TCI Exim Pvt. Ltd. Vs ACIT (ITAT Delhi)
The Delhi bench of the Income Tax Appellate Tribunal (ITAT), Delhi bench has held that loan on interest received from the sister concern to fulfill the enhanced requirement of working capital for export orders does not attract the provisions of deemed dividend under section 2(22)(e) of the Income Tax Act, 1961.
The assessee received the loan on interest from M/s TCI India Ltd. of Rs.52,00,000/- during the F.Y. 2012-13 to fulfill the enhanced requirement of working capital for export orders. TCI India Ltd. is a closely held company holding 50,000 equity shares of the assessee company which is 2.5% of the total equity shares issued and subscribed. The AO made an addition based on the fact that Mrs. Urmila Agarwal having more than 20% equity holding is also holding more than 10% of equity holding in the lender company.
Before the authorities, the assessee contended that the assessee company does not have any shareholding in the TCI India Ltd., and hence the provisions of Section 2(22)(e) are not attractive. It was further argued that the trade loans do not fall under the category of loans and advances as envisaged under section 2(22)(e) of the Act.
The assessee also relied on the Delhi High Court decision in the case of CIT Vs. Ambassador Travels Pvt. Ltd., where the Court has held that “since the transactions were normal business transactions, which were carried out during the course of the relevant previous year, they cannot be described as advances or loans, which form a distinct category of financial transactions.”
After considering the arguments, the bench comprising Judicial Member Mr. Amit Shukla and Accountant Member B R R Kumar relied on the decision of the Supreme Court in the case of Rameshwarlal Sanwarmal Vs. CIT and the and a few High Court judgments wherein the Courts granted relief to the taxpayers.
Relying on the above rulings, the Tribunal held that “after giving due credence to the circular of the CBDT and looking into the facts of the instant case, where it can be held that the transaction is a commercial transaction and hence the provisions of Section 2(22)(e) are not attracted.”
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeals have been filed by the assessee against the orders of the ld. CIT(A)-9 , New Delhi dated 09.03.2018.
2. Since, the issues involved in both the appeals are identical, they were heard together and being ad judicated by a common order.
3. In ITA No. 4194/Del/2018 , following grounds have been raised by the assessee:
“1. That on facts and circumstances of the case, the order passed by the Ld. CIT (Appeal) is bad both in the eyes of law and on facts.
2. That on the facts and circumstances o f the case and in law the Ld. CIT(A) erred in law as the provisions of section 2(22)(e) of the Act are not applicable as the impugned transaction is in the nature of business transaction and not in the nature of loan or advances.
3. That on the facts and circumstances o f the case and in law the Ld. CIT(A) erred in interpreting the provisions o f section 2(22)(e) of the Income Tax Act, 1961 ignoring the judgment of Hon’ble Supreme Court in case of CIT v Madhur Housing and Development Co.
4. That on the facts and circumstances of the case , the Ld. CIT(A) erred in law in sustaining addition of Rs 37,00,000/- in the hands of the appellant company, who is not the shareholder of the company, u/s 2(22)(e) of the Act.”
4. The moot issue pertains to the ob jection to the addition of Rs.52 ,00,000/- u/s 2(22)(e) of the Income Tax Act, 1961 .
5. The undisputed facts are ,
