Sri. G. Jayamuni Rao, Bangalore V. ACIT, Bangalore

ITA 1114/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63662 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 18-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: FARHAR HUSSAIN QURESHI CITII
• Assessee Lawyers: V CHANDRASEKHAR
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRI BNAL BANGALORE BENCH B, BANGALORE BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.1114(BNG.)/2011 (ASSESSMENT YEAR : 2008-09) SHRI G. JAYAMUNI RAO, THE ASST. COMMISS IONER OF INCOME-TAX, NO.D/1, HAYES COURT, 11/9, CIRCLE-1(1), HM T BHAVAN, HAYES ROAD, BELLAR Y ROAD, BANGALORE BANG ALORE PAN NO. AAFFJ5900M VS APPELLANT RESPONDENT ASSESSEE BY : SHRI V. CHANDRASEKHAR, ADVOCATE REVENUE BY : SHRI. FARHAR HUSSAIN QURESHI, CIT-II DATE OF HEARING : 3 0-08-2012 DATE OF PRONOUNCEMENT : 07- 09-2012 O R D E R PER SHRI N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED19-09- 2011OF CIT(A)-I, BANGALORE, RELATING TO AY: 2008-09 . 2. THE ONLY ISSUE THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS AS TO WHETHER THE REVENUE AUTHORITIES WERE JUSTIFIED IN M AKING THE ADDITION TO THE TOTAL INCOME OF RS.1,78,04,371/-AS DIVIDEND BY INVOKING THE PROVISIONS OF SEC.2(22)(E) OF THE IT ACT, 1961 (HER EINAFTER REFERRED TO AS THE THE ACT). SECTION 2(22)(E) OF THE ACT, PROV IDES THAT DIVIDEND WILL ITA NO.1114(B)/2011 2 INCLUDE ANY PAYMENTS BY A COMPANY BY WAY OF ADVANCE OR LOAN TO A SHARE HOLDER WHO HOLDS 10% OF THE VOTING POWER IN T HE COMPANY WHICH MAKES THE PAYMENT. SUCH PAYMENTS WILL BE DEEMED TO BE DIVIDEND ONLY TO THE EXTENT THE COMPANY POSSESSES ACCUMULATED PRO FITS. 3. IN THE PRESENT CASE, THE ASSESSEE WHO IS AN IND IVIDUAL WAS ADMITTEDLY A SHARE HOLDER OF A COMPANY BY NAME M/S SOGO COMPUTERS PVT.LTD., (HEREIN AFTER REFERRED TO AS M/S SCPL) HO LDING 1/10 TH OF THE TOTAL VOTING POWER IN M/S SCPL. THE ASSESSEE OWNED ABOUT EIGHT PREMISES. THESE EIGHT PREMISES WERE LET PUT BY THE ASSESSEE TO M/S SCPL FOR A PERIOD OF FIVE YEARS FROM 01-04-2007. A S PER THE LEASE DEED DATED 01-04-2007, THE LESSEE NAMELY M/S SCPL WAS TO PAY THE ASSESEEE AN INTEREST FREE REFUNDABLE DEPOSIT OF RS. 3.6 CRORES. DURING THE PREVIOUS YEAR M/S SCPL PAID THE FOLLOWING AMOUN TS TOWARDS SECURITY DEPOSITS AS PROVIDED IN THE LEASE DEED. DATE AMOUNT 08-07-2007.1.1 2,50,000 30-07-2007.1.1 8,00,000 11-08-2007.1.1 18,50,000 30-10-2007.1.1 40,00,000 21-11-2007.1.1 10,00,000 24-11-2007.1.1 6,00,000 28-01-2008 15,00,000 11-02-2008 50,00,000 TOTAL RS. 1,50,00,000 APART FROM THE ABOVE PAYMENT M/S SCPL HAD ALSO MADE SEVERAL PAYMENTS TO THE ASSESSEE. THE SECURITY DEPOSITS F OR THE LEASE AND OTHER PAYMENTS MADE BY M/S SCPL TO THE ASSESSEE AS ON 24-03-2008 WAS A SUM OF RS.2,09,74,874/-. THE AO WAS OF THE V IEW THAT THE ITA NO.1114(B)/2011 3 AFORESAID PAYMENT RECEIVED BY THE ASSESSEE FROM M/S SCPL HAD TO BE TREATED AS DEEMED DIVIDEND IN TERMS OF SEC.2(22)(E) OF THE ACT. THE AO HOWEVER, FOUND THE ACCUMULATED PROFITS AS ON 31-03- 2008 OF THE ASSESSEE WAS RS.1,7804,371/-. SINCE THE UNDER THE P ROVISIONS OF SEC.2(22)(E) OF THE ACT, THE PAYMENTS TO THE EXTENT THE COMPANY POSSESS ACCUMULATED PROFITS A LOAN CAN BE TREATED AS DEEMED DIVIDEND. THE AO MADE AN ADDITION OF RS.1,78,04,371/- AS DEEMED DIVI DEND, THE SAID AMOUNT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSE E. 4. BEFORE THE CIT(A) THE ASSESEEE SUBMITTED THAT I T HAD SEVERAL TRANSACTIONS WITH M/S SCPL AND RECEIVED SUMS FROM THEM. THE ASSESSEE GAVE A BREAK-UP OF THOSE TRANSACTIONS WHIC H WERE AS FOLLOWS; 1. FOR THE SALE OF THE GOODS TO COMPANY 2. FOR THE LEASE DEPOSIT 3. INTEREST FREE SECURITY DEPOSIT FOR THE COLLATERAL O FFERED. 4. ONLY IN CASE THERE IS CREDIT BALANCE IN MY ACCOUNTS . THE ASSESSEE SUBMITTED THAT TRANSACTION OF SALE OF GOODS TO SCPL CANNOT FALL WITHIN THE PARAMETERS OF SEC.2(22)(E) O F THE ACT. THE CIT(A) WAS OF THE VIEW THAT THE TRANSACTIONS OF SALES AS G IVEN BY THE ASSESSEE (THROUGH VIVID DISPLAY SYSTEM) WAS RIGHTLY NOT CONS IDERED BY THE AO FOR THE PURPOSE OF APPLICATION OF SEC.2(22)(E) OF THE A CT. THERE IS NO DISPUTE ON THIS ASPECT BEFORE US. 5. AS FAR AS THE LEASE DEPOSIT AMOUNT IS CONCERNED, THE CONTENTION OF THE ASSESSEE WAS THAT THE SECURITY DEPOSIT TAKEN ON LEASE OF THE PREMISES CANNOT BE SAID TO BE EITHER A LOAN OR AN A DVANCE WITH IN THE MEANING OF SEC.2(22)(E) OF THE ACT. THE ASSESSEE S UBMITTED THAT THERE IS NO RELATIONSHIP OF LENDER AND BORROWER AND THERE FORE, THE RECEIPT OF ITA NO.1114(B)/2011 4 SECURITY DEPOSIT SAID TO BE A LOAN. THE ASSESSEE AL SO SUBMITTED THAT THE EXPRESSION ADVANCE MEANS SOMETHING SIMILAR TO A LOA N OR THE EXPRESSION IS USED WHEN AN OBLIGATION IS DISCHARGED MUCH BEFORE THE DUE DATE OF PERFORMANCE OR PAYMENT. THE ASSESSEE I N THIS REGARD RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS SRINIVAS(1963) 50 ITR 788 (MAD.). WITH REGARD T O THE PAYMENT FOR OFFERING ASSESSEES PROPERTY AS SECURITY FOR THE LO AN AVAILED BY M/S SCPL FROM THE BANK, THE ASSESSEE CLAMED THAT IT WAS A BUSINESS TRANSACTION. LASTLY, THE ASSESSEE SUBMITTED THAT T HE OTHER PAYMENTS WERE IN RESPECT OF OTHER CREDITS IN THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S SCPL. 6. THE CIT(A) DID NOT AGREE WITH THE SUBMISSIONS OF THE ASSESSEE AND HE HELD AS FOLLOWS; 5.4 I SEE GAPS IN THE ABOVE AGREEMENT OF AR. FI RSTLY, HE IS NOT SURE ABOUT THE AMOUNT RECEIVED AS SECURITY DEPO SIT AND MIX UP WITH ADVANCE LEASE RENTALS. SECONDLY, THE P ROPERTY RECEIVED ON LEASE BY M/S SCPL HAS BEEN UTILIZED FO R GETTING CASH CREDIT LIMIT FROM THE BANK WITHOUT ANY AUTHORI TY OF LAW BECAUSE THE LEASE DEED IS SILENT ABOUT SUCH USE OF PROPERTY. THE CHAIN OF EVENTS DO NOT SUPPORT THE ARGUMENT OF THE AR TO HOLD THAT THE PAYMENTS OF ADVANCE LEASE RENTAL AND SECURITY DEPOSIT HAS ANY LEGAL NEXUS WITH THE BUSINESS OF TR ADING IN COMPUTERS AND ITS PERIPHERALS. PARAMOUNT APPARELS (P)LTD., VS ITO(2010) 35 SOT 126(MUM.) THE PAYMENTS FOR USE OF PROPERTY HAD BEEN TREATED AS LONG TERM LOAN AND THEREFORE, DEEMED DIVIDEND U/S 2(22)( E) OF IT ACT. IN THAT CASE, THE SHARE HOLDER HAVING SUBSTAN TIAL VOTING POWER HAD BEEN PAID ADVANCE DEPOSITS BY THE COMPANY PARAMOUNT APPARELS (P) LTD., FOR USE OF HIS PROPERT Y AS IN THIS CASE. THUS, FACTS ARE SIMILAR HERE WHEREAS FACTS IN THE CASE CITED BY THE AR ARE NOWHERE NEAR THE FACTS OF THIS CASE. ITA NO.1114(B)/2011 5 5.5. THE FOURTH ITEM RELATES TO PAYMENT MADE FROM THE CREDITS IN THE ACCOUNT OF SHARE HOLDER IN THE BOOKS OF M/S SCPL. WHAT IS THE SOURCE OF SUCH CREDIT? THE OBVI OUS SOURCE IS ADVANCE DEPOSIT OF LEASE RENT AND FOR THE COLLAT ERAL SECURITY WHICH HAD ALREADY BEEN HELD AS NON-BUSINESS TRANSAC TION ABOVE BUT KINDS OF ADVANCES ONLY. THE CREDITS CANN OT BE ALLEGED TO HAVE GENERATED BECAUSE OF SALES INSOMUCH AS A SEPARATE ACCOUNT IS MAINTAINED THEREOF AND IT IS NO T CONSIDERED FOR DETERMINATION OF THE DEEMED DIVIDEND . THUS, THE ARGUMENT OF AR ALSO FAILS TO CONVINCE ME THAT O NE OF THE SOURCE OF PAYMENT BEING CREDITS IN THE ACCOUNTS, IT SHOULD NOT BE CONSIDERED AS LOAN OR ADVANCES FOR THE PURPOSE O F DETERMINATION OF DEEMED DIVIDEND. 5.6 THUS, ON LAW AS WELL AS ON FACTS, I HOLD THAT THE AO IS JUSTIFIED IN TREATING THE SUM OF RS.1,78,04,371/- A S DEEMED DIVIDEND U/S 2(22)(E) OF THE IT ACT. THE ADDITION IS CONFIRMED. APPEAL IS DISMISSED. 7. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 8. WE HAVE HEARD THE SUBMISSIONS OF THE LEARNED CO UNSEL FOR THE ASSESSEE AND THE LEARNED DR. THE LEARNED COUNSEL F OR THE ASSESSEE SUBMITTED BEFORE US THAT NONE OF THE RECEIPTS COMPR ISED THE SUM OF RS.2,09,74,874/- CONSIDERED BY THE AO AS FALLING WI THIN THE AMBIT OF SEC.2(22)(E) OF THE ACT CAN BE SAID TO BE A LOAN O R AN ADVANCE BY M/S SCPL TO THE ASSESSEE. IT WAS SUBMITTED BY HIM THAT AS FAR AS SECURITY DEPOSIT RECEIVED BY THE ASSESSEE FROM M/S SCPL FOR LEASE OF EIGHT PROPERTIES IS CONCERNED, IT CANNOT BE SAID TO BE LO AN OR AN ADVANCE. IN THIS REGARD, RELIANCE WAS PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE DECISION OF THE MUMBAI BENCH OF THE ITAT IN THE CASE OF M/S SEAMIST PROPERTIES (P)LTD.,VS ITO 95 TTJ(MUM .) 201 WHEREIN THE HONBLE MUMBAI BENCH HELD THAT RECEIVING A DEPO SIT FROM A ITA NO.1114(B)/2011 6 COMPANY BY ITS SHAREHOLDER UNDER A MEMORANDUM OF UN DERSTANDING TO START A NEW BUSINESS CANNOT BE SAID TO BE A LOAN OR AN ADVANCE. THE LEARNED COUNSEL ALSO FURTHER REFERRED TO THE DE CISION OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF A.M.SHAMSU DEEN VS UNION OF INDIA & ANOTHER 266 ITR 244(MAD.) WHEREIN THE HO NBLE MADRAS HIGH COURT HELD THAT THERE WAS A DISTINCTION IN LAW BETWEEN LOAN AND DEPOSIT. IN THE CASE OF A LOAN, IT IS THE DUTY OF THE DEBTOR TO SEEK THE CREDITOR AND REPAY THE MONEY TO HIM OR TO REPAY THE MONEY ACCORDING TO THE AGREEMENT. IN THE CASE OF DEPOSIT, IT IS T HE DUTY OF THE DEPOSITOR TO GO TO THE BANKER OR THE PERSON WITH WH OM THE MONEY IS DEPOSITED AND MAKE A DEMAND FOR THE REPAYMENT OF TH E SAME. REFERENCE WAS ALSO MADE TO THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF BAIDYANATH PLASTIC IND.(P)LTD. , & ANOTHER VS ITO 230 ITR 522(1998) WHEREIN THE HONBLE DELHI HIGH CO URT, EXPLAINING THE DISTINCTION BETWEEN THE DEPOSIT AND THE LOAN HE LD THAT DEPOSIT IS TO BE KEPT BY THE DEPOSITEE FOR THE DEPOSITOR WHERE AS A LOAN IS TO BE KEPT BY THE BORROWER FOR HIMSELF. THE OTHER SUBMIS SIONS MADE BEFORE THE CIT(A) WERE REITERATED. 9. THE LEARNED DR WHILE RELYING ON THE ORDER OF TH E CIT(A) SUBMITTED THAT THE SPIRIT BEHIND THE PROVISIONS OF SEC.2(22)( E) OF THE ACT, WAS THAT A SHARE HOLDER SHOULD NOT GET ANY BENEFIT FROM THE COMPANY EXCEPT BY WAY OF DIVIDEND. ACCORDING TO HIM, THE REVENUE AUTH ORITIES HAVE RIGHTLY TAXED THE SUM IN QUESTION AS DEEMED DIVIDEN D. 10. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO MADE SUBMISSIONS WITH REGARD TO WORKING OF ACCUMULATED PROFITS AND IN THI S REGARD, REFERRED TO THE DECISION OF THE ITAT AHMEDABAD BENCH IN THE CASE OF ITA NO.1114(B)/2011 7 M.B.STOCK HOLDING (P) LTD., VS ACIT 84 ITD 542(AHD) . THIS WILL BE CONSIDERED, IN CASE WE COME TO THE CONCLUSION THAT THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT, ARE ATTRACTED IN THE PRES ENT CASE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FACTUAL DETAILS AS NARRATED BY THE ASSESSEE BEFORE THE CIT(A) ARE NOT IN DISPUTE. THE FIRST ASPECT TO BE CONSIDERED IS AS TO WHETHER THE RECEIPT OF SECURITY DEPOSIT OF RS.1.50 CRORES CAN BE CONSIDERED AS A LO AN OR AN ADVANCE BY M/S SCPL TO THE ASSESSEE. IN THIS REGARD, A COP Y OF THE LEASE DEED HAS BEEN FILED BEFORE US AND THE SAME IS AT PAGE NO S.41 TO 44 OF THE ASSESSEES PAPER BOOK. THE LEASE DEED IS DATED 01- 04-2007 AND IS FOR A PERIOD OF FIVE YEARS. THE FOLLOWING ARE THE RELEV ANT CLAUSES WITH REGARD TO THE PAYMENT OF SECURITY DEPOSITS BY M/S S CPL TO THE ASSESSEE. THE LESSOR HEREBY AGREE TO LET AND THE LESSEE AGRE E TO TAKE ON LEASE ALL THE PROPERTIES MENTIONED IN ANNEXURE A FO R INTEREST FREE REFUNDABLE DEPOSIT OF RS.3.6 CRORES PAYABLE AS FOLL OWS: 1. RS.75 TO BE CREDITED TO THE ACCOUNT OF THE LESSER I N THE BOOKS OF LESSEE ON 1 ST APRIL, 2007. 2. RS.1.50 CRORES TO BE PAID TO THE LESSOR AS AND WHEN REQUIRED ON OR BEFORE 31 ST MARCH, 2008. 3. RS.1.35 CRORES TO BE PAID TO THE LESSOR AS AND WHEN REQUIRED ON OR BEFORE 31 ST MARCH 2009. 4. LESSOR WILL NOT PAY INTEREST ON THIS DEPOSIT AND LE SSEE WILL NOT PAY THE RENT FOR THE PROPERTIES MENTIONED IN THE AN NEXURE-A. A PERUSAL OF THE ABOVE WOULD SHOW THAT THE AMOUNT I N QUESTION NAMELY RS.1.5 CRORES IS THE SECURITY DEPOSITS PAYAB LE BY M/S SCPL TO THE ASSESSEE FOR LEASE OF THE PREMISE OWNED BY THE ASSESSEE TO M/S SCPL. THIS FACTUAL ASPECT IS NOT IN DISPUTE. THE SECURITY DEPOSIT RECEIVED FOR LEASE OF A PROPERTY BY A LESSOR FROM T HE LESSEE, CAN IT BE ITA NO.1114(B)/2011 8 SAID TO BE A LOAN OR AN ADVANCE WITHIN THE MEANIN G OF SEC.2(22)(E) OF THE ACT? THE EXPRESSION LOAN OR ADVANCE HAS NOT BEEN DEFINED IN THE ACT. WE THEREFORE HAVE TO SEE ITS ORDINARY MEA NING TO FIND OUT WHETHER THE SUM IN QUESTION CAN BE SAID TO BE LOAN OR ADVANCE.SEC.105 OF THE TRANSFER OF PROPERTY ACT, 1 882 DEFINES LEASE AND IT PROVIDES AS FOLLOWS; 105. LEASE DEFINED. A LEASE OF IMMOVABLE PROP ERTY IS A TRANSFER OF A RIGHT TO ENJOY SUCH PROPERTY MADE FOR A CERTAIN TIME, EXPRESS OR IMPLIED, OR IN PERPETUITY, IN CONS IDERATION OF A PIECE PAID OR PROMISED, OR OF MONEY, A SHARE OF CRO PS, SERVICE OR ANY OTHER THING OF VALUE, TO BE RENDERED PERIODI CALLY OR ON SPECIFIED OCCASIONS TO THE TRANSFEROR BY THE TRANSF EREE, WHO ACCEPTS THE TRANSFER ON SUCH TERMS. LESSOR, LESSEE, PREMIUM, AND RENT DEFINED THE TRANSFEROR IS CALLED THE LESSOR, THE TRANSFEREE IS CALLED THE LESEE, THE PRICE IS CALLED THE PREMIUM, AND THE MON EY, SHARE, SERVICE OR OTHER THING TOP BE SO RENDERED IS CALLED THE RENT. THE AMOUNT IN QUESTION CAN THUS BE CHARACTERIZED AS PREMIUM CANNOT BE SAID TO BE A LOAN OR AN ADVANCE. THE EXPR ESSION ADVANCE ACCORDING TO ADVANCED LAW LEXICON 3 RD EDITION, 2005 BY P. RAMANATHA AIYAR, IS AS FOLLOWS; ADVANCE: ADVANCE MEANS AN ADVANCE, WHETHER IN CASH OR IN KIND OR PARTLY IN CASH OR PARTLY IN KIND, MAD E BY ONE PERSON (HEREINAFTER REFERRED TO AS THE CREDITOR) TO ANOTHER PERSON (HEREINAFTER REFERRED TO AS THE DEBTOR) AS A NOUN MEANS, SOMETHING THAT PRECEDES, SOMETHIN G PAID IN ADVANCE, SUCH AS A PAYMENT OF MONEY MADE BEFORE IT IS DUE. IT IS THUS, CLEAR THAT THE EXPRESSION ADVANCE IS AK IN TO THE EXPRESSION LOAN AND IN ANY EVENT IS DIFFERENT FROM THE SECUR ITY DEPOSIT GIVEN BY THE LESSEE TO THE LESSOR. THE DECISIONS RELIED UPO N BY THE LEANED ITA NO.1114(B)/2011 9 COUNSEL FOR THE ASSESSEE BEFORE US ALSO SUPPORTS TH E PLEA OF THE ASSESSEE THAT THE SECURITY DEPOSIT RECEIVED BY THE ASSESSEE CANNOT BE SAID TO BE A LOAN OR AN ADVANCE WITHIN THE MEANING OF SEC.2(22)(E) OF THE ACT AS THERE IS A DISTINCTION IN LAW BETWEEN A DEPOSIT AND LOAN. WE THEREFORE, HOLD THAT IN SO FAR AS A SUM OF RS.1. 50 CRORES RECEIVED BY THE ASSESSEE AS SECURITY DEPOSIT FOR LEASE OF TH E PROPERTY, THE SAME CANNOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) O F THE ACT, AS IT WAS NOT A LOAN OR AN ADVANCE BY M/S SCPL TO ITS SHA REHOLDER I.E., THE ASSESSEE. 12. AS FAR AS THE CREDITS IN THE ACCOUNT OF THE AS SESSEE IN THE BOOKS OF M/S SCPL IS CONCERNED, WE FIND THAT THE ASSESSEE HAD OFFERED THE PROPERTIES WHICH WERE GIVEN ON LEASE TO M/S SCPL A S SECURITY DEPOSITS FOR A LOAN AVAILED BY M/S SCPL FROM HE BAN K. THE ASSESSEE WAS COMPENSATED BY M/S SCPL FOR THE SERVICES SO REN DERED. IN OUR VIEW, THIS HAS TO BE REGARDED AS BUSINESS TRANSACTI ONS. THE SAME CANNOT THEREFORE, BE SAID TO BE EITHER A LOAN OR AD VANCE. THE PROVISIONS OF SEC.2(22)(E) OF THE ACT, CANNOT BE TH EREFORE, BE APPLIED. 13. THE LEARNED CIT(A) IN DECIDING THE ISSUE AGAIN ST THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF THE ITAT MUMBAI BENCH IN THE CASE OF M/S PARAMOUNT APPARELS (P)LTD.,VS ITO 35 SOT 12 6 (MUM.). WE HAVE PERUSED THE SAID DECISION AND WE FIND THAT IN THE AFORESAID CASE, THE TRIBUNAL FOUND THAT THE AMOUNT PAID BY THE COMP ANY TO ITS SHARE HOLDERS WAS NOT SECURITY DEPOSITS FOR LEASE OF THE PROPERTY OF THE SHARE HOLDER TO THE COMPANY. IN SUCH CIRCUMSTANCES, THE ISSUE WAS DECIDED AGAINST THE ASSESSEE. IN OUR VIEW, THE AFORESAID DE CISION SUPPORTS THE PLEA OF THE ASSESSEE. IF ON FACTS THE TRIBUNAL WOU LD HAVE FOUND THE ITA NO.1114(B)/2011 10 AMOUNT IN QUESTION IN THAT CASE TO BE SECURITY DEPO SIT FOR A LEASE THEN THE TRIBUNAL WOULD NOT UPHELD THE APPLICABILITY OF SEC.2(22)(E) OF THE ACT. WE THEREFORE, HOLD THAT THERE WAS NO LOAN OR ADVANCE BY M/S SCPL TO THE ASSESSEE SO AS TO ATTRACT THE PROVISION S OF SEC. 2(22)(E) OF THE ACT. WE ACCORDINGLY, HOLD THAT THE ADDITION MA DE BY THE AO BY INVOKING PROVISIONS OF SEC. 2(22)(E) OF THE ACT ARE HEREBY DELETED. 14. THE OTHER ARGUMENTS REGARDING THE MODE OF WORK ING OUT OF ACCUMULATED PROFITS DO NOT REQUIRE ANY CONSIDERATIO N, IN VIEW OF THE ABOVE CONCLUSION. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 7.9.2012 SD/- SD/- (JASON P BOAZ) (N.V.VASUD EVAN) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE: D A T E D : 07-09-2012 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-IV, BANGALORE. 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE (1+1) BY ORDER SR. PRIVATE SECRETARY ITAT, BANGALORE