Sri Bhaskar Raju, Bangalore V. Assistant Commissioner of Income-Tax, Bangalore

ITA 1828/BANG/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5654 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V SRINIVASAN
• Keywords: Rectification of order; Search and seizure; Salary income; Deemed dividend; Capital expenditure; Set aside
• Section: 2(22)(e); 143(1); 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI B.R BASKARAN , ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NOS.1828 & 1829/BANG/2016 ASSESSMENT YEARS : 2007-08 & 2011-12 SRI S.K BHASKAR RAJU, #97, 8 TH CROSS, RMV EXTENSION, SADASHIVANAGAR, BENGALURU-560 080. PAN ABLPB 3852 H VS. THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE-9, BENGALURU. [ITA NO.1829/BANG/2016] THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-9(1), BENGALURU. [ITA NO.1828/BANG/2016] APPELLANT RESPONDENT APPELLANT BY : SHRI V SRINIVASAN, ADVOCATE RESPONDENT BY : SHRI R.N SIDDAPPAJI, ADDL. CIT DATE OF HEARING : 09.07.2019 DATE OF PRONOUNCEMENT : 01.10.2019 O R D E R PER B.R BASKARAN, ACCOUNTANT MEMBER BOTH THE APPEALS FILED BY THE ASSESSEE ARE DIRECTE D AGAINST THE ORDERS PASSED BY LD CIT(A)-6, BENGALURU AND THE Y RELATE TO THE ASSESSMENT YEARS 2007-08 AND 2011-12. BOTH THE APP EALS WERE HEARD TOGETHER AND HENCE THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 2. THE ASSESSEE IS AN INDIVIDUAL AND IS DERIVIN G INCOME FROM SALARY, RENT AND BUSINESS. ITA NOS.1828 & 1829 /BANG/2016 PAGE 2 OF 21 3. WE SHALL FIRST TAKE UP THE APPEAL FILED FOR AY 2007-08. THE ASSESSEE IS CHALLENGING THE ORDER OF LD CIT(A) IN C ONFIRMING THE VALIDITY OF RECTIFICATION ORDER PASSED BY THE AO U/ S 154 OF THE ACT AND ALSO IN CONFIRMING THE ADDITION MADE THEREIN. 4. THE FACTS RELATING TO THE ABOVE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSEE FILED HIS RETURN OF INCOME FOR AY 2007 -08 ON 15-02- 2008 AND THE SAME WAS PROCESSED U/S 143(1) OF THE A CT ON 01-07- 2008. IN THE RETURN OF INCOME, THE ASSESSEE HAD OF FERED OTHER INCOME OF RS.91.50 LAKHS. THE ASSESSEE HAD DECLAR ED GROSS RECEIPT OF RS.100.00 LAKHS AND AFTER DEDUCTING EXPENSES OF RS.8.50 LAKHS, HE HAD OFFERED RS.91.50 LAKHS AS OTHER INCOME. 5. THE FACTS RELATING TO THE ABOVE SAID OTHE R INCOME ARE STATED IN BRIEF. THE ASSESSEE OWNED CERTAIN LANDS AT KATT IGENAHALLI, VEERSANDRA VILLAGE, BANGALORE. HE TOOK THE RESPONS IBILITY TO SELL ADJACENT LAND BELONGING TO SOME OTHER PERSON ADMEAS URING 12.50 ACRES. THE ASSESSEE DEVELOPED THE ADJACENT LAND BY INCURRING EXPENSES TOWARDS CLEANING THE SAME, PUTTING FENCING , PAYING WATCHMAN SALARY, LEGAL FEES ETC., AGGREGATING TO RS .8.50 LAKHS. IT IS STATED THAT THE ASSESSEE INCURRED THOSE EXPENSES IN ORDER TO MAKE THE LAND ATTRACTIVE AND ALSO TO PUT IT IN SALEABLE CONDITION. THE ASSESSEE IDENTIFIED A BUYER NAMED SRI D.K.SARMA AND ENTERED AN AGREEMENT WITH HIM AND RECEIVED A SUM OF RS.100 LAK HS AS ADVANCE FROM HIM. HOWEVER, THE PROPOSED PURCHASER SHRI D.K . SHARMA COULD NOT COMPLETE THE SALE TRANSACTION AND HENCE T HE ASSESSEE FORFEITED THE ABOVE SAID ADVANCE AMOUNT OF RS.100 L AKHS AND THE SAME WAS TAKEN AS HIS INCOME. AFTER DEDUCTING THE EXPENSES OF ITA NOS.1828 & 1829 /BANG/2016 PAGE 3 OF 21 RS.8.50 LAKHS SPENT ON DEVELOPMENT AND OTHER EXPENS ES, THE ASSESSEE OFFERED THE REMAINING AMOUNT OF RS.91.50 L AKHS AS HIS INCOME. 6. SUBSEQUENTLY, THE AO REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. THE AO COMPLETED THE RE -OPENED ASSESSMENT ON 10-12-2009 BY MAKING AN ADDITION OF R S.27,325/- TO THE RETURNED INCOME. DURING THE COURSE OF THE REAS SESSMENT PROCEEDINGS, THE AO DID NOT DOUBT WITH THE CLAIM OF RS.8.50 LAKHS MADE BY THE ASSESSEE AGAINST THE GROSS RECEIPTS OF RS.100 LAKHS. 7. THE REVENUE CARRIED OUT SEARCH AND SEIZURE O PERATIONS IN THE HANDS OF A COMPANY NAMED M/S IND-SING DEVELOPERS P LTD ON 26- 08-2008. DURING THE COURSE OF SEARCH, CERTAIN DOCU MENTS BELONGING TO THE ASSESSEE WERE SEIZED AND HENCE THE ASSESSMENT FOR AY 2007-08 WAS AGAIN REOPENED U/S 153C OF THE ACT. THE AO COMPLETED THE ABOVE ASSESSMENT ON 16-12-2010, WHERE IN ALSO THE ASSESSING OFFICER DID NOT DOUBT WITH THE CLAIM OF R S.8.50 LAKHS MADE BY THE ASSESSEE. 8. THEREAFTER, THE AO INITIATED RECTIFICATION P ROCEEDINGS U/S 154 OF THE ACT ON 08-03-2012 AND ISSUED A NOTICE DATED 09-03-2012 TO THE ASSESSEE. THE AO MENTIONED IN THE NOTICE THAT THE DEVELOPMENT EXPENSES OF RS.8.50 LAKHS IS CAPITAL IN NATURE AND HENCE THE SAME IS PROPOSED TO BE DISALLOWED. IT WAS ALSO MENTIONE D THAT THE ASSESSEE HAS INCURRED EXPENSES ON THE LANDS NOT OWN ED BY HIM AND HENCE THE SAME CANNOT BE ALLOWED AS DEDUCTION IN TH E HANDS OF THE ASSESSEE. ITA NOS.1828 & 1829 /BANG/2016 PAGE 4 OF 21 9. BEFORE THE AO, THE ASSESSEE SUBMITTED THAT H E IS NOT THE OWNER OF LAND AND HE HAS UNDERTAKEN RESPONSIBILITY TO SEL L THE LAND AS A BROKER. ACCORDINGLY HE HAS INCURRED EXPENSES OF RS .8.50 LAKHS IN RELATION TO THE ABOVE SAID LAND IN THE CAPACITY OF BROKER. ACCORDINGLY HE SUBMITTED THAT THE ABOVE SAID EXPEND ITURE IS DIRECTLY CONNECTED WITH THE INCOME OF RS.100 LAKHS EARNED BY THE ASSESSEE AND HENCE THE SAME IS ALLOWABLE AS DEDUCTION. THE ABOVE SAID EXPLANATIONS DID NOT FIND FAVOUR WITH THE AO AND AC CORDINGLY THE AO PASSED THE RECTIFICATION ORDER BY DISALLOWING TH E CLAIM OF RS.8.50 LAKHS. THE LD CIT(A) ALSO CONFIRMED THE SA ME. 10. BEFORE US, THE LD A.R SUBMITTED THAT THE AO HAS COMPLETED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION TWIC E, I.E., ONCE U/S 148 OF THE ACT AND AGAIN U/S 153C OF THE ACT. THE AO HAS NOT FOUND FAULT WITH THE IMPUGNED CLAIM. HE SUBMITTED THAT THE AO WAS NOT CORRECT IN OBSERVING THAT THE EXPENDITURE O F RS.8.50 LAKHS INCURRED BY THE ASSESSEE IS CAPITAL IN NATURE, SINC E THE ASSESSEE IS NOT THE OWNER OF THE LAND. HE SUBMITTED THAT THE A SSESSEE HAS UNDERTAKEN RESPONSIBILITY TO SELL THE LAND AS A BRO KER AND ACCORDINGLY INCURRED THE ABOVE SAID EXPENSES OF RS. 8.50 LAKHS IN HIS CAPACITY AS BROKER. HENCE THOSE EXPENSES ARE R ELATED TO THE REAL ESTATE ACTIVITY CARRIED ON BY THE ASSESSEE AND HENC E THE SAME IS DEDUCTIBLE AS EXPENSES RELATED TO THE REAL ESTATE I NCOME. HE FURTHER SUBMITTED THAT, IN ANY CASE, THE VIEW ENTERTAINED B Y THE AO IS DEBATABLE ONE AND HENCE THE SAME CANNOT BE CONSIDER ED AS MISTAKE APPARENT FROM RECORD AS HELD BY HON'BLE SUPREME COU RT IN THE CASE OF T.S. BALARAM ITO VS. VOLKART BROTHERS (82 ITR 50 ). ACCORDINGLY ITA NOS.1828 & 1829 /BANG/2016 PAGE 5 OF 21 HE SUBMITTED THAT THE IMPUGNED RECTIFICATION PROCEE DINGS IS LIABLE TO BE QUASHED. 11. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS NOT CARRIED OUT ANY REAL ESTATE ACTIVITY AS CLAIMED . HE HAS INCURRED EXPENSES FOR DEVELOPMENT OF LAND AND HENCE THE SAME WAS NOT RELATED TO THE INCOME OF RS.100 LAKHS DECLARED BY T HE ASSESSEE, WHICH REPRESENTED FORFEITURE AMOUNT OF LAND ADVANCE . ACCORDINGLY HE SUBMITTED THAT THERE WAS NO RELATIONSHIP BETWEEN THE EXPENSES AND THE INCOME OFFERED BY THE ASSESSEE. ACCORDINGL Y, THE CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE. 12. WE HEARD RIVAL CONTENTIONS AND PERUSED TH E RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSE SSEE WAS NOT THE OWNER OF LAND ON WHICH THE IMPUGNED AMOUNT OF RS.8. 50 LAKHS WAS SPENT. HENCE THE QUESTION OF TREATING THE SAME AS CAPITAL EXPENDITURE DOES NOT ARISE. THE ASSESSEE HAS UNDER TAKEN TO SELL THE LAND BELONGING TO OTHER PERSON AND ACCORDINGLY HE HAS ENTERED INTO AN AGREEMENT TO SELL THE LAND WITH A PERSON NA MED SHRI D.K.SHARMA, ADMITTEDLY, AS REPRESENTATIVE OF THE OW NER OF THE LAND. IN OUR VIEW, THE ABOVE SAID ACTIVITIES CARRIED ON B Y THE ASSESSEE CAN ONLY CONSIDERED AS REAL ESTATE ACTIVITY CARRIED ON BY THE ASSESSEE. THERE IS ALSO NO DISPUTE WITH REGARD TO THE FACT TH AT THE ASSESSEE HAS INCURRED THE EXPENSES OF RS.8.50 LAKHS ON THE D EVELOPMENT AND MAINTAINING THE LAND AND THE GROSS RECEIPTS OF RS.1 00 LAKHS, BEING THE ADVANCE AMOUNT FORFEITED, WAS ALSO ARISEN IN RE SPECT OF THE VERY SAME LAND. HENCE, WE ARE OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE THAT THE DEVELOPMENT/MA INTENANCE OF ITA NOS.1828 & 1829 /BANG/2016 PAGE 6 OF 21 LAND IS RELATED TO THE REAL ESTATE ACTIVITY CARRIED ON BY THE ASSESSEE AND THE ABOVE SAID AMOUNT OF RS.100 LAKHS WAS ALSO RECEIVED OUT OF THE SAID ACTIVITY ONLY. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF RS.8.50 LAKHS AGAINST THE GROSS RECEIPTS OF RS.100 LAKHS. HENCE WE ARE OF TH E VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOW ANCE OF RS.8.50 LAKHS. 13. WE ALSO FIND MERIT IN THE ALTERNATIVE CONT ENTIONS OF THE ASSESSEE THAT THE ISSUE RELATING TO DEDUCTION OF RS .8.50 LAKHS AGAINST THE GROSS RECEIPTS OF RS.100 LAKHS IS A DEB ATABLE ISSUE AND HENCE THE SAME IS OUTSIDE THE SCOPE OF RECTIFICATIO N PROCEEDINGS. ACCORDINGLY THE IMPUGNED ORDERS ARE LIABLE TO BE QU ASHED ON THIS GROUND ALSO. 14. IN VIEW OF THE FOREGOING, WE SET ASIDE THE O RDERS PASSED BY THE TAX AUTHORITIES. 15. WE SHALL NOW TAKE UP THE APPEAL FILED FOR A Y 2011-12. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSING OFFICER NOTICED THAT THE ASSESSEE HEREIN IS A SUBSTANTIAL S HARE HOLDER IN A CLOSED HELD COMPANY NAMELY M/S. B & B INFRASTRUCTUR E LIMITED. FROM THE BALANCE SHEET OF THE ASSESSEE, THE ASSESSI NG OFFICER NOTICED THAT THE ASSESSEE HAS TO RECEIVE RS.29.72 L AKHS FROM THE ABOVE SAID COMPANY. WHEN QUESTIONED ABOUT THIS, TH E ASSESSEE FURNISHED CURRENT ACCOUNT COPY OF TRANSACTIONS ENTE RED BETWEEN THE ASSESSEE AND THE ABOVE SAID COMPANY. FROM THE SCRU TINY OF THE ABOVE SAID LEDGER COPY, THE ASSESSING OFFICER NOTIC ED THAT THE ITA NOS.1828 & 1829 /BANG/2016 PAGE 7 OF 21 ASSESSEE HAS RECEIVED RS.100 LAKHS FROM THE ABOVE S AID COMPANY ON 19.4.2010 AND THE SAME WAS REPAID ON 12.06.2010. WHEN THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE ABOVE SAID AMOUNT OF RS.100 LAKHS SHOULD NOT BE TAXED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, THE AS SESSEE SUBMITTED THAT THE SAME WAS A BUSINESS TRANSACTION AND MORE IN THE NATURE OF REIMBURSEMENTS. ACCORDINGLY, THE ASSESSEE SUBMI TTED THAT THE ABOVE SAID AMOUNT IS NOT LOAN / ADVANCE ATTRACTING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASSESSING OFF ICER DID NOT ACCEPT THE SUBMISSION OF THE ASSESSEE AND ACCORDINGLY TAXE D RS.100 LAKHS AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE AC T. 16. BEFORE LD CIT(A), THE ASSESSEE SUBMITTED THAT T HE ASSESSEE HAS GIVEN PERSONAL GUARANTEE FOR LOANS TAKEN BY M/S B & B INFRASTRUCTURE LTD, WHICH IS MENTIONED IN THE TERM LOAN SANCTION LETTER. ACCORDINGLY IT WAS SUBMITTED THAT THE ABOV E SAID PAYMENT IS IN RETURN TO THE GUARANTEE GIVEN BY THE ASSESSEE. A CCORDINGLY IT WAS SUBMITTED THAT IT WAS NOT A SIMPLE LOAN CONTEMPLATE D U/S 2(22)(E) OF THE ACT. IN THIS REGARD, THE ASSESSEE PLACED HIS R ELIANCE ON THE FOLLOWING DECISIONS:- (A) PRADIP KUMAR MALHOTRA (338 ITR 538)(CAL) (B) CIT VS. CREATIVE DYEING AND PRINTING P LTD (318 IT R 476)(DELHI) (C) BAGMANE CONSTRUCTIONS P LTD & ORS. CIT (119 DTR 49)(KAR) THE LEARNED CIT (APPEALS) WAS NOT CONVINCED WITH TH E CONTENTIONS OF THE ASSESSEE AND ACCORDINGLY HE CONFIRMED THE AD DITION. ITA NOS.1828 & 1829 /BANG/2016 PAGE 8 OF 21 17. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS GIVEN PERSONAL GUARANTEE TO THE LOAN TAKEN BY THE ASSESSEE FROM CA NARA BANK. FURTHER THE ASSESSEE IS MAINTAINING CURRENT ACCOUNT WITH THE ABOVE SAID COMPANY, THROUGH WHICH THE FINANCIAL TRANSACTI ONS ARE ENTERED BETWEEN BOTH THE PARTIES CONTINUOUSLY. HE SUBMITTE D THAT THE HONBLE KARNATAKA HIGH COURT HAS HELD IN THE CASE O F BAGMANE CONSTRUCTIONS P LTD (SUPRA) THAT THE PROVISIONS OF SEC. 2(22)(E) ARE NOT ATTRACTED TO THE LOAN OR ADVANCE GIVEN IN RETUR N TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER. HE SUBMITTED THAT AN IDENTICAL VIEW HAS BEEN EXPRESSED BY HONBL E CALCUTTA HIGH COURT IN THE CASE OF PRADEEP KUMAR MALHOTRA (SURPA) . 18. THE LD A.R SUBMITTED THAT, IN THE CURRENT ACC OUNT TRANSACTIONS, THE OUTSTANDING BALANCE SHALL ALWAYS FLUCTUATE, I.E., SOMETIMES IT MAY BE DEBIT BALANCE AND SOMETIMES IT MAY BE CREDIT BALANCE. HE SUBMITTED THAT THE HONBLE PUNJAB & HA RYANA HIGH COURT HAS HELD IN THE CASE OF CIT VS. SURAJ DEV DAD A (2014)(367 ITR 78)(P & H) THAT THE LOAN GIVEN THROUGH CURRENT ACCOUNT TRANSACTIONS COULD NOT BE TREATED AS DEEMED DIVIDEN D U/S 2(22)(E) OF THE ACT. HE SUBMITTED THAT THE KOLKATTA BENCH O F ITAT HAS EXPRESSED IDENTICAL VIEW IN THE CASE OF ITO VS. SMT . GAYATRI CHAKRABORTY (ITA NO.151/KOL/2013 DATED 30-10-2015. ACCORDINGLY THE LD A.R SUBMITTED THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION MADE U/S 2(22) (E) OF THE ACT. ITA NOS.1828 & 1829 /BANG/2016 PAGE 9 OF 21 19. ON THE CONTRARY, THE LD D.R SUBMITTED THAT THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT DO NOT EXCLUDE CURRENT ACC OUNT TRANSACTIONS. HE SUBMITTED THAT THE PROVISIONS OF SEC.2(22)(E) SH ALL BE ATTRACTED THE MOMENT THE ASSESSEE WAS ALLOWED TO MAKE WITHDRA WALS. IN THIS REGARD, HE PLACED HIS RELIANCE ON THE DECISION REND ERED BY HONBLE SUPREME COURT IN THE CASE OF MISS P SARADA VS. CIT (229 ITR 444)(SC). 20. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT TH E ASSESSEE IS MAINTAINING A CURRENT ACCOUNT/RUNNING ACCOUNT WITH M/S B AND B INFRASTRUCTURE LTD. THE AO HAS EXTRACTED THE SAME IN PAGE NOS.8 AND 9 OF THE ASST. ORDER. A PERUSAL OF THE SAME WO ULD SHOW THAT THE ASSESSEES MONEY IS ALWAYS LYING WITH M/S B AND B I NFRASTRUCTURE LTD. ONLY THE PAYMENT OF RS.100 LAKHS RECEIVED BY T HE ASSESSEE FROM THE ABOVE SAID COMPANY HAS MADE THE ACCOUNT BA LANCE OF THE ASSESSEE INTO A DEBIT BALANCE IN THE BOOKS OF M/S B AND B INFRASTRUCTURE LTD. 21. THE SUBMISSION OF THE ASSESSEE BEFORE THE AO WA S THAT THE ABOVE SAID AMOUNT WAS RECEIVED IN THE NORMAL COURSE OF BUSINESS. BEFORE THE LD CIT(A) THE ASSESSEE ALSO POINTED OUT THAT HE HAS GIVEN PERSONAL GUARANTEE TO THE TERM LONG TAKEN BY THE AB OVE SAID COMPANY FROM M/S CANARA BANK. 22. AT THIS JUNCTURE WE WOULD LIKE TO REFER TO PRIN CIPLES LAID DOWN BY HONBLE HIGH COURTS IN THIS REGARD. THE HONBLE CALCUTTA HIGH ITA NOS.1828 & 1829 /BANG/2016 PAGE 10 OF 21 COURT IN THE CASE PRADEEP KUMAR MALHOTRA (SUPRA) HAS MADE THE FOLLOWING OBSERVATIONS:- AFTER HEARING THE LEARNED COUNSEL FOR THE PARTIES AND AFTER GOING THROUGH AFORESAID PROVISIONS OF THE ACT , WE ARE OF THE OPINION THAT THE PHRASE BY WAY OF ADVANCE OR LOAN' APPEARING IN SUB-CLAUSE (E) MUST B E CONSTRUED TO MEAN THOSE ADVANCE OR LOANS WHICH A SHAREHOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT IT PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT, OF THE VOTING POWER BUT IF SUCH LOAN OR ADVANCE IS GIVEN T O SUCH SHAREHOLDER CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUC H ADVANCE OR LOAN CANNOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, FOR GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22) BUT NOT TO THE CASES WHERE THE LOAN O R ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRE D UPON THE COMPANY BY SUCH SHAREHOLDER. 23. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF BAGMANE CONSTRUCTIONS PVT. LTD., (SUPRA) HAS MADE FOLLOWING OBSERVATIONS:- 24. THEREFORE. FROM THE AFORESAID JUDGMENTS IT IS CLEAR THAT THE PURPOSE OF THE INSERTION OF SUB-CL. (E) OF S. 2(22) OR THE ACT WAS TO BRING WITHIN THE TAX NET ACCUMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSEL Y HELD COMPANIES TO HIS SHAREHOLDERS IN THE FORM OF LOANS TO AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX UNDER S. 115-0 OF THE ACT. THE PURPOSE BEING THAT PERSONS WHO MANAGE SUCH CLOSELY HELD COMPANIES SHOULD NOT ARRANGE THEIR AFFAIRS IN A MANNER THAT ITA NOS.1828 & 1829 /BANG/2016 PAGE 11 OF 21 THEY ASSIST THE SHAREHOLDERS IN AVOIDING PAYMENT OF TAX BY HAVING THESE COMPANIES PAY OR DISTRIBUTE MONEY IN THE FORM OF ADVANCE OR LOAN. LOAN OR ADVANCE GIVEN TO THE SHAREHOLDERS OR TO A CONCERN, UNDER NORMAL CIRCUMSTANCES WOULD NOT QUALIFY AS DIVIDEND. IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUC H ADVANCE OR LOAN CANNOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. INSTEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS LOAN OR ADVANCES TO SHAREHOLDERS OR TO CONCERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDER, IN SUCH AN EVENT, BY THE DEEMING PROVISIONS, SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. IT IS SO MADE BY LEGAL FICTION CREATED UNDER S. 2(22)(E) OF THE ACT. THUS, THE DEFINITION OF DIVIDEND HAS BEEN ENLARGED, AND THAT LOAN OR ADVANCES GIVEN UNDER THE CONDITIONS SPECIFIED UNDER THIS PROVISION WOULD ALSO BE TREATED AS DIVIDEND. THUS, FOR GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF S. 2(22) BUT NOT TO THE CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER. THE INTENTION BEHIND THE PROVISIONS OF S. 2(22)(E) OF THE ACT IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDERS. 24. A PERUSAL OF THE ABOVE SAID OBSERVATIONS WOULD SHOW THAT IF THE PAYMENT OF LOAN OR ADVANCE IS GIVEN IN RETURN T O THE ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER THEN THE PROVISION OF SEC. 2(22)(E) OF THE ACT WOULD NOT AP PLY. ITA NOS.1828 & 1829 /BANG/2016 PAGE 12 OF 21 25. IN THE INSTANT CASE IT IS THE SUBMISSIONS OF TH E ASSESSEE THAT HE HAS PROVIDED PERSONAL GUARANTEE TO THE ABOVE SAI D COMPANY FOR THE TERM LOAN TAKEN BY IT AND HENCE THE ABOVE SAID PAYMENT OF RS.100 LAKHS GIVEN BY THE ABOVE SAID COMPANY TO THE ASSESSEE WAS SHORT ACCOMMODATION IN RETURN TO THE ABOVE CONFERRE D BY THE ASSESSEE TO THE ABOVE SAID COMPANY. HE SUBMITTED T HAT THE ABOVE SAID LOAN WAS REPAID WITHIN TWO MONTHS. 26. THE LD AR ALSO PLACED RELIANCE ON THE DECISION RENDERED BY HONBLE P&H HIGH COURT IN THE CASE OF SURAJ DEV DAD A TO CONTEND THAT THE CURRENT ACCOUNT TRANSACTIONS ARE NOT COVER ED BY SEC.2(22)(E) OF THE ACT. IN THE ABOVE SAID CASE, T HE HONBLE HIGH COURT HAS OBSERVED AS UNDER:- THE LEARNED COUNSEL FOR THE REVENUE ARGUED THAT NO REASONS HAVE BEEN ASSIGNED WHILE DECLINING QUESTION S NOS. (I) AND (II), WHICH ARE SUBSTANTIAL QUESTIONS OF LAW AND IN VIEW OF THE PROVISO TO SECTION 260A(4) OF T HE ACT, ARE REQUIRED TO BE ADJUDICATED BY THIS COURT. ACCORDINGLY, WE PROCEED TO DECIDE QUESTIONS NOS. (I ) AT II (IT) IS WELL. IT WOULD BE APPOSITE TO REFER TO THE FINDINGS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL ON QUESTIONS NOS. (I) AND (II). THE COMMISSIONER OF INCOME-TAX (APPEALS) WITH RESPECT T O QUESTIONS NOS. (I) AND (II) HAD NOTICED AS UNDER: '4. I HAVE GONE THROUGH THE THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER AND REPLY SUBMITTED BY THE COUNSEL OF THE APPELLANT. I AM OF THE CONSIDERED OPINION THAT SECTION 2(22)(E) OF THE ACT IS A DEEMING PROVISION WHICH ASSUMES EXISTENCE OF CERTAIN FACTS IF THE CONDITIONS SPECIF IED IN A PARTICULAR SECTION ARE FULFILLED. WE AGREE TH AT THESE PROVISIONS ARE TO BE CONSTRUED STRICTLY. THIS ITA NOS.1828 & 1829 /BANG/2016 PAGE 13 OF 21 LEGAL FICTION HAS TO BE CARRIED OUT TO LOGICAL ENDS AND NOT TO ILLOGICAL LENGTH. THE COPY OF ACCOUNT OF THE APPELLANT IN THE BOOKS OF THE COMPANY CLEARLY SHOWS THAT THE APPELLANT HAS RUNNING CURRENT ACCOUNT WITH THE COMPANY AND IN FACT THE APPELLANT HAD BEEN ADVANCING MONIES TO THE COMPANY AS AND WHEN REQUIRED FOR THE PURPOSE OF BUSINESS OF THE COMPANY. IT WAS ONLY FOR 55 DAYS IN BETWEEN THE YEAR THAT BALANCE OF THE APPELLANT IN BOOKS OF ACCOUNT TURNED CREDIT. IT IS BEYOND DOUBT THAT THI S SECTION CAN BE INVOKED TO CURTAIL TO MISUSE OF THE FUNDS BELONGING TO A PRIVATE LIMITED COMPANY BY ITS SHAREHOLDERS BUT NOT WHEN THERE IS RUNNING CURRENT ACCOUNT OF THE APPELLANT WITH THE COMPANY AND THE APPELLANT HAS IN FACT FOR MOST THE TIME LENT THE MONEY TO THE COMPANY. THIS SECTION HAD BEEN INSERTED TO STOP THE MISUSE OF THE TAXING PROVISION S BY THE ASSESSEES BY TAKING THE FUNDS OUT OF THE COMPANY BY WAY OF LOANS OR ADVANCES INSTEAD OF DIVIDENDS AND THUS AVOID TAX. BUT IN THIS CASE WHERE THERE IS NO SUCH INTENTION OF THE APPELLANT AND HE HAD IN FACT ADVANCED MONEY TO THE COMPANY, CREDIT IN THAT ACCOUNT FOR SOME DAYS CANNOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). IT IS EVIDENT FACT THAT THE APPEL LANT IN REAL SENSE NOT DERIVED ANY BENEFIT FROM THE FUNDS OF THE COMPANY AND, THEREFORE, BY NO STRETCH OF IMAGINATION IT CAN BE SAID THAT THE COMPANY HAS DISBURSED OR GIVEN DIVIDEND TO ITS SHAREHOLDER/DIRECTOR IN THE GUISE OF LOAN. IT WILL BE TRAVESTY OF LAW TO APPLY THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT TO THE FACTS OF THE PRESENT CAS E WHETHER IN FACT THE PERSON CONCERNED HAS NOT GAINED ANY BENEFIT FROM THE FUNDS OF THE COMPANY AND ONE HAS TO CONSIDER THE TOTALITY OF THE FACTS A ND CIRCUMSTANCES OF THE CASE BEFORE APPLYING THE PROVISIONS OF THIS SECTION. HENCE, THE PROVISIONS O F SECTION 2(22)(E) COULD NOT BE INVOKED WHEN THERE IS A GENUINE BUSINESS TRANSACTION BETWEEN THE TWO ENTITIES AND FUNDS OF THE APPELLANT-DIRECTOR WERE I N FACT LYING WITH THE COMPANY FOR MOST OF THE TIME. ITA NOS.1828 & 1829 /BANG/2016 PAGE 14 OF 21 4.1 IN VIEW OF THE ABOVE DISCUSSED POSITION OF THE CASE, THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE AND DESERVES TO BE DELETED. HENCE, THE SAME IS HEREBY DELETED. THEREFORE, THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED.' THE AFORESAID FINDINGS WERE AFFIRMED IN APPEAL BY T HE TRIBUNAL. FROM THE ABOVE, IT EMERGES THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL HAD CONCURREN TLY RECORDED THAT THE ASSESSEE HAD RUNNING ACCOUNT WITH THE COMPANY M/S. DADA MOTORS PVT. LTD. AND HAD BEEN ADVANCING MONEY TO IT. IT WAS FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE NOT ATTRACTED IN THE PRESENT CASE AS THIS PROVISION WAS INSERTED TO STOP THE MISUSE BY THE ASSESSEE BY TAKI NG THE FUNDS OUT OF THE COMPANY BY WAY OF LOAN ADVANCE S INSTEAD OF DIVIDENDS AND THEREBY AVOID TAX. IN THE PRESENT CASE, THE ASSESSEE HAD IN FACT ADVANCED MON EY TO THE COMPANY AND THERE WAS CREDIT FOR ONLY 55 DAY S FOR WHICH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT COULD NOT BE INVOKED. THESE FINDINGS WERE NOT SHOWN TO BE ERRONEOUS OR PERVERSE IN ANY MANNER.' 27. THE CALCUTTA BENCH OF TRIBUNAL HAS ALSO CONSIDE RED AN IDENTICAL ISSUE IN THE CASE OF SMT. GAYATRI CHAKRAB ORTY (SUPRA), WHEREIN ALSO AN IDENTICAL VIEW HAS BEEN TAKEN. FOR THE SAKE OF CONVENIENCE WE EXTRACT BELOW THE OPERATIVE PORTION OF THE ORDER PASSED BY THE KOLKATTA BENCH OF TRIBUNAL. 11. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. A COPY OF THE LEDGER OF THE ASSE SSEE IN THE BOOKS OF BAPL IS PLACED AT PAGES 41 TO 46 OF THE ASSESSEE'S PAPER BOOK. A COPY OF THE STATEMENT SHOWING THE BALANCE AFTER EVERY TRANSACTION IN THE ASSESSEE'S LEDGER IN THE BOOKS OF BAPL IS PLACED AT ITA NOS.1828 & 1829 /BANG/2016 PAGE 15 OF 21 PAGE 47 TO 52 OF THE ASSESSEE'S PAPER BOOK. THE SAM E IS GIVEN AS ANNEXURE TO THIS ORDER FOR BETTER APPRE CIATION OF FACTS. 12. A PERUSAL OF THE STATEMENT OF BALANCES OF TRANSACTIONS BETWEEN THE ASSESSEE AND BAPL SHOWS THAT AS ON 2.4.2008 BAPL OWED ASSESSEE A SUM OF 1,95,000. BAPL PAID THE ASSESSEE A SUM OF RS.2.4.2008 A SUM OF RS.21,05,000 AND THE ASSESSEE OWED BAPL A SUM OF RS.19,10,000. THE AMOUNTS GIVEN IN THE BRACKET IN THE LAST COLUMN OF THE ENCLOSED BALANCES IN THE RUNNING CURRENT ACCOUNT IS THE AMOU NT WHICH BAPL OWED THE ASSESSEE. MUTUAL TRANSACTIONS G O ON IN THIS FASHION THROUGHOUT THE PREVIOUS YEAR AND AS ON THE LAST DATE OF THE PREVIOUS YEAR THE ACCOUNT I S SQUARED I.E., NEITHER THE ASSESSEE OWES BAPL NOR BA PL OWES ASSESSEE ANY SUM. THE ASSESSEE WAS BENEFICIARY OF THE SUMS GIVEN BY BAPL AT SOME POINT OF TIME DUR ING THE PREVIOUS YEAR AND BAPL WAS THE BENEFICIARY OF T HE SUMS GIVEN BY THE ASSESSEE AT ANOTHER POINT OF TIME DURING THE PREVIOUS YEAR. IT WAS THEREFORE A CASE O F MUTUAL RUNNING OR CURRENT ACCOUNT WHICH CREATED INDEPENDENT OBLIGATIONS ON THE OTHER AND NOT MERELY TRANSACTIONS WHICH CREATED OBLIGATIONS ON THE OTHER SIDE, THOSE ON THE OTHER BEING MERELY COMPLETE OR P ARTIAL DISCHARGE OF SUCH OBLIGATIONS. THERE WERE RECIPROCA L DEMANDS BETWEEN THE PARTIES AND THE ACCOUNT WAS MUTUAL. 13. THIS TRIBUNAL IN THE CASE OF MR.PURUSHOTTAM DAS MIMANI (SUPRA) ON IDENTICAL FACTS CAME TO THE CONCL USION THAT THE ACCOUNT BETWEEN THE ASSESSEE AND A PUBLIC LIMITED COMPANY WAS A RUNNING MUTUAL CURRENT ACCOUN T AND THEREAFTER FOLLOWING THE DECISION OF THE HON'BL E CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA (SUPRA) HELD AS FOLLOWS: '4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE GONE THROUGH THE FACTS OF THE CASE AND FOUND FROM THE PERUSAL OF LEDGER ACCOUNT OF ASSESSEE IN ITA NOS.1828 & 1829 /BANG/2016 PAGE 16 OF 21 THE BOOKS OF ACCOUNT OF GANESH WHEAT PRODUCTS (P) LTD., THE LENDER COMPANY, IT IS SEEN THAT AS ON THE FIRST DAY OF THE RELEVANT ACCOUNTING YEAR 2005- 06 (A. Y. 2006-07) OPENING BALANCE IS AT RS.28,07,5841-. THEREAFTER, ON SEVERAL DATES DURING THE ENTIRE FINANCIAL YEAR THERE WERE SEVERAL TRANSACTIONS THROUGH CHEQUES AND SOME IN CASH BY EITHER PARTIES, I.E. THE ASSESSEE AND THE LOAN GIVI NG COMPANY, RESULTING IN SHIFTING BALANCES. ON MANY OCCASIONS THE BALANCE WAS IN FAVOUR OF THE ASSESSEE AND ON SOME OTHER OCCASIONS THE BALANCE WAS IN FAVOUR OF GANESH WHEAT PRODUCTS (F) LTD. THE LEDGER OF THE ASSESSEE FURTHER REVEALS THAT NO PAYMENT BY LOAN CREDITOR IS FOLLOWED BY A REPAYMENT BY THE LOAN DEBTOR AND, IN FACT, THE PAYMENTS BY THE ASSESSEE AND GANESH WHEAT PRODUCTS (P) LTD. ARE INDEPENDENT OF ONE ANOTHER. NO INTEREST WAS CHARGED BY EITHER SIDE FOR ADVANCING MONEY ON MUTUALITY INASMUCH AS THE LOAN ACCOUNT WAS A CURRENT ACCOUNT IN NATURE. IT IS THUS EVIDENT THAT THERE WERE RECIPROCAL DEMANDS BETWEEN THE PARTIES AND THUS MUTUAL IN CHARACTERISTIC. AT THE CLOSE OF ACCOUNTING YEAR AS ON 31-03-2006, DEBIT BALANCE STOOD AT A SUM OF RS. 18,87,5221- WHICH WAS DULY REFLECTED IN THE BALANCE SHEET UNDER THE HEAD LOANS & ADVANCES. SIMILARLY, IN RESPECT OF MIMA FLOUR MILLS OPENING BALANCE WAS NIL AND THERE WERE SEVERAL SHIFTING OF BALANCE AND THE RESULTANT DEBIT BALANCE WAS RS.5,00,8331-. FOR A. Y. 2007-08, IN RESPECT OF MIMA FLOUR MILLS, OPENING BALANCE WAS RS.5,00,8331- AND AFTER SHIFTING BALANCE, THE DEBIT BALANCE CAME TO NIL. IN RESPECT OF GANESH WHEAT PRODUCTS, OPENING BALANCE WAS RS. 18,87,5221- AND AFTER SHIFTING BALANCE THE CREDIT BALANCE CAME TO RS.9 LAKHS. ON PERUSAL OF THE LEDGER ACCOUNT OF THE ASSESSEE IN THE BOOKS OF M/S. MIMA FLOUR MILLS (P) LTD. IT IS SEEN THAT ON SEVERAL DATES THERE WER E SHIFTING BALANCES. ON MANY OCCASIONS THE BALANCE WAS IN FAVOUR OF THE ASSESSEE AND ON SOME OTHER OCCASIONS THE BALANCE WAS IN FAVOUR OF GANESH ITA NOS.1828 & 1829 /BANG/2016 PAGE 17 OF 21 WHEAT PRODUCTS (P) LTD. IT IS THUS EVIDENT THAT THE RE WERE RECIPROCAL DEMANDS BETWEEN THE PARTIES AND THUS MUTUAL IN CHARACTERISTIC. THE ACCOUNT SO MAINTAINED IN RESPECT OF SUCH MUTUAL TRANSFER OF AMOUNT BY WAY OF GIVING AND TAKING FINANCIAL ASSISTANCE IS, THEREFORE, A CURRENT ACCOUNT AND THI S CURRENT ACCOUNT IS DIFFERENT FROM A LOAN ACCOUNT FO R THE SOLE REASON THAT FEATURE OF MUTUALITY IS NOT PRESENT IN A LOAN TRANSACTION. 5. HERE IN THE PRESENT CASE, FROM THE FACTS NARRATE D ABOVE, IT IS CLEAR THAT BOTH THE PARTIES ARE BENEFICIARY OF THE TRANSACTION BEING CURRENT ACCOUN T OF THE ABOVE TRANSACTIONS I.E. SHIFTING BALANCES. THIS ISSUE HAS BEEN ANSWERED BY HON 'BLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MAIHOTRA V. CIT 338 ITR 538 (CAL) WHEREIN HON 'BLE HIGH COURT HELD AS UNDER: 'THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING IN SUB-CLAUSE (E) OF SECTION 2(22) OF THE INCOME-TAX ACT, 1961, MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT. OF THE VOTING POWER; BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CANNOT BE SAID TO BE DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22) BUT NOT CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER.' ITA NOS.1828 & 1829 /BANG/2016 PAGE 18 OF 21 FROM THE ABOVE FACTS AND LEGAL PROPOSITION DECIDED BY HON'BLE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT SECTION 2(22)(E) OF THE ACT WAS INSERTED TO BRING WITHIN TH E PURVIEW OF TAXATION THOSE AMOUNTS WHICH ARE ACTUALL Y A DISTRIBUTION OF PROFITS BUT ARE DISBURSED AS A LOAN SO THAT TAX THEREON CAN BE AVOIDED. IT IS PERTINENT TO NOTE HERE THAT WHEN DIVIDENDS ARE DECLARED BY A COMPANY, IT IS SOLELY THE SHAREHOLDERS WHO BENEFIT FROM THE TRANSACTION. NO BENEFITS ACCRUE TO THE COMPANY BY W AY OF DIVIDEND DISTRIBUTION. THUS, SECTION 2(22)(E) OF THE ACT COVERS ONLY SUCH SITUATIONS, WHERE THE SHAREHOLDER ALONE BENEFITS FROM THE LOAN TRANSACTION, BECAUSE I F THE COMPANY ALSO BENEFITS FROM THE SAID TRANSACTION, IT WILL TAKE THE CHARACTER OF A COMMERCIAL TRANSACTION AND HENCE WILL NOT QUALIFY TO BE DIVIDEND. IN THE CASE OF THE ASSESSEE, BY GIVING AND TAKING FINANCIAL ASSISTANCE FROM EACH OTHER, BOTH THE ASSESSEE AND THE COMPANY WERE BENEFITED AND SUCH TRANSACTIONS BETWEEN THEM WERE NOTHING BUT COMMERCIAL IT(SS)A NO.60-62 & 73- 76/KO11201 1 A.YS.06-07 TO 08-09 AND 02-03 TO 05- 06MR. PURUSHOTTAM DAS MIMANI. V. DCIT, CC-V, KOL PAGE 5 TRANSACTIONS AND DIVIDEND ATTRIBUTABLE TO TH E SHAREHOLDER IS NOTHING TO DO WITH SUCH BUSINESS TRANSACTION. FROM THE ABOVE DISCUSSIONS IT CAN BE S AID THAT SEC. 2(22)(E) OF THE ACT COVERS ONLY THOSE TRANSACTIONS WHICH BENEFIT THE SHAREHOLDER ALONE AN D RESULTS IN NO BENEFIT TO THE COMPANY. ON THE OTHER HAND, IF THE TRANSACTION IS MUTUAL BY WHICH BOTH SIDES AR E BENEFITED, IT IS UNDOUBTEDLY OUTSIDE THE PURVIEW OF PROVISIONS OF SEC. 2(22)(E) OF THE ACT. FROM THE AB OVE, IT IS CLEAR THAT THE LOAN ACCOUNT DIFFERS FROM CURRENT ACCOUNT AND THE PROVISIONS OF SECTION 2(22)(E) OF T HE ACT, BEING A DEEMING SECTION, CANNOT BE APPLIED TO CURRE NT ACCOUNT. IN SUCH CIRCUMSTANCES, WE DELETE THE ADDIT ION AND THIS COMMON ISSUE OF ASSESSEE'S APPEALS IS ALLOWED.' 14. WE ARE OF THE VIEW THAT IN THE PRESENT CASE ALS O THE TRANSACTIONS IN QUESTION DOES NOT BENEFIT THE SHAREHOLDER I.E., THE ASSESSEE ALONE AND THE RESULT S IN ITA NOS.1828 & 1829 /BANG/2016 PAGE 19 OF 21 NO BENEFIT TO THE COMPANY BAPL. THE LOAN ACCOUNT IS DIFFERENT FROM A CURRENT ACCOUNT WITH A SHAREHOLDER AND THE TRANSACTIONS BETWEEN THE ASSESSEE AND BAPL ARE IN THE NATURE OF CURRENT ACCOUNT AND PROVISIONS OF SEC.2(22)(E) OF THE ACT WILL NOT BE APPLICABLE TO T HE CASE OF THE ASSESSEE. WE THEREFORE CONCUR WITH THE DECIS ION OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE . 28. IN THE INSTANT CASE ALSO, THE ASSESSEE HAS MAIN TAINED A CURRENT ACCOUNT/RUNNING ACCOUNT WITH THE ABOVE SAID COMPANY AND THE OUTSTANDING BALANCES WERE FLUCTUATING DURING TH E COURSE OF HEARING. WE NOTICE THAT, MOST OF THE TIME, THE ASS ESSEES MONEY WAS LYING WITH THE ABOVE SAID COMPANY AND ONLY FOR A SHORT PERIOD OF ABOUT TWO MONTHS, THE COMPANYS MONEY WAS AVAILA BLE WITH THE ASSESSEE. HENCE THE RATIO OF ABOVE SAID DECISIONS CAN ALSO BE CONVENIENTLY APPLIED TO THE FACTS OF THE PRESENT CA SE. HENCE THERE IS MERIT IN THE ALTERNATIVE CONTENTION OF THE ASSESSEE . 29. IN VIEW OF THE FOREGOING, WE ARE OF THE VIEW TH AT THE AMOUNT OF RS.100 LAKHS GIVEN TO THE ASSESSEE BY THE ABOVE SAI D COMPANY CANNOT BE CONSIDERED AS LOAN OR ADVANCE WITHIN THE MEANING OF PROVISIONS OF SEC. 2(22)(E) OF THE ACT. ACCORDINGL Y WE SET ASIDE THE ORDER PASSED BY THE LD CIT(A) ON THIS ISSUE AND DIR ECT THE AO TO DELETE THE ADDITION MADE U/S 2(22)(E) OF THE ACT. ITA NOS.1828 & 1829 /BANG/2016 PAGE 20 OF 21 30. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1ST OCTOBER, 2019. SD/ - (BEENA PILLAI) JUDICIAL MEMBER SD/ - (B.R BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED, 1ST OCTOBER, 2019. / VMS / COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE. ITA NOS.1828 & 1829 /BANG/2016 PAGE 21 OF 21 1. DATE OF DICTATION 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER . 3. DATE ON WHICH THE APPROVED DRAFT COMES TO SR.P.S .. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER .. 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S. .. 6. DATE OF UPLOADING THE ORDER ON WEBSITE.. 7. IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO .. 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. DICTATION NOTE ENCLOSED DATE ON WHICH ORDER GOES FOR XEROX & ENDORSEMENT 10. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 11. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER . 12. THE DATE ON WHICH THE FILE GOES TO DISPATCH SEC TION FOR DISPATCH OF THE TRIBUNAL ORDER . 13. DATE OF DESPATCH OF ORDER. .. 14. DICTATION NOTE ENCLOSED