Case Law Details
Dinesh Kumar Agarwal Vs. Income-tax Officer (ITAT Hyderabad)
Assessee is an individual running a proprietary business in the name of V3 Staffing Solutions providing manpower services mainly to Google India Pvt. Ltd. Along with his wife Nisha Agarwal commenced closely held companies in the name of M/s Life Science Mechanics Pvt. Ltd. and M/s V3 Staffing Solutions Pvt. Ltd., which are also in the business of providing manpower services, holding 50% shares in each company.
During the AY under consideration, assessee has taken loans from the closely held companies for the purpose of discharging payment of salaries in the proprietary business. i.e. V3 Staffing Solutions. Since V3 Staffing Solutions is a proprietary concern owned by the assessee and also this concern does not extend services of manpower to any of the closely held companies, it cannot be treated as a commercial transaction. Ld. AR relied, mainly, on the CBDT Circular No. 19/2017 in support of the contention that taking loan from closely held company to discharge the payment of salary is to be treated as a commercial transaction. We are not in agreement with the submissions of the ld. AR as the salary commitment is in the proprietary concern, in which, assessee is the sole owner and any loan taken from the closely held company wherein assessee is holding substantial interest will definitely attract provisions of section 2(22)(e).
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This appeal is preferred by the assessee against the order of CIT(A) – 6, Hyderabad, dated 05/05/2017 for the AY 2014-15.
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