M/s. Infomark Marketing Pvt. Ltd, Bangalore V. ACIT, Bangalore

ITA 1204/BANG/2010

• Counselvise Citation: 120421114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 14-12-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSAN THOMAS JOSE
• Keywords: Retrospective amendment; Deemed dividend; Revenue expenditure; Capital expenditure
• Section: 43B; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO.1204/BANG/2010 (ASSESSMENT YEAR : 2006-07) M/S. INFOMARK MARKETING PVT. LTD. NO.243, 243A, 2 ND CROSS, 11 TH MAIN, III PHASE, PEENYA INDUSTRIAL AREA, BANGALORE-560 058 . APPELLANT. PAN AABCI 5395K VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE 11(4), BANGALORE. .. RES PONDENT. APPELLANT BY : SMT. SHEETHAL BORKAR. RESPONDENT BY : SMT. SUSAN THOMAS JOSE. DATE OF HEARING : 14.12.2011. DATE OF PRONOUNCEMENT : 06.01.2012. O R D E R PER N.K. SAINI, A.M. : THIS IS AN APPEAL BY THE ASSESSEE AND IS DIRECTED A GAINST THE ORDER DT.28.06.2010 OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-I, BANGALORE FOR THE ASSESSMENT YEAR 2006-07. 2 ITA NO.1204/BANG/10 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN T HIS APPEAL READS AS UNDER : 1. THE LEARNED COMMISSIO N ER OF I NCOME - TAX (APPEALS) ERRED IN UPHOLDING THE D I S ALLOWANCE OF R S . 62,500/ - WITHOUT A P PRECIATING THAT THE EX P ENDITURE WAS INCI D ENTAL TO RAISING FURT H ER CAPITAL FOR BUSINESS PURPOSE. . 2. T HE L EARNED CO MM ISS I O N E R (A) ERRED IN U PH O LD I N G THE D I SALLOWANCE OF R S.1, 0 1,391/- REPRESE N TING THE EMP L OYEES' CONTRIBUTION TO THE PROVIDENT FUND WITHOUT APPRECIA TING THAT THE SAME HAD TO BE REMITTED TO THE GOVERNMENT ACCOU NT ONLY BY THE APPELLANT AND ACCORDINGLY THE RATIO OF THE J URISDICTIONAL HIGH COURT AS UPHELD BY THE SUPREME COURT IN THE C ASE OF CIT & OTHERS VS. SHAB A RI ENTERPRISES REPORTED IN 298 ITR 141 (KAR) WOULD SQUARELY APPLY AND THE APPELLANT IS ENT ITLED TO THE DEDUCTION AS CLAIMED EVEN BY APPLYING THE PROVISION S OF SEC . 43B OF THE ACT. 3. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE REFR A INED FROM UPHOLDIN G T HE D ETERMINATION OF INCO M E UNDER SECTION 2(22)(E) OF T H E ACT IN THE HANDS OF TH E A PP E L LAN T IN RESPECT OF T H E A D VANCE RECEIVE D FOR PROVI D ING OFFICE SPACE. 4. T HE LEARNED COMMISSIONER (A) OUGHT TO H AVE APPRECIATED THAT TH E TRANSACTION WAS PURELY A BUSINESS TRANSACTION OR IN THE ALTERNATIVE IT WAS FOR PROVIDING SPACE FOR OFFICE PREMISES AND CONSEQUENTL Y CANNOT BE HELD TO BE THE ADVANCE P ER SE FOR THE BENEFIT OF THE APPELLANT TO JUSTIF Y THE APPLICATION OF SEC.2(22)(E) OF THE ACT. 5. THE LEARNED COMMISSIONER (A) OUGHT TO HAVE REFRAINE D FROM UPHOLDING THE ADDITION ONLY ON SURMISES WHEN THE EV IDENCE FURNISHED SUPPORTED THE AP P ELLANT'S CLAIM. 6. ON THE FACTS HE OUGHT TO HAVE DELETED THE INCLUSION OF THE AMOUNT IN THE TOTAL INCOME OF THE APPELLANT UNDER SECTION 2(22)(E) OF THE ACT . 7. WITHOUT PREJUDICE , THE DISALLOWANCE AND ADDITION ARE E XCESSIVE, ARBITRARY AND UNREASONABLE AND OUGHT TO BE DELETED IN FULL . 3 ITA NO.1204/BANG/10 8. THE LEARNED COMMISSIONER (A) ERRED IN CONFIRMING THE LEVY OF INTEREST U/S. 234B AND 234C OF THE ACT . 9. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT TH E TIME OF HEARING OF THE APPEAL THE APPELLANT PRAYS THAT T HE APPEAL MAY BE ALLOWED. 3. IN THE GROUND NO.1, GRIEVANCE OF THE ASSESSEE RE LATES TO THE DISALLOWANCE OF RS.62,500. 4. THE FACTS RELATING TO THE ISSUE IN BRIEF ARE THA T THE ASSESSEE FILED HIS RETURN OF INCOME ON 30.11.2006 DECLARING AN INCOME OF RS.34,41,490 WHICH WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 (H EREIN AFTER REFERRED TO AS THE ACT). THEREAFTER, THE CASE WAS SELECTED FOR SCRUT INY. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE A.O. NOTICED THAT THE AS SESSEE HAD SHOWN AN INCREASE IN THE AUTHORIZED SHARE CAPITAL DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. HE ASKED THE ASSESSEE TO SUBMIT THE DETAILS OF EXPENSE S RELATING TO INCREASE IN ASSESSEES SHARE CAPITAL. IN REPLY, THE ASSESSEE ST ATED THAT RS.62,500 HAD BEEN INCURRED FOR THE INCREASE IN THE ASSESSEES SHARE C APITAL. THE A.O. WAS OF THE VIEW THAT THE EXPENDITURE LEAD TO ENDURING BENEFIT. HE, THEREFORE, TREATED THE SAID AMOUNT AS CAPITAL IN NATURE. RELIANCE WAS PLACED O N THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF BROOK BOND INDIA LTD. VS. CIT (1997) 225 ITR 798. 5. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) AND THE SUBMISSION MADE BY THE ASSESSEE AS MENTIONED IN PARA 6.1 OF THE IMPUGNED ORDER READS AS UNDER : IT IS SUBMITT E D THAT DURING THE R E L E V A NT A S S ES SM E NT YEAR , TH E A PP E LLANT COMPANY HAS INCR E ASED THE AUTHORI Z ED C APITAL FROM RS.50 LAKHS TO RS.1 , 25 , 00,000/- BY ISSUE OF 7 5 , 000 EQUITY SHARES OF RS.100/- E ACH WHICH IS EVID E NT FRO M THE SP E CIAL R E SOLUTION PASS E D O N 30 - 03-2006. 4 ITA NO.1204/BANG/10 IT IS S UBMITT E D THAT THE APP E LLANT R E MITT E D RS.62,500/- AS FE E S TO TH E REGISTRAR IN CONNECTION WITH THE RAISING FURTHER CA PITAL FOR TH E COM P ANY. THE APP E LLANT COMPANY CLAIMED THIS PAYM E NT AS R E VENUE EXP E NDITURE. HOWEV E R , TH E ASSESSING OFFIC E R WAS OF THE OPINION THAT THIS E XPENDITUR E IS O F CAPITAL IN NATUR E AND NOT REV E NUE E XP E NDITURE. IT WAS SUBMITTED B E F O R E THE AS SE S S ING O FFICER THAT M E R E LY B E CAUSE TH E E XP E NS E S RELATED TO R A I S ING OF AUTH O RIZ E D CAPITAL, IT CANNOT BE C LA S SIFI E D AS CAPITAL E XP E NDITUR E. IN F A C T , IN C R E A SE IN AUTHORIZ E D C APITAL HAD B EE N DON E WITH AN O BJ EC T OF RAI S ING MOR E FINANC E T O WAR DS ITS WORKIN G CAP ITAL R EQ UIR E M E NT W HI C H I S E VID E NT F RO M TH E S TAT E MENT O F FUND FL O W F O R T H E P E RI O D 01-04 - 2005 TO 3 1 - 03- 2 006 . FURTH E R , IT WAS S UBMITT E D T HA T W ITHOU T WO RKING C APITAL , TH E COMP AN Y CO ULD NOT C ARRY O N ITS B US IN ESS . TH E R E F O R E , TH E E X P E N SES INCURR E D TO IN C R E A SE TH E C APITAL O F TH E CO MPANY AR E R E QUIR E D FO R FUNCTIONING A N D FIN A N C ING OF TH E BU S IN ESS OF T H E CO M PA NY. JUST L IKE T H E EX P E NDITUR E O N THE M O N E Y BORROWED D OES NOT AFFECT THE ALLOWANCE, SIMILARLY TH E FA C T THAT E XP E N SE S C O NTRIBUT E D TO INCR EASE TH E C APITAL S H O ULD NOT MAK E A DIFF E R E NC E IN IT S ALLOWABILITY . H O W E VER, TH E ASS E SSING O FFIC E R D E CLINED TO ACC E PT TH E S UBMIS S I O NS OF TH E A P P E LLANT IN THIS R E GARD. IT IS S UBMITT E D THAT JUDGM E NTS R E LIED BY THE ASSE S SING O FFIC E R AR E NOT APPLICABL E TO TH E FACTS OF THE APPELLANT ' S C A SE. F URTH E R , TH E D EC I S ION O F THE HON ' B L E SUPR E ME CO UR T IN T H E CASE O F B ROO K E BO ND IN D IA LTD , 22 5I T R 798 O N W HI C H R E LIAN CE HAS B E E N P L ACED . BY THE AS SES S I NG OFFIC E R TO COME TO THE C ON C LU S I O N IN TH E C A SE O F TH E A PP E LLANT I S A L S O DISTINGUI S HABL E AS T H E HON ' BL E SUPR E M E CO URT IN IT S JUDGM E NT O B SE RV E D AS F O LL O WS: ' IT I S N O D O U BT TRU E THAT B EFO R E TH E AP P E LL A NT ASS ISTANT C O MMIS S I O N E R AS WE LL A S B E FOR E TH E TR I BUNA L I T WAS SUBMITT E D O N B E HA L F OF TH E ASSESS EE T H A T T H E I NCR E ASE IN T H E CAP IT A L WA S T O M E E T T H E N E E D F O R WO RKIN G FUND S FO R TH E ASSESSEE COMPANY. BUT THE STATEMENT OF CASE SENT B Y THE TRIBUNAL DOES NOT INDI C ATE THAT A FINDING WAS RECORD E D TO THE EFFECT THAT THE EXPAN S ION OF THE CAPITAL WAS UNDERTAK E N BY THE ASSE S S EE IN ORD E R TO MEET TH E NEE D FOR MOR E WORKING FUNDS F OR T H E ASS ESSEE . W E , TH E R EFO R E ; CA NNOT PRO CEE D O N T HE BASIS THAT THE EXPANSION OF THE CAPITAL WAS UND E RTAK E N B Y TH E ASSESSEE FOR THE PURPOSE OF ME E TING THE NEED FOR WORKING FUNDS FOR THE ASS E SS EE TO CARRY ON ITS BUSIN ES S. HENCE IT IS HUMBLY SUBMITTED THAT THE ABOVE DECISION IS ALSO NOT APPLICABLE TO THE APPELLANTS CASE, AS THE APPELLANT COMPANY HA D INCREASED THE AUTHORIZED SHARE CAPITAL ONLY IN ORDER TO MEET THE N EED OF WORKING CAPITAL AND HENCE THE ASSESSING OFFICER OUGHT TO HAVE REFRA INED FROM ADDING RS.62,500 ON THE GROUND THAT IT DOES NOT CONSTITUTE REVENUE EXPENDITURE. THE APPELLANT IN THIS CONNECTION PLACES RELIANCE ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GLAXO LABOR ATORIES INDIA LTD. (1990) 181 ITR 59 WHEREIN THE HON'BLE COURT HAS HEL D THAT IF THE 5 ITA NO.1204/BANG/10 EXPENDITURE IS RELATED TO CARRYING ON THE BUSINESS, IT MAY BE REGARDED AS INTEGRAL PART OF PROFIT EARNING PROCESS AND NOT FOR ACQUIRING OF ASSET AND THE EXPENDITURE IS REGARDED AS REVENUE EXPENDITURE. 6. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS ION OF THE ASSESSEE OBSERVED THAT THE FOLLOWING DECISIONS ARE IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE : I) BROOKE BOND INDIA LTD. VS. CIT (1997) 225 ITR 798 ( SC) II) CIT VS. KODAK INDIA CO. LTD. (2002) 253 ITR 445 (SW C) III) PSIDC LTD VS. CIT (1997) 225 ITR 792 (SC) IV) CIT VS. THUNGABHADRA INDUSTRIES LTD. (1994) 207 IT R 553 (CAL) V) CIT VS. ADITY MILLS (1990) 181 ITR 195 (RAJ) 7. THE LEARNED CIT(A) OBSERVED THAT IN ALL THE CASE S ESPECIALLY, IN THE CASE OF BROOK BOND INDIA LTD. (SUPRA), IT WAS HELD THAT THE EXPENDITURE INCURRED BY A COMPANY IN CONNECTION WITH ISSUE OF SHARE WITH A VIE W TO INCREASE ITS SHARE CAPITAL DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BAS E OF THE COMPANY AND WAS CAPITAL EXPENDITURE, EVEN THOUGH IT MAY INCIDENTALL Y HELP IN THE BUSINESS OF THE COMPANY AND IN PROFIT MAKING. THE LEARNED CIT(A) PO INTED OUT THAT THE ASSESSEE HAD REFERRED THE AFORESAID DECISION AND STATED THAT THERE WAS NO ARGUMENT THAT THE INCREASE IN SHARE CAPITAL WAS UNDERTAKEN BY THE ASSESSEE FOR THE PURPOSE OF MEETING THE NEED FOR WORKING FUNDS FOR THE ASSESSEE TO CARRY ON ITS BUSINESS WHICH WAS THE CASE OF ASSESSEE NOW. THE LEARNED CIT(A) P OINTED OUT THAT THIS OBITER DICTA HAS BEEN SUPERSEDED BY THE HONBLE SUPREME COU RT IN THE CASE OF CIT VS. KODAK INDIA CO. 253 ITR 445 BY HOLDING AS UNDER : WHICHEVER WAY WE LOOK AT IT, THE OBJECT OF THE ASS ESSEE WAS TO INCREASE ITS SHARE CAPITAL; WHETHER IT DID SO TO CO NTINUE TO DO BUSINESS 6 ITA NO.1204/BANG/10 AFTER THE RESERVE BANK DIRECTIVE OR OTHERWISE, THE CASE IS COVERED BY THE JUDGMENT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. VS. CIT (1997) 225 ITR 792 (SC). 8. THE LEARNED CIT(A) CONFIRMED THE ACTION OF THE A .O. AGGRIEVED BY THE DECISION OF LEARNED CIT(A), THE ASSESSEE IS IN APPE AL BEFORE US. 9. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE LEARNED CIT(A) AND FURTHER SUBMITTED THAT THE A SSESSEE WAS IN NEED OF WORKING CAPITAL, THEREFORE, THE SHARE CAPITAL WAS I NCREASED. SO, THE EXPENSES INCURRED FOR INCREASING THE SHARE CAPITAL WERE ALLO WABLE AS REVENUE EXPENDITURE. 10. IN HER RIVAL SUBMISSION, THE LEARNED D.R. STRON GLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 11. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE ITSELF ADMITTED BEFORE THE A.O. THAT A SUM OF RS.62,500 WA S INCURRED TO INCREASE THE SHARE CAPITAL. SO, THOSE EXPENSES WERE DIRECTLY REL ATED TO INCREASE THE SHARE CAPITAL AND IT WAS IMMATERIAL FOR WHAT PURPOSE THE SHARE CAPITAL WAS UTILIZED BY THE ASSESSEE BECAUSE THE ASSESSEE WAS FREE TO USE THE S HARE CAPITAL FOR WHATEVER PURPOSE I.E. IT COULD HAVE BEEN UTILISED FOR ACQUIR ING THE ASSETS, REPAYING THE DEBTS OR TO INCREASE THE SHARE CAPITAL CONSIDERING IN NEC ESSITY OR THE NEED. BUT THE FACT REMAINS THAT THE ASSESSEE INCURRED EXPENSES AMOUNTI NG TO RS.62,500 WHICH WERE DIRECTLY RELATED TO INCREASE THE SHARE CAPITAL. SO, THOSE EXPENSES WERE CAPITAL IN NATURE AND AS SUCH WERE NOT ALLOWABLE AS REVENUE EX PENDITURE. ON A SIMILAR ISSUE, THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KO TAK INDIA LTD. (SUPRA) HAS HELD THAT THE EXPENDITURE INCURRED FOR THE PURPOSE OF IS SUE OF SHARE CAPITAL WAS CAPITAL 7 ITA NO.1204/BANG/10 EXPENDITURE. WE, THEREFORE, DO NOT SEE ANY VALID GRO UND TO INTERFERE WITH THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE. 12. THE SECOND ISSUE VIDE GROUND NO.2 RELATES TO TH E DISALLOWANCE OF RS.1,01,391 REPRESENTING THE EMPLOYEES CONTRIBUTION TO PROVIDEN T FUND. 13. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE A.O. FROM THE ANNEXURE TO THE 3CD REPORT NOTICED THAT THERE WAS A DELAY IN REMITTANCE OF EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND FOR THE MONTHS O F APRIL, OCTOBER AND NOVEMBER 2005 AND FEB. 2006. HE, THEREFORE, TREATE D THE REMITTANCES TO THE EMPLOYEES CONTRIBUTION TO THE PROVIDENT FUND AFTER THE DUE DATE AS INCOME OF THE ASSESSEE BY INVOKING THE PROVISIONS OF SECTION 2(24) (X) R.W.S. 36(I)(VA) OF THE ACT AND ACCORDINGLY MADE THE ADDITION OF RS.1,01,391. T HE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT(A) AND THE SUBMISSIONS MADE BEFO RE HIM AS MENTIONED IN PARA 7.1 OF THE IMPUGNED ORDER READ AS UNDER : IT IS SUBMITTED THAT ALL PAYMENTS WITH REGARD TO P F FOR THE MONTH OF APRIL, 2005, OCTOBER, 2005, NOVEMBER, 2005 & FEBRUA RY, 2006 WERE MADE MUCH BEFORE THE DUE DATE FOR FILING THE RETURN . THE DETAILS REGARDING THE PAYMENT IS ENCLOSED AS ANNEXURE C HERE IN. FURTHER, CLAUSE (VA) OF SECTION 36 OF THE ACT MAKES IT CLEAR THAT AMOUNT ACTUALLY PAID BY THE ASSESSEE ON OR BEFORE THE DUE DATE FOR F ILING THE RETURN IS AN ALLOWABLE DEDUCTION. THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT & OTHERS VS. SHABARI ENTERPRISES, 298 ITR 141 (KAR) H AS THAT NO PART OF EXPENDITURE IS REQUIRED TO BE DISALLOWED IF THE PAYM ENTS ARE MADE BEFORE THE DUE DATE FOR FILING THE RETURN. HENCE, THE ASSESSING OFFICER OUGHT TO HAVE REFRAINED FROM DISALLOWING THE ABOVE EXPENDITURE AS BELATED PAYMENT OF PF. 14. THE LEARNED CIT(A) AFTER CONSIDERING THE S UBMISSION OF THE ASSESSEE OBSERVED THAT RELIANCE PLACED BY THE ASSESSEE IN THE CASE OF CIT VS. SHABARI 8 ITA NO.1204/BANG/10 ENTERPRISES 298 ITR 141 (KAR) WAS HIGHLY MISPLACED. HE OBSERVED THAT THE DECISION WAS ON SECTION 43B OF THE ACT WHICH EXCLUSIVELY PERT AIN TO THE EMPLOYEES PROVIDENT FUND AND ESI AND NOT EMPLOYEES CONTRIBUTI ON AND THE RELEVANT SECTION WAS 36(1)(VA) OF THE ACT WHICH STATES THAT CERTAIN EMPLOYERS WERE DEDUCTING AMOUNTS FROM THE SALARIES OF THE EMPLOYEES TOWARDS C ERTAIN WELFARE SCHEMES LIKE PF, ESI, ETC. BUT WERE NOT CREDITING IT TO THE EMPL OYEES ACCOUNTS EVEN AFTER LONG PERIODS. SO THIS SECTION WAS INTRODUCED TO CHECK SU CH MALPRACTICES, SUM DEDUCTED FROM THE SALARY OF THE EMPLOYEE AS HIS CONTRIBUTION TO ANY PROVIDENT FUND OR SUPERANNUATION FUND OR ESI OR ANY OTHER FUND FOR THE WELFARE OF SUCH EMPLOYEE NOW TREATED AS AN INCOME OF THE EMPLOYER AS PER SUB- CLAUSE (X) OF CLAUSE 24 OF SECTION 2. HE FURTHER OBSERVED THAT HOWEVER, IF SUC H CONTRIBUTION WAS ONLY PAID ON OR BEFORE THE DUE DATE, THE DEDUCTION WOULD BE ALLO WED FOR THE SAME AND THE DUE DATE MEANS THE DATE BY WHICH THE ASSESSEE IS REQUIRE D AS AN EMPLOYER TO CREDIT AN EMPLOYEES CONTRIBUTION TO THE EMPLOYEES ACCOUNT IN THE RELEVANT FUND UNDER ANY ACT, RULE, ORDER OR NOTIFICATION ISSUED THERE-UNDER OR UNDER ANY STANDING ORDER, AWARD, CONTRACT OF SERVICE OR OTHERWISE. 15. THE LEARNED CIT(A) POINTED OUT THAT IN THIS CAS E, THE EMPLOYER HAD ADMITTEDLY DEDUCTED EMPLOYEES CONTRIBUTION FROM THEI R SALARY AND HAD FAILED TO DEPOSIT THE SAME WITHIN THE DUE DATE SPECIFIED UNDE R P.F. ACT AND THEREFORE SUCH SUM HAS TO BE TREATED AS INCOME OF THE EMPLOYER-ASSE SSEE EVEN SUCH CONTRIBUTION DEDUCTED ALONG WITH OWN CONTRIBUTION HAD BEEN DEPOS ITED BEFORE THE DUE DATE OF FILING OF RETURN. HE, ACCORDINGLY, CONFIRMED THE AC TION OF THE A.O. BEING AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 9 ITA NO.1204/BANG/10 16. THE LEARNED COUNSEL FOR THE ASSE SSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT THE PAYMENT WAS MADE WELL BEFORE FILING OF THE RETURN, SO, NO DISAL LOWANCE WAS TO BE MADE SINCE THE SECOND PROVISO TO SECTION 43B OF THE ACT HAS BEEN A MENDED BY THE FINANCE ACT, 2003 WITH RETROSPECTIVE EFFECT. RELIANCE WAS PLACE D ON THE FOLLOWING CASE LAWS : I) CIT VS. DESH RAKSHAK AUSHDHALAYA LTD. (2009) 313 ITR 140 (UTTARAKHAND). II) CIT VS. P.M. ELECTRONICS LTD. (2009) 313 ITR 161 (D EL) 17. IN HER RIVAL SUBMISSIONS, THE LEAR NED DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 18. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT I S NOTICED THAT A SIMILAR ISSUE HAVING IDENTICAL FACTS HAS BEEN DECIDED IN FAVOUR O F THE ASSESSEE BY THE HON'BLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. DESH RAKSHAK AUSHDHALYA LTD. (2009) 313 ITR 140 (SUPRA), WHEREIN IT HAS BEEN HEL D AS UNDER : THAT AN AMENDMENT WHICH SIMPLY REMOVES AN AMBIGUITY AND IS CURATIVE IN NATURE, IMPLIEDLY HAS RETROSPECTIVE EFFECT. THE DEL ETION OF THE SECOND PROVISO TO SECTION 43B IN 2003 IS RETROSPECTIVE IN NATURE. THEREFORE THE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION OF RS.2,98,924 MADE BY THE ASSESSING OFFICER WHICH WAS THE AMOUNT DEPOSITE D TO THE CREDIT OF THE CENTRAL GOVERNMENT ACCOUNT BY THE ASSESSEE BY WAY OF CONTRIBUTION TO THE PROVIDENT FUND OF ITS EMPLOYEES. 19. THE SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. P.M. ELECTRONICS LTD. (2009) 313 IT R 161 (DEL) BY HOLDING AS UNDER : THAT THE VIEW TAKEN BY THE TRIBUNAL DESERVED TO BE SUSTAINED AS IT WAS NO LONGER RES INTEGRA IN VIEW OF THE DECISION OF TH E SUPREME COURT. THE 10 ITA NO.1204/BANG/10 ASSESSEE WAS ENTITLED TO CLAIM THE BENEFIT UNDER SE CTION 43B FOR THE PERIOD PARTICULARLY IN VIEW OF THE FACT THAT IT HAD CONTRIBUTED TO PROVIDENT FUND BEFORE FILING THE RETURN. 20. THE SAME VIEW HAS BEEN TAKEN BY THE H ON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. NEXUS COMPUTER P. LTD. (2009) 313 I TR 144 (MAD) BY HOLDING AS UNDER : THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT UNDE R SECTION 43B AS THE CONTRIBUTION HAD BEEN PAID PRIOR TO THE FILING OF T HE RETURN. IN THE AFORESAID CASES, THE HON'BLE HIGH COURTS HAV E FOLLOWED THE JUDGMENT OF THE HON'BLE SUPREME COURT DATED 7.3.2007 REPORTED AT 31 3 ITR (STATUTE) 1 WHEREIN THE SPECIAL LEAVE PETITION AGAINST THE JUDGMENT OF THE HON'BLE GAUHATI HIGHCOURT IN THE CASE OF CIT VS. VINAY CEMENT LTD. 284 ITR 619 HAS BEEN DISMISSED BY OBSERVING AS UNDER : THAT THESE WERE CASES CONCERNING THE LAW AS IT STO OD PRIOR TO THE AMENDMENT OF SECTION 43B AND THAT IN THE CIRCUMSTAN CES THE ASSESSEE WAS ENTITLED TO CLAIM THE BENEFIT IN SECTION 43B FO R THAT PERIOD PARTICULARLY IN VIEW OF THE FACT THAT IT HAD CONTRIB UTED TO PROVIDENT FUND BEFORE FILING THE RETURN. 21. WE, THEREFORE, KEEPING IN VIEW OF THE RATIO LAI D DOWN IN THE AFORESAID REFERRED TO CASES, SET ASIDE THE IMPUGNED ORDER PAS SED BY THE LEARNED CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLO W THE CLAIM OF THE ASSESSEE SINCE THE PAYMENT TOWARDS CONTRIBUTION OF PROVIDENT FUND H AS BEEN MADE BY THE ASSESSEE BEFORE FILING THE RETURN OF INCOME. 11 ITA NO.1204/BANG/10 22. THE NEXT ISSUE VIDE GROUND NOS.3 TO 7 RELATES T O THE SUSTENANCE OF THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING T HE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 23. THE FACTS RELATED TO THIS ISSUE IN BRIEF ARE TH AT THE ASSESSING OFFICER DURING THE COURSE OF APPELLATE PROCEEDINGS ASKED TH E ASSESSEE TO SUBMIT THE SHARE HOLDING PATTERN OF THE ASSESSEE-COMPANY AND OF M/S. PRIMETEX APPARELS INDIA PVT. LTD. FROM WHOM THE ASSESSEE HAD RECEIVED A SUM OF R S.66 LAKHS AS UNSECURED LOAN DURING THE YEAR UNDER CONSIDERATION. THE DETAILS OF SHARE HOLDING PATTERN AS SUBMITTED BY THE ASSESSEE WERE AS UNDER : M/S. INFOMARK MARKETING PVT. LTD. PERCENTAGE SHARE HOLDING PRIYA MENON 19.85 VIJAYA MENON 10.01 L.K. MENON 70.13 M/S. PRIMETEX APPARELS INDIA PVT. LTD. PRIYA MENON 7 SHEEL K.S. 14 U.K. MENON 79 THE ASSESSING OFFICER DISCOVERED THAT ONE OF THE SH AREHOLDERS VIZ. MR. U.K. MENON OF THE ASSESSEE-COMPANY (HAVING 79%) OWNED ALSO 70.1 3% OF SHARE HOLDING IN M/S. PRIMETEX APPARELS INDIA PVT. LTD. THE ASSESSING OFF ICER POINTED OUT THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT HAD UNDER GONE MODIFICATION BY THE FINANCE ACT, 1987 AND TWO IMPORTANT CHANGES HAD BEE N MADE. HE FURTHER OBSERVED 12 ITA NO.1204/BANG/10 THAT THE SECTION WAS WIDENED TO INCLUDE ADVANCES OR LOANS MADE AFTER 31.5.1987 TO A SHARE HOLDER WHO IS BENEFICIAL OWNER OF SHARES HO LDING 10% OR MORE OF THE VOTING POWER OF THE COMPANY, IT ALSO INCLUDES PAYMENTS MADE BY THE COMPANY ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF THE SHARE HOLDER, MORE IMPORTANTLY IT ALSO INCLUDES ADVANCES OR LOANS MADE TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST I.E. THE SHARE HOLDER IS ENTITLED TO 20% OF THE INCOME OF SUCH CONCERN. THE ASSESSIN G OFFICER WAS OF VIEW THAT THE PROVISION OF SECTION 2(22)(E) TREATS LOANS GRANTED BY A CLOSELY HELD COMPANY TO ANY OF ITS SHAREHOLDERS IN THE SAME MANNER AS IT TREATS DIVIDENDS DISTRIBUTED BY IT TO THEM. ACCORDING TO THE ASSESSING OFFICER, THE ASSE SSEE-COMPANY IS A COMPANY IN WHICH THERE IS A GROUP OF MEMBERS CONTROLLING ITS A FFAIRS AND POSSESSING A BLOCK OF MAJORITY SHARES AND SINCE THERE WERE ACCUMULATED PRO FITS IN THE COMPANY, THIS GROUP IF IT CHOOSES, CAN HAVE DISTRIBUTION ARRANGED OF SUCH PROFITS TO ITS SHAREHOLDERS IN WHICH EVENT THE SHAREHOLDERS WOULD NOT BE LIABLE TO PAY TAX. AND IN ORDER TO AVOID SUCH A LIABILITY MAY GRANT A LOAN. THE ASSESSING OFFICER WAS OF THE VIEW THAT WHEN SUCH A LOAN WAS ADVANCED TO A SH AREHOLDER WHO HAD A SUBSTANTIAL INTEREST IN THE COMPANY, THE ONLY INFEREN CE WAS THAT THE LOAN WAS A MADE-UP AFFAIR AND THE DEPARTMENT IN SUCH A CASE HA S EVERY REASON FOR TREATING SUCH LOAN AS DIVIDEND. THE ASSESSING OFFICER POINT ED OUT THAT THE COMMON SHARE HOLDER MR. U.K. MENON HELD MORE THAN 10% SHARE IN T HE LENDING COMPANY AND WAS HAVING SUBSTANTIAL SHARE HOLDER IN THE RECEIVING CO MPANY BY VIRTUE OF HOLDING MORE THAN 20% OF EQUITY CAPITAL. UNDER NORMAL CIRCUMSTA NCES NOTHING COULD HAVE PREVENTED THE LENDING COMPANY M/S. PRIMETEX APPARELS INDIA PVT. LTD. TO DISTRIBUTE DIVIDENDS TO ITS SHAREHOLDERS OUT OF ITS ACCUMULATE D PROFITS AFTER PAYMENT OF TAX 13 ITA NO.1204/BANG/10 UNDER SECTION 115O OF THE ACT AND THE RECIPIENT O F SUCH DIVIDENDS IN TURN COULD HAVE GIVEN THE DIVIDEND SO RECEIVED, AS A LOAN TO T HE ASSESSEE COMPANY. HOWEVER, MR. U.K. MENON WHO CONTROLLED THE AFFAIRS OF M/S. P RIMETEX APPARELS INDIA PVT. LTD. CHOSE TO TRANSFER A SUM OF RS.66 LAKHS AS LOAN TO THE ASSESSEE-COMPANY IN WHICH HE WAS THE DIRECTOR HOLDING MORE THAN 70% OF THE EQUITY CAPITAL, THIS WAS DONE TO AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX. THE ASSESSING OFFICER ALSO ASKED THE ASSESSEE TO FURNISH THE FINANCIAL STATEME NT OF M/S. PRIMETEX APPARELS INDIA PVT. LTD. SO AS TO VERIFY WHETHER THERE WERE ACCUMULATED PROFITS TO THE EXTENT OF UNSECURED LOANS LENT TO THE ASSESSEE-COMP ANY. THE ASSESSING OFFICER POINTED OUT THAT THE DETAILS PRODUCED BY THE ASSESSE E SHOWED THAT AS ON 1.4.2005 M/S. PRIMETEX APPARELS INDIA PVT. LTD. HAD ENOUGH A CCUMULATED PROFITS SO AS TO GIVE UNSECURED LOANS AT VARIOUS POINTS OF TIME AGGR EGATING TO RS.66 LAKHS. HE, THEREFORE, ASKED THE ASSESSEE TO SUBSTANTIATE AS TO WHY THE SUM OF RS.66 LAKHS SHOULD NOT BE TREATED AS DEEMED DIVIDEND IN THE HAN DS OF THE ASSESSEE-COMPANY. IN REPLY, THE ASSESSEE SUBMITTED THAT THE LOAN WAS G IVEN FOR SPECIFIC PURPOSE FOR PROVIDING FACILITIES FOR CARRYING ON THE BUSINESS OP ERATIONS OF M/S. PRIMETEX APPARELS INDIA PVT. LTD. THE ASSESSING OFFICER OBS ERVED THAT THE ASSESSEE COULD NOT EXPLAIN THE REASON FOR NOT AVAILING LOAN FROM F INANCIAL INSTITUTIONS AND WAS UNABLE TO EXPLAIN AS TO WHY M/S. PRIMETEX APPARELS I NDIA PVT. LTD. DID NOT DECLARE DIVIDEND DURING THE YEAR AND THE DETAILS OF FACILIT IES PROVIDED FOR CARRYING ON THE BUSINESS OF M/S. PRIMETEX APPARELS INDIA PVT. LTD. WERE ALSO NOT SUBMITTED. THE ASSESSING OFFICER TAXED A SUM OF RS.66 LAKHS IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND. ON BEING AGGRIEVED THE ASSESSEE C ARRIED THE MATTER TO THE 14 ITA NO.1204/BANG/10 LEARNED CIT(A) AND THE SUBMISSIONS MADE BEFORE HIM AS MENTIONED IN PARA 8.1 OF THE IMPUGNED ORDER ARE REPRODUCED VERBATIM AS UNDER : IT WAS SUBMITTED BEFORE THE ASSESSING OFFICER THA T THIS AMOUNT WAS NEITHER A LOAN NOR AN ADVANCE TO ATTRACT THE PROVIS IONS OF SECTION 2(22)(E) OF THE ACT. IN FACT, THIS AMOUNT HAS BEEN RECEIVED BY THE APPELLANT COMPANY TO PROVIDE OFFICE SPACE IN ITS BUI LDING PREMISES WHICH IS UNDER CONSTRUCTION TO ONE M/S. PRIMETEX APPARELS INDIA PVT. LTD. WHICH IS ALSO A GARMENT SOURCING AND QUALITY ASSURAN CE COMPANY. HENCE, THE TRANSACTION WAS DURING THE NORMAL COURSE OF BUS INESS AND CANNOT BE DESCRIBED AS LOAN OR ADVANCES WHICH FORMS A DISTINC T CATEGORY OF FINANCIAL TRANSACTION. HENCE, THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT ARE NOT ATTRACTED. THUS, THE FINDING OF THE A SSESSING OFFICER THAT THE AMOUNT REPRESENTED LOAN OR ADVANCE IS INCORRECT AS THE PAYMENT HAS ALSO NOT RESULTED INANY INDIVIDUAL BENEFIT TO ANY BEN EFICIAL OWNERS OF SHARES. THIS IS EVIDENT FROM THE MEMORANDUM OF UNDE RSTANDING BETWEEN THE APPELLANT AND M/S. PRIMETEX APPARELS INDIA PVT. LTD. THE APPELLANT RELIES ON THE FOLLOWING JUDGMENTS : A) CIT VS. SIVASUBRAMANIAM (1998) 231 ITR 655 (MAD) B) CIT VS. AMBASSADOR TRAVELS (P) LTD (2008) 173 TAXM AN 407 (DEL) C) MUKUNDRAY K. SHAH VS. CIT (2005) 277 ITR 128 (CAL) THE HON'BLE MADRAS HIGH COURT IN THE CA SE OF CIT VS. V.S. SIVASUBRAMANIAM (231 ITR 656) HAS HELD THAT ANY ADVA NCE MADE TO THE SHAREHOLDER BY A COMPANY IN ORDINARY COURSE OF ITS BU SINESS SHOULD NOT BE TREATED AS DEEMED DIVIDEND TO ATTRACT THE PROVIS IONS OF SECTION 2(22)(E) OF THE ACT. THE HON'BLE DELHI HIGH COURT IN 173 TAXMAN 407, HAS HELD THAT WHEN THE TRANSACTION IS IN THE ORDINA RY COURSE OF BUSINESS, IT COULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SE CTION 2(22)(E) MERELY BECAUSE OF SHAREHOLDING PATTERN. THE CALCUTT A HIGH COURT IN THE CASE OF MUKUNDRAY K. SHAH HAS HELD THAT REPAYMENT OF ADVANCES IN REGULAR COURSE OF BUSINESS CANNOT BE TREATED AS DEE MED DIVIDEND. HENCE, THE PROVISIONS OF SECTION 2(22)(E) OF THE AC T ARE NOT ATTRACTED. IT IS FURTHER HUMBLY SUBMITTED THAT THE VARIOUS CAS E LAWS CITED BY THE ASSESSING OFFICER ARE NOT APPLICABLE TO THE APPELLA NTS CASE AS THEY DEAL 15 ITA NO.1204/BANG/10 WITH LOANS/ADVANCES GIVEN TO ASSESSEE WHEREAS THE A MOUNT RECEIVED BY THE APPELLANT IS PURE BUSINESS TRANSACTION WHICH DO ES NOT FORM LOAN OR ADVANCES TO ATTRACT THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT. 24. IT WAS FURTHER SUBMITTED THAT THE SUM RECEIVED BY THE ASSESSEE HAD TO PROVIDE OFFICE SPACE IN ITS BUILDING PREMISES AND A PURE BUSINESS TRANSACTION, THEREFORE, COULD NOT BE INCLUDED IN THE DEFINITION OF EITHER LOAN OR ADVANCE SO AS TO COVER WITHIN THE AMBIT OF DEFINITION OF SECTION 2(2 2)(E) OF THE ACT. 25. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE OBSERVED THAT IT WAS HIGHLY IMPROBABLE THAT M/S. PRI METEX APPARELS INDIA PVT. LTD. COULD HAVE GIVEN SUCH HUGE SUM TO THE ASSESSEE ON D IFFERENT DATES ONLY THROUGH MOU ON PLAIN PAPER FOR SO CALLED RENTING THE OFFICE SPACE UNLESS IT COULD BE SEEN AS LOAN OR ADVANCE. HE FURTHER OBSERVED THAT THE AMOU NT HAD BEEN SHOWN AS UNSECURED LOAN IN BOOKS AND THE ASSESSEE MIGHT BE I N THE SAME LINE OF BUSINESS OF GARMENT EXPORTS BUT IT HAD NOT SHOWN WITH EVIDENCE THAT THEY WERE HAVING ANY BUSINESS RELATION EARLIER TO THIS TRANSACTION. THE LEARNED CIT(A) POINTED OUT THAT TWO OF THE SHARE HOLDERS OF THE ASSESSEE-COMPANY VIZ . MR. U.K. MENON AND MS. PRIYA MENON WERE ALSO SHARE HOLDERS IN THE CREDITOR M/S. PRIMETEX APPARELS INDIA PVT. LTD. AND IT WAS A CASE OF FUND DIVERSION FOR T HE BENEFIT OF THESE TWO SHARE HOLDERS. THE LEARNED CIT(A) OBSERVED THAT IT WAS A CASE OF LOAN OR EVEN IF NOT LOAN, PAYMENTS FOR THE INDIVIDUAL BENEFIT OF THE SUBSTANTI AL SHARE HOLDER SRI U. K. MENON AND THEREFORE DESERVES TO BE TAXED AS INCOME IN THE SHAPE OF DEEMED DIVIDEND OF THE ASSESSEE. 26. ON BEING AGGRIEVED BY THE DECISION OF LEAR NED CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 16 ITA NO.1204/BANG/10 27. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATE D THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE AMOUNT IN QUESTION WAS NEITHER A LOAN NOR AN ADVANCE TO ATTRACT THE PR OVISIONS OF SECTION 2(22)(E) OF THE ACT BECAUSE THE AMOUNT HAD BEEN RECEIVED BY THE ASSESSEE TO PROVIDE OFFICE SPACE IN ITS BUILDING PREMISES WHICH WAS UNDER CONS TRUCTION TO ONE M/S. PRIMETEX APPARELS INDIA PVT. LTD. WHICH WAS ALSO A GARMENT S OURCING AND QUALITY ASSURANCE COMPANY. HENCE THE TRANSACTION WAS DURING THE NORMA L COURSE OF BUSINESS AND COULD NOT BE DESCRIBED AS LOAN OR ADVANCE WHICH FOR MS A DISTINCT CATEGORY OF FINANCIAL TRANSACTION. HENCE, THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED. RELIANCE WAS PLACED ON THE FOLLOWIN G DECISIONS : I) ACIT VS. BHAUMIK COLOUR P. LTD. (2009) 313 ITR (AT) 146 (MUM) (SB) II) CIT VS. HOTEL HILLTOP (2009) 313 ITR 116 (RAJ) III) CIT VS. AMBASSADOR TRAVELS P. LTD. (2009) 318 ITR 3 76 (DEL) IV) 328 ITR 1 (ST) (SC) [CIT VS. VINAY CEMENT LTD. 284 I TR 619 (GAU)] 28. IN HER RIVAL SUBMISSION, THE LEARNED DE PARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW AND REITE RATED THE OBSERVATIONS MADE BY THE LEARNED CIT(A) AND SUBMITTED THAT IT WAS NOT A BUSINESS TRANSACTION BUT A LOAN AND THE DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE APPLICABLE TO THE FACTS OF THE PRESENT CASE. THEREFORE, THE ASSE SSING OFFICER RIGHTLY MADE THE ADDITION AND THE LEARNED CIT(A) WAS JUSTIFIED IN CO NFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER. 29. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL ON RECORD. IN THE INSTAN T CASE, THE ASSESSING OFFICER 17 ITA NO.1204/BANG/10 INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE A CT BY CONSIDERING THE AMOUNT IN QUESTION AS LOAN GIVEN BY M/S. PRIMETEX APPARELS IND IA PVT. LTD. TO THE ASSESSEE- COMPANY AND THERE WERE THE COMMON SHARE HOLDER HAVIN G MORE THAN 20% OF THE EQUITY CAPITAL IN BOTH THE COMPANIES. AT THE SAME T IME, THE CONTENTION OF THE ASSESSEE BEFORE THE ASSESSING OFFICER AS WELL AS BE FORE THE LEARNED CIT(A) WAS THAT THE AMOUNT IN QUESTION RELATES TO A BUSINESS T RANSACTION BECAUSE THE ASSESSEE RECEIVED THE DEPOSIT FOR PROVIDING SPACE TO M/S. PR IMETEX APPARELS INDIA PVT. LTD. IN THE INSTANT CASE, THE ASSESSING OFFICER IN PARA 5.4 OF THE ASSESSMENT ORDER DATED 15.12.2008 ALTHOUGH STATED THAT THE DETAILS P RODUCED BY THE ASSESSEE REVEALED THAT AS ON 1.4.2005, M/S. PRIMETEX APPARE LS INDIA PVT. LTD. HAD ENOUGH ACCUMULATED PROFITS BUT HE DID NOT POINT OUT HOW M UCH PROFIT WAS THERE TO SUBSTANTIATE THAT IT WAS SUFFICIENT TO COVER THE LO AN, IF ANY, AMOUNTING TO RS.66 LAKHS. THE ASSESSING OFFICER ALSO ADMITTED THAT NO DETAILS WERE PROVIDED TO EXPLAIN THE REASON FOR NOT AVAILING LOAN FROM FINAN CIAL INSTITUTION, IN CONTRARY TO THAT THE CONTENTION OF THE ASSESSEE WAS THAT A DEPO SIT WAS TAKEN AGAINST THE SPACE TO BE PROVIDED TO M/S. PRIMETEX APPARELS INDIA PVT. LTD. IN THE PRESENT CASE, THE NATURE OF TRANSACTION IS NOT CLEAR IN OTHER WORDS I T IS NOT CLEAR AS TO WHETHER IT WAS A LOAN OR A DEPOSIT FOR SPECIFIC PURPOSE PARTICULAR LY WHEN THE AFORESAID SUBMISSION OF THE ASSESSEE HAD NOT BEEN REBUTTED BY COGENT REAS ON EITHER BY THE ASSESSING OFFICER OR BY THE LEARNED CIT(A). IT IS ALSO NOTICE D FROM THE OBSERVATIONS OF THE LEARNED CIT(A) IN PARA 8.3 OF THE IMPUGNED ORDER TH AT HE WAS NOT SURE AS TO WHETHER THE ASSESSEE AND THE CREDITOR WERE IN THE L INE OF THE SAME BUSINESS OF GARMENT EXPORT AND AS TO WHETHER THERE WAS ANY BUSIN ESS RELATION EARLIER TO THIS TRANSACTION. FROM THE OBSERVATION OF LEARNED CIT(A ) AT PAGE NO.10 OF THE 18 ITA NO.1204/BANG/10 IMPUGNED ORDER, IT IS ALSO NOT CLEAR WHETHER IT WAS A LOAN BECAUSE HE HAD MENTIONED THAT EVEN IF IT WAS NOT A LOAN, IT WAS A PAYMENT FOR THE INDIVIDUAL BENEFIT OF THE SUBSTANTIAL SHAREHOLDER. WE, THEREFORE, BY CONSIDER ING THE TOTALITY OF THE FACTS AS DISCUSSED HEREIN ABOVE, ARE OF THE VIEW THAT THE FACTS OF THIS CASE ARE NOT CLEAR AND NEITHER THE ASSESSING OFFICER NOR THE LEARNED C IT(A) HAD BROUGHT THE RELEVANT FACTS ON RECORD. IN THAT VIEW OF THE MATT ER, WE DEEM IT APPROPRIATE TO SET ASIDE THE ORDER OF THE LEARNED CIT(A) ON THIS I SSUE AND REMAND THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH ADJUDICA TION IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 30. AS REGARDS GROUND NO.8 RELATING TO LEVY OF INTER EST UNDER SECTIONS 234B & 234C OF THE ACT. IT WAS THE COMMON CONTENTION OF B OTH THE PARTIES THAT IT IS CONSEQUENTIAL IN NATURE. WE ORDER ACCORDINGLY. 31. GROUND NO.9 IS GENERAL IN NATURE AND DO NOT REQ UIRE ANY ADJUDICATION. 32. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. (ORDER PRONOUNCED IN THE OPEN COURT ON 06 .01.2012.) SD/- SD/- (P. MADHAVI DEVI) (N .K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED: 06.01.2012. *REDDY GP