ACIT, New Delhi V. Sh Vivek Chanana, Delhi

ITA 2190/DEL/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1726 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 02-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDREKAR
• Keywords: Depreciation; Corroborative evidences; Deemed dividend; Revenue expenditure; Capital expenditure
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : H : NEW DELHI BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO . 2190 /DEL/201 2 ASSESSMENT YEAR: 2008 - 09 ASSTT. COMMISSIONER OF VS. VIVEK CHANANA, PROP. M/S THE INCOME TAX, CIRCLE 39(1), IKON, 987, PAN MANDI, SADAR ROOM NO. 212, CR BUILDING, BAZAR, DELHI IP ESTATE, NEW DELHI (PAN: AAEPC0223B ) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. J.P. CHANDREKAR, SR. DR RESPONDENT BY: SH. KAPIL , ADV. DATE OF HEARING: 02.07.2015 DATE OF PRONOUNCEMENT: 12.08.2015 ORDER PER INTURI RAMA RAO, A.M. : THIS IS AN APPEAL OF THE REVENUE FILED FOR THE ASSESSMENT YEAR 2008 - 09 AGAINST THE ORDER OF CIT(A), DATED 27.03.2012, RAISING THE FOLLOWING GROUNDS OF APPEAL: I. THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 5,76,708/ - BY TREAT ING THE CAPITAL EXPENDITURE OF R S. 1,44,333/ - AND RS. 4,62,728/ - AS REVENUE EXPENDITURE MERELY ON THE SUBMISSION OF THE ASSESSEE COMPLETELY IGNORING THE REASONS GIVEN BY THE AO AND WITHOUT SUBMISSION OF ANY SUPPORTING EVIDENCE. II. THE LD. CIT(A) ERRED IN DELETING THE ADDITI ON OF RS. 15,53,855/ - ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME - TAX ACT, 1961 MERELY ON THE SUBMISSION OF THE ASSESSEE COMPLETELY IGNORING THE REASONS GIVEN BY THE AO. III. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTERH . IV. THE APPELLANT CRAVES TO ADD, AMEND OR MODIFY THE GROUNDS OF APPEAL AT ANY TIME. 2 2. BRIEF STATED FACTS OF THE CASE ARE THAT THE RESPONDENT ASSESSEE IS AN INDIVIDUAL. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008 - 09 WAS FILED ON 24 TH SEPTEMBER, 2008 , DECLARING INCOME OF RS. 6,36,510/ - . AGAINST THE SAID RETURN OF INCOME, ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) VIDE ORDER DATED 31.12.2010 AT A TOTAL INCOME OF RS. 27,67,070/ - . WHILE DOING SO, THE A SSESSING OFFICER DISALLOWED A SUM OF RS. 4,62,728/ - AS A CAPITAL EXPENDITURE BEING AN AMOUNT PAID TO MCD AND MADE FURTHER ADDITION OF RS. 15,53,855/ - AS DEEMED DIVIDEND. BEING AGGRIEVED BY THIS ORDER, AN APPEAL WAS FILED BEFORE THE CIT(A) WHICH VIDE ORD ER DATED 27.03.2012 ALLOWED THE GROUNDS OF APPEAL. BEING AGGRIEVED FROM THIS ORDER, THE REVENUE IS BEFORE US WITH THE PRESENT APPEAL. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CIT(A), IN RESPE CT OF ADDITION OF RS. 5,76,708/ - A S CAPITAL EXPENDITURE ; RS. 1,44,333/ - AND RS. 4,62,728/ - AS REVENUE EXPENDITURE, GIVEN HIS FINDINGS, WHICH ARE AS FOLLOWS : I HAVE GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSION OF THE APPELLANT. I HAVE ALSO CONSIDERED THE CASE LAW CITED BY THE APPELLANT. THE ASSESSING OFFICER HAS CONTENDED THAT RS.144333/ - WAS PAID ON ACCOUNT OF MIXED LAND USE CHARGES. THESE CHARGES H AVE BEEN PAID BECAUSE OF USING A RESIDENTIAL PROPERTY FOR COMMERCIAL PURPOSE. BY PAYING THESE CHARGES ASSESSEE HAS GOT THE BENEFIT OF USING A RESIDENTIAL PROPERTY FOR COMMERCIAL PURPOSE. THIS BENEFIT IS OF ENDURING AND LASTING NATURE. THEREFORE THIS IS CAP ITAL EXPENDITURE AND NOT REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE. AMOUNT OF RS.144333/ - WAS DISALLOWED AND ADDED BACK. ASSESSEE ALSO PAID RS.462728/ - ON ACCOUNT OF ONE - TIME PARKING CHARGES. AS PER SECTION LETTER OF MCD SUBMITTED BY THE ASSESSEE BY PAYING THESE CHARGES, ASSESSEE HAS GOT THE BENEFIT OF ENDURING AND LASTING NATURE. MOREOVER, THIS IS ONE TIME PAYMENT CHARGES. THIS EXPENDITURE IS IN NATURE OF CAPITAL AND NOT REVENUE AS CLAIMED BY THE ASSESSEE. AMOUNT OF RS.462728/ - WAS DISALLOWED AND AD DED BACK. PARKING CHARGES OF RS.462728/ - AND MIXED USE CHARGES OF RS.144333/ - WERE DISALLOWED AS REVENUE EXPENDITURE. THIS TOTAL AMOUNT OF RS.607061/ - WAS CAPITALIZED. DEPRECIATION AT THE RATE @ 3 10% TAX FOR HALF YEAR IS RS. 30353/ - . THIS AMOUNT OF DEPREC IATION WAS DEDUCTED FROM THE TOTAL INCOME. HOWEVER, THE APPELLANT HAS CONTENDED THAT SECTION 30(B) ALLOWS DEDUCTION FOR ANY SUMS PAID ON ACCOUNT OF LAND REVENUE, LOCAL RATES OR MUNICIPAL TAXES. IT DOES NOT DIFFERENTIATE BETWEEN CAPITAL OR REVENUE EXPEND ITURE OR EXPENDITURE OF RECURRING OR PERMANENT NATURE. THE APPELLANT ALSO REFERRED TO SECTION 43(B) OF INCOME TAX ACT, 1961, WHICH STATES THAT NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF ANY SUM PAYABLE BY THE ASSESSEE BY WAY OF TAX, DUTY, CESS OR FEE, BY WHATEVER NAME CALLED, UNDER ANY LAW FOR THE TIME BEING IN FORCE SHALL BE ALLOWED (IRRESPECTIVE OF THE PREVIOUS YEAR IN WHICH THE LIABILITY TO PAY SUCH SUM WAS INCURRED BY THE ASSESSEE ACCORDING TO THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY HIM) ONLY IN COMPUTING THE INCOME REFERRED TO IN SECTION 28 OF THAT PREVIOUS YEAR IN WHICH SUCH SUM IS ACTUALLY PAID BY HIM. THEREFORE, ANY SUM PAID ON ACCOUNT OF LOCAL RATES AND M UNICIPAL TAXES SHALL BE ALLOWED AS DEDUCTION. THE APPELLANT HAS PLACED RELIANCE ON THE CASE OF COMMISSIONER OF INCOME TAX VS ASAHI INDIA SAFETY GLASS LTD (2011) 203 TAXMAN 277 (DELHI) WHEREIN IT WAS HELD: - 'THE TEST OF ENDURING BENEFIT IS NOT A CERTAI N OR A CONCLUSIVE TEST WHICH THE COURTS CAN APPLY ALMOST BY ROTE. WHAT IS REQUIRED TO BE SEEN IS THE REAL INTENT AND PURPOSE OF THE EXPENDITURE AND WHETHER THE EXPENDITURE RESULTS IN CREATION OF FIXED CAPITAL FOR THE ASSESSEE'. IN TH E PRESENT CASE, NO FI XED ASSET IS CREATED AS A RESULT OF INCURRING OF THE SAID EXPENDITURE. THE AO IS NOT JUSTIFIED IN CAPITALIZING THE ABOVE EXPENDITURE OF RS 6,07,061 (RS.1,44,333 AND RS 4,62,728) AND THEN ALLOWING DEPRECIATION FOR SIX MONTHS AMOUNTING TO RS 30353/ - . IN VI EW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE TOTAL EXPENDITURE OF RS.607061/ - IS ALLOWED AS REVENUE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER HAS ALREADY ALLOWED DEPRECIATION OF RS. 30353/ - OUT OF THE TOTAL EXPENSES THEREFORE, THE BALANCE AMOUNT OF RS 576708/ - (607061 - 30353) IS BEING ALLOWED. APPEAL ON THESE GROUNDS IS ALLOWED. 4. IN RESPECT OF THE DELETION OF ADDITION OF RS. 15,53,855/ - ON ACCOUNT OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT, THE CIT(A) HAS GIVEN HIS FINDINGS IN HIS ORDER, WHICH READS AS UNDER: I HAVE GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISS ION OF THE APPELLANT. I HAVE ALSO CONSIDERED THE CASE LAWS CITED BY THE APPELLANT. THE 4 ASSESSING OFFICER MADE AN ADDITION OF RS 15,53,855 AS DEEMED DIVIDEND U/ S 2(22) (E). THE APPELLANT IS A SHARE HOLDER HOLDING 50% SHARES IN M/ S IKON RESIDENCY (P) LTD. THE APPELLANT HAD GIVEN PREMISES AT D - 823, NEW FRIENDS COLONY, NEW DELHI ON RENT TO M/ S IKON RESIDENCY (P) LTD. DURING THE YEAR THE APPELLANT HAD RECE IVED RENT OF RS 9,00,000 FROM M/ S IKON RESIDENCY (P) LTD. M/S IKON RESIDENCY (P) LTD. IS ALSO ENGAGED IN THE BUSINESS OF RUNNING OF GUEST HOUSE FROM THE PREMISES TAKEN ON RENT FROM THE ASSESSEE. THE ASSESSING OFFICER OBSERVED IN PARA 4.2 TO 4.5 OF ASSESSMENT ORDER 4 .2 ASSESSEE SUBMITTED THE CONFIRMED COPY OF LEDGER A/ C OF MR. VIVEK CHANANA IN THE BOOKS OF I KON RESIDENCY P. LTD FOR THE PERIOD 01.04.2007 TO 31.3.2008. DURING THE PERUSAL OF LEDGER A/ C, IT WAS FOUND THAT AS ON 01.04.2007, THERE IS CR. BALANCE OF RS 24,00,113 I.E. ASSESSEE MR. VIVEK CHANANA HAS GIVEN LOANS TO IKON RESIDENCY P LTD. DURING THE YEA R, COMPANY HAS GIVEN LOAN/ ADVANCE TO MR. VIVEK CHANANA. AFTER 05.11.2007, ASSESSEE IS HAVING DEBIT BALANCE IN THE BOOKS OF IKON RESIDENCY P. LTD. THAT MEANS COMPANY HAS GIVEN LOAN/ ADVANCE TO ASSESSEE. ' 4.4 FROM THE ABOVE TABLE IT CAN BE SEEN THAT PEAK DEBIT BALANCE IS RS 15,53,855 ON 10.01.2008. THIS IS THE PEAK AMOUNT OF LOAN/ ADVANCE GIVEN BY IKON RESIDENCY P. LTD TO VIVEK CHANANA. 4.5 IKON RESIDENCY IS HAVING SURPLUS PROFIT OF RS 5,81,855 ON 31.3.2007 AND RS 16,98,775 DURING THE YEAR 01.4.2007 TO 31.3.2008. TOTAL COMES TO RS 2,80,630 .THUS COMPANY IS HAVING ENOUGH ACCUMULATED PROFIT OF RS 22,80,630 TO GIVE LOAN/ ADVANCE TO MR. VIVEK CHANANA OF RS. 15,53,855. DEEMED DIVIDEND UNDER INCOME TAX ACT, 1961. SECTION 2(22)( E) OF THE INCOME TAX ACT,1961 LAYS THAT A PAYMENT WOULD ACQUIRE THE ATTRIBUTES OF A DIVIDEND WITHIN THE MEANING OF THE PROVISION IF THE FOLLOWING CONDITIONS ARE FULFILLED: THE COMPANY MAKING THE PAYMENT IS ONE IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INT ERESTED. MONEY SHOULD BE PAID BY THE COMPANY TO A SHAREHOLDER HOLDING NOT LESS THAN 10% OF THE VOTING POWER OF THE COMPANY. THE MONEY SHOULD BE PAID EITHER BY WAY OF AN ADVANCE OR LOAN OR IT MAY ANY PAYMENT WHICH THE COMPANY MAY MAKE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SHAREHOLDER OR ALSO TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE IS SUBSTANTIALLY INTERESTED, AND THE LIMITING FACTOR IS THAT THESE PAYMENTS MUST BE TO THE EXTENT OF ACCUMULATED PROFITS PO SSESSED BY SUCH A COMPANY. THUS, SECTION 2(22)(E) SEEKS TO BRING WITHIN THE TAX NET, ACCUMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSELY HELD COMPANIES TO ITS SHAREHOLDERS IN THE FORM OF LOANS. THE PURPOSE BEING THAT PERSON WHO MANAGES SUCH CLOSELY HELD 5 COMPANIES SHOULD NOT ARRANGE THEIR AFFAIRS IN A MANNER THAT THEY ASSIST THE SHAREHOLDERS IN AVOIDING THE PAYMENT OF TAXES BY HAVING THESE COMPANIES PAY OR DISTRIBUTE, WHAT WOULD LEGITIMATELY BE DIVIDEND IN THE HANDS OF THE SHAREHOLDERS' MONEY IN THE FORM OF AN ADVANCE OR LOAN . THE WORD ADVANCE HAS TO BE READ IN CONJUNCTION WITH THE WORD LOAN. THE WORD ADVANCE WHICH APPEARS IN THE COMPANY OF THE WORD LOAN COULD ONLY MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT. HON'BLE HIGH COURT, DELH I, HAS HELD IN A RECENT JUDGMENT CIT VS RAJ KUMAR, (2009)318 ITR 462 THAT TRADE ADVANCES WHICH ARE IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACTION WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT . IN ANOTHER DECIDED CASE PRADIP KUMAR MALHOTRA VS C I T, WEST BENGAL (2011) 15 TAXMAN.COM66 (CAL) , H ON'B LE CALCUTTA HIGH COURT HAS HELD: THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING TO SUB - CLAUSE (E ) OF SECTION 2(22) MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARE S ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN 10 PER CENT OF THE VOTING POWER; BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHARE HOLDER 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 A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, FOR GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOL DERS WOULD COME WITHIN THE PURVIEW OF SECTION 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. IN THE INSTANT CASE, THE ASSESSEE PERMITTED HIS PROPERTY TO BE MORTGAGED TO THE BANK FOR ENABLING THE COMPANY TO TAKE THE BENEFIT OF LOAN AND IN SPITE OF REQUEST OF THE ASSESSEE, THE COMPANY WAS UNABLE TO RELEASE THE PROPERTY FROM THE MORTGAGE. IN SUCH A SITUATION, FOR RETAINING THE BENEFIT OF LOAN AVAILED FROM THE BANK IF DEC ISION WAS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION WAS NOT TO GIVE GRATUITOUS ADVANCE TO ITS SHARE HOLDER BUT TO PROTECT THE BUSINESS INTEREST OF THE COMPANY. T HE APPELLANT HAD GIVEN HIS BUILDING ON RENT TO M/S IKON RESIDENCY P LTD. HE WAS REC EIVING RENT FOR THE SAID PROPERTY. HE TOOK MONEY FROM M/ S IKON RESIDENCY P LTD AGAINST ADVANCE RENT/ DEPOSIT FOR PROPERTY. THIS IS SUPPORTED BY THE RENT AGREEMENT BETWEEN VIVEK CHANANA AND IKON RESIDENCY P. LTD. AND ACCORDING TO AGREEM ENT, VIVEK CHANANA I S ENTITLED TO RECEIVE RS.1800000 / - AS SECURITY DEPOSIT FROM THE COMPANY. ONE MORE THING THAT MERITS CONSIDERATION HERE IS THAT VIVEK CHANANA HAS LET OUT GROUND FLOOR TO IDBI BANK ON ANNUAL RENT OF RS.1051200/ - . THE SECURITY DEPOSIT GIVEN BY IDBI BANK IS RS. 1051200/ - FOR GROUND FLOOR ONLY. 6 THE TAXABILITY OF RS 15,53,855 AS DEEMED DIVIDEND IS WRONG OTHERWISE ALSO. EVEN IF IT IS PRESUMED THAT TRANSACTION BETWEEN IKON RESIDENCY P. LTD AND VIVEK CHANANA WAS LIABLE TO TAX UNDER SECTION 2(22)(E) , IT CANNOT EXCEED THE ACCUMULATED PROFITS OF IKON RESIDENCY P.LTD. THE ACIT CIR 39(1) HAD OBSERVED THAT THE COMPANY M/S IKON RESIDENCY P.LTD HAD ACCUMULATED PROFITS OF RS 5,81,855 ON 31.3.2007. HE HAD FURTHER OBSERVED THAT THE COMPANY HAD MADE SURPLUS OF RS 16,98,775 DURING THE YEAR 01.04.2007 TO 31.03.2008. THIS OBSERVATION WAS NOT CORRECT. THE NET PROFIT AFTER PROVISION FOR TAX WAS RS. 10,79,845. THE HON 'BLE SUPREME COURT IN THE CASE OF CIT VS. ASHOK BHAI CHIMAN BHAI (1965) 56 ITR 42 HELD THAT THE PROFITS DO NOT ACCRUE FROM DAY TO DAY OR EVEN FROM MONTH TO MONTH AND HAVE TO BE ASCERTAINED BY COMPARISON OF ASSETS OF TWO STATED POINTS. UNLESS THE RIGHT TO PROFITS COMES INTO EXISTENCE, THERE IS NO ACCRUAL OF PROFITS AND THE DESTINATION OF PROFITS MUST BE DETERMINED B Y THE TITLE THERETO ON THE DAY ON WHICH THEY ARISE. IT FURTHER HELD THAT THE PROFITS DO NOT ARISE UNTIL THE CONTINGENCY, WHICH BY OPERATION OF LAW OR UNDER A COVENANT OF THE PARTNERSHIP DEED, GIVES RISE TO RIGHT. THE SUPREME COURT IN THE CASE OF V. DAMOD ARAN (SUPRA) HAVE SPECIALLY HELD THAT THERE IS DISTINCTION, BETWEEN THE 'ACCUMULATED PROFITS' AND THE 'CURRENT YEAR'S BUSINESS PROFITS' AND, THEREFORE TO HOLD THAT CURRENT YEAR'S BUSINESS PROFITS ARE TO BE INCLUDED IN THE ACCUMULATED PROFITS WOULD BE CONTR ARY TO THE DECISION OF THE SUPREME COURT. THE SUPREME COURT IN THE CASE OF NAVNITLAL C. JAVERI V. K.K. SEN , AAC [1965J 56 ITR 198 HAVING HELD THAT THE BUSINESS PROFITS ACCRUE ONLY AT THE END OF THE YEAR, IT IS INCONCEIVABLE THAT FOR PURPOSES OF APPLICATI ON OF SECTION 2(22)(E), AN EXERCISE SHALL HAVE TO BE TAKEN TO WORK OUT THE BUSINESS PROFITS OF THE COMPANY ON EACH DAY THE LOAN IS ADVANCED. WORKING OUT THE PROFITS IN THE MIDDLE OF THE YEAR IS A COMPLICATED AFFAIR IN CONTRAST TO WORKING OUT THE ACCUMULAT ED PROFITS ON THE DATE OF LOAN WITH REFERENCE TO THE ACCUMULATED PROFITS OF THE PRECEDING YEAR WITH CERTAIN ADJUSTMENT. HON'BLE ITAT AHMEDABAD HAS HELD IN M.B.STOCKHOLDING P.LTD VS ACIT, 84 ITD 542( AHD) T HAT, THE EXPLANATION 2 TO SECTION 2(22)(E ) DOES NOT HAVE THE EFFECT OF INCLUSION OF CURRENT YEAR'S BUSINESS PROFITS. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSING OFFICER IS NOT JUSTIFIED IN ADDING CURRENT PROFITS TO ACCUMULATED PROFITS OF IKON RESIDENCY P. LTD. THE ACCUMULATED PRO FITS WERE RS 581855 ONLY. IF LOAN OR ADVANCE IS GIVEN TO SUCH SHARE HOLDER 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 A DEEMED 7 DI VIDEND 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 OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER. THE APPELLANT HAD GIVEN HIS BUILDING ON RENT TO M/ S IKON RESIDENCY P LTD. HE / WAS RECEIVING RENT FOR THE SAID PROPERTY. HE TOOK MONEY FROM M/S IKON RESI DENCY P LTD AGAINST ADVANCE RENT/ DEPOSIT FOR PROPERTY . THIS IS SUPPORTED BY THE RENT AGREEMENT BETWEEN VIVEK CHANANA AND IKON RESIDENCY P. LTD. AND ACCORDING TO AGREEMENT, VIVEK CHANANA IS ENTITLED TO RECEIVE RS.1800000/ - AS SECURITY DEPOSIT FROM THE COMPANY. IT WOULD BE WORTH WHILE TO NOTE THAT VIVEK CHANAN A HAS LET OUT GROUND FLOOR TO IDBI BANK ON ANNUAL RENT OF RS.1051200/ - . THE SECURITY DEPOSIT G IVEN BY IDBI BANK IS RS.1051200/ - FOR GROUND FLOOR ONLY. IN THE LIGHT OF AFORESAID EXPLANATION AND DECIDED CASE LAWS, THE ASSESSING OFFICER IS NOT JUSTIFIED IN M AKING ADDITION OF RS 15,53,855 AS DEEMED DIVIDEND U/ S 2(22)(E). APPEAL ON THIS GROUND IS ALLOWED. 5. AFTER PERUSING THE ABOVE ORDER, WE AGREE WITH THE REASONING OF THE CIT(A) AND WE DO NOT FIND ANY REASON TO INTERFERE WITH THE SAME. THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. IN THE RESULT, THE APPEA L IS DISMISSED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 1 2 T H A U G U S T , 2015. S D / - S D / - ( I.C. SUDHIR ) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 2 T H A U G U S T , 2015. RK/ - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI