor, the assessee has submitted [refer pg. no. 4 para 6.2 of Assessment Order] that:
“There are some entries of cheque payment and cheque receipt. The accounts also ‘unlinks the entries having narration of settlement posting” which indicates that the relevant debit and credit entry is result of said transaction at the day. “
8.14 Your Honor, in our case the transaction is apparently in the regular business transaction. And if the contention of AO is acts pied then each and every payment to shareholder would tantamount to deemed dividend us 2(22)(e). even the payment for re-imbursement of any expense incurred by the shareholder director on the part of company would be deemed dividend. Certainly this is not the intendment of the Section, the section only wants to cover those transactions, which arc realty in the nature of dividend and not each and every payment.
8.15 Further reliance is also placed on the order passed by Your Honor in the case of the assessee for the A.Y 2011-12 whereby your Honor has deleted addition u/s 2(22)(e). Relevant extract is quoted below:
In view of the above, I hold that the transactions in the client ledger accounts are. transactions entered in the ordinary course of business and are relating to sale/purchase of share /currency/derivatives only. Therefore, I hold that since these transactions are trading business transactions, accordingly, provisions of Section 2(22)(e), do not apply to the facts of the case of the appellant.
Accordingly. the addition made by the A.O. on account of deemed dividend of Rs.19,34,21,760 is hereby deleted.
8.16 Hence the contention of AO is not at all tenable in law and should be set aside.
8.17 Your honor in new of the above facts and the position of law, it is prayed that the additions made be deleted and such other relief be given which your honor may deem fit. “
Besides the above, the appellant has also relied upon the following ease laws/decisions:-
