Bees Infracon Private Ltd. Vs ITO (ITAT Ahmedabad)
Ahmedabad Tribunal allowed the appeal of Assessee by holding that loans advanced through current account for business purposes cannot be treated as deemed dividend u/s 2(22)(e).
Assessee, a private limited company engaged in infrastructure development, had originally filed its return declaring ₹29.19 lakh which was assessed at ₹29.79 lakh u/s 143(3). Subsequently, AO reopened the assessment on the basis that Assessee held 10.71% shares in M/s Sunburg Tradelink Pvt. Ltd., which had advanced ₹4.25 crore to Assessee. Since Sunburg had accumulated profits of ₹80.75 lakh, AO invoked provisions of deemed dividend u/s 2(22)(e) & made addition of ₹80,75,996/-.
In appeal, CIT(A) confirmed the action of AO, holding that the provision does not differentiate between interest-free & interest-bearing loans.
Before Tribunal, it was argued that the transaction was in the nature of current account maintained between group companies for business purposes. It was pointed out that part of the loan had been repaid during the year with interest of ₹6,16,800/- on which TDS u/s 194A was duly deducted. Assessee relied on the judgment of Calcutta High Court in CIT v. Gayatri Chakraborty (407 ITR 730), Gujarat High Court ruling in CIT v. Schutz Dishman Bio-Tech Pvt. Ltd., as well as ITAT Delhi decisions in Exotica Housing & Infrastructure Pvt. Ltd. & DCIT v. Ramesh Kumar Paggi. It was further contended that CBDT Circular No.19/2017 clarified that trade advances in the nature of commercial transactions do not fall within the ambit of deemed dividend.
