The ACIT,(OSD), Circle-8, Ahmedabad V. M/s. S.Dev Fashion Pvt.Ltd., Ahmedabad

ITA 2491/AHD/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6642 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 11-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: RUPESH P MEHTA
• Keywords: Depreciation; Question of law; Deemed dividend; Reason to believe
• Section: 32; 6; 12; 10; 2; 11; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND D. C. AGRAWAL , AM) ITA NO.2491/AHD/2010 A.Y.: 2007-08 THE A. C. I. T. (OSD), CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRES, A WING, ASHRAM ROAD, AHMEDABAD VS M/S. S. DEV FASHION PVT. LTD., 1 ST FLOOR, MOHANLAL CHHOTALAL CHAMBERS, PANCHKUVA, AHMEDABAD PA NO. AACCS 1106 L (APPELLANT) (RESPONDENT) C. O. NO.285/AHD/2010 (IN ITA NO.2491/AHD/2010 A.Y.: 2007-08) M/S. S. DEV FASHION PVT. LTD., 1 ST FLOOR, MOHANLAL CHHOTALAL CHAMBERS, PANCHKUVA, AHMEDABAD VS THE A. C. I. T. (OSD), CIRCLE-8, 4 TH FLOOR, AJANTA COMMERCIAL CENTRES, A WING, ASHRAM ROAD, AHMEDABAD PA NO. AACCS 1106 L (CROSS OBJECTOR) (RESPONDENT) DEPARTMENT BY SHRI S. P. TALATI, SR. DR ASSESSEE BY SHRI RUPESH P. MEHTA, AR O R D E R PER BHAVNESH BENCH: THE DEPARTMENTAL APPEAL AS WELL THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AG AINST ORDER OF THE LEARNED CIT(A)-XIV, AHMEDABAD DATED 18-05-2010 FOR ASSESSMENT YEAR 2007-08. ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 2 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH T HE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, THE LE ARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. ITA NO.2491/AHD/2010 (DEPARTMENTAL APPEAL) 3. THE REVENUE CHALLENGED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF RS.15 LACS ON ACCOUNT OF D EEMED DIVIDEND INCOME U/S 2 (22) (E) OF THE IT ACT. 4. THE FACTS OF THE CASE ARE THAT THE AO NOTICED TH AT THE ASSESSEE HAS RECEIVED LOANS OF RS.15 LACS FROM ITS GROUP COM PANY NAMED SURAP CLOTHING PVT. LTD., WHICH FALLS UNDER SEC. 40 A (2) (B) OF THE ACT. BOTH THE DIRECTORS, I.E. SUKHDEV S. PUNJABI AND SAN GITA S. PUNJABI HAD SUBSTANTIAL INTEREST IN SURAP CLOTHING PVT. LTD . CONSIDERING THE SHARE HOLDING PATTERNS, I.E. INTEREST EXCEEDING 20% OF BOTH THE ASSESSEE AND THIS CONCERN, VIDE ORDER SHEET ENTRY D ATED 8-12-09, THE A.O. ASKED THE ASSESSEE TO EXPLAIN AS TO WHY LOAN R ECEIVED FROM SURAP CLOTHING PVT. LTD. SHOULD NOT BE TREATED AS D EEMED DIVIDEND AS PER SEC. 2 (22)(E) OF THE I.T. ACT, IN RESPONSE TO WHICH THE ASSESSEE VIDE ITS LETTER DATED 14-12-2009, REPLIED THAT THE INTER CORPORATE DEPOSIT (ICD) RECEIVED BY THE COMPANY CANNOT BE TRE ATED AS LOANS OR ADVANCES, AS ALL THE TERMS HAVE DIFFERENT MEANING A ND DIFFERENT INTERPRETATION IN THE EYES OF LAW. AS REGARDS THE C HARACTERISTICS OF LOAN, THE NEEDY PERSON APPROACHES THE LENDER TO GIV E THE LOAN; LOAN IS GIVEN BY THE LENDER ON THE BASIS OF HIS TERMS, T HE LOAN IS GIVEN ON ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 3 THE TERMS OF THE LENDER AND NOT ON THE TERMS OF BOR ROWER AND THE SAME WAS ALWAYS PAYABLE IN INSTALLMENTS AND WITH TH E INTEREST PORTION ON EACH INSTALLMENT. AS REGARDS THE CHARACTERISTICS OF DEPOSITS, THE DEPOSITOR GOES TO THE PERSON ACCEPTING DEPOSITS FOR INVESTING HIS MONEY WITH THE INTENTION TO EARN INTEREST OUT OF TH E SAID DEPOSIT; GENERALLY THE DEPOSITS WILL BE FOR A SHORTER PERIOD OF TIME AND IS PAYABLE ON DEMAND OF THE DEPOSITOR; THE DEPOSIT CAN NEVER PAYABLE IN INSTALLMENTS; IN CASE OF DEPOSITS, THE INTEREST IS ALWAYS PAYABLE AT CERTAIN PERIOD OF PREDEFINED TIME WITHOUT REPAYMENT OF PRINCIPAL AMOUNT; DEPOSITOR PUTS A DEPOSIT ONLY WHEN HE HAS S URPLUS MONEY; DEPOSITS WILL ACCEPT BY THE PERSON ALWAYS AT HIS OW N TERMS AND CONDITIONS WHICH MUST HAVE TO ACCEPT TO THE DEPOSIT OR; THE DEPOSITOR HAS NO CHOICE BUT TO ACCEPT THE SAME AND DEPOSITOR NEVER ASKS ABOUT ANY SECURITY OR MORTGAGES INCLUDING PERSONAL GUARAN TEE BEFORE PUTTING ANY DEPOSIT UNLIKE IN CASE OF LOAN. THEREFO RE, THE APPELLANT SUBMITTED THAT IN CASE OF DEPOSIT THERE IS NO BORRO WER - LENDER RELATIONSHIP DUE TO ABOVE REFERRED REASONS. FURTHER , THE I.T. ACT, 1961 ITSELF DISTINGUISH THESE TWO TERMS. THE ACT ITSELF HAS THE INTENTION OF NOT TO COVER THE 'DEPOSIT' FOR THE PURPOSE OF SECTI ON 2(22)(E). THE INFERENCE OF THE INTENTION OF THE MAKES OF LEGISLAT URE CAN BE CLEARLY SEEN FROM THE PROVISIONS OF SEC. 269SS & 269T VIS A VIS READ WITH THE PROVISIONS OF SEC. 2(22) (E). PROVISION OF THIS SEC TION COVERS ONLY LOANS OR ADVANCE GIVEN BY THE COMPANY TO THE BENEFI CIAL SHAREHOLDERS. THE WORD 'DEPOSIT' HAS NOT BEEN COVER ED SPECIFICALLY U/S. 2(22)(E). WHILE SECTION 269SS & 269T COVERS ON LY LOANS AND DEPOSITS GIVEN BY ANY PERSON TO ASSESSEE, THE WORD 'ADVANCES' HAS NOT BEEN COVERED SUPERFICIALLY U/S. 269SS & 269T. T HE APPELLANT ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 4 THEREFORE, SUBMITTED THAT THE INTENTION OF LAW IS T O COVER ONLY LOAN AND OR ADVANCES GIVEN BY THE COMPANY TO THE BENEFICIAL SHARE HOLDER AND NOT THE DEPOSIT GIVEN BY THE COMPANY. IF THE GOVERN MENT HAS THE INTENTION TO TREAT THE DEPOSIT AS DEEMED DIVIDEND U /S. 2(22)(E), IT WOULD HAVE CLEARLY MENTIONED THE TERM DEPOSIT IN TH E PROVISIONS OF SEC. 2(22)(E). FROM THE ABOVE IT IS CLEARLY ESTABLI SHED THAT THE LEGISLATURE ALSO RECOGNIZED THE LOANS AND DEPOSIT A S DIFFERENT TERMS HAVING DIFFERENT MEANING AND DIFFERENT PURPOSE AND DIFFERENT USES AND IN APPELLANT'S CASE, THE SURAP CLOTHING PVT. LTD., HAD DEPOSIT SURPLUS WITH THE ASSESSEE. ON RECEIPT OF REQUEST LETTER FROM THAT COMPANY, THE A PPELLANT OFFERED THEM THEIR TERMS AND CONDITIONS FOR ACCEPTING THE S AME AND AT THE END OF SIX MONTHS, THE SAID COMPANY HAS DEMANDED BA CK THEIR DEPOSIT IN PART VIDE THEIR LETTER DATED 27-3-07 WIT H A REQUEST TO MATURE THE PART OF THE DEPOSIT AND ON 23-4-07 THEY HAVE DE MANDED FOR THE MATURITY OF BALANCE AMOUNT OF DEPOSIT AND ACCORDING LY THE APPELLANT REPAID THE DEPOSIT WITH INTEREST. THE ASSESSEE, THE REFORE, EXPLAINED THAT THE AMOUNT GIVEN BY SURAP CLOTHING P. LTD. IS INTER CORPORATE DEPOSIT ONLY AS PER THE TERMS AND CONDITIONS LAID D OWN AND SINCE SEC. 2(22)(E) DOES NOT OVER THE WORD DEPOSIT AS PROVED I N EARLIER PARA, THE DEPOSIT AMOUNT SHOULD NEVER BE CONSIDERED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT. IN ITS SUPPORT, THE APPEL LANT PLACED RELIANCE ON THE DECISION OF HON. IT AT MURNBAI BENCH IN THE CAS E OF BOMBAY OIL INDUS. LTD., VS. DY. CIT, 28 SOT 383 (MUM). AFTER GOING THROUGH THE SUBMISSIONS OF THE APPELLAN T, THE A.O. DID NOT ACCEPT THE SAME BY OBSERVING AS UNDER:- ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 5 IT WAS NOT THE BUSINESS ACTIVITY OF THE ASSESSEE C OMPANY TO RECEIVE DEPOSITS; IT IS MENTIONED VERY CLEARLY I N THE SCHEDULE 2 OF THE B/S. THAT THE UNSECURED LOAN WAS RECEIVED FROM SURAP CLOTHING PVT. LTD.; THE ASSESSE E IN ITS SUBMISSION DT: 18-8-09 ITSELF ACCEPTED VIDE PARA NO . 5 THAT THE COMPANY HAD RECEIVED LOANS FROM SURAP CLOT HING PVT. LTD.; THE AUDITOR IN HIS REPORT, VIDE PARA 3(A ) HAS STATED THAT THE COMPANY HAD TAKEN UNSECURED LOANS F ROM 9 PARTIES COVERED IN THE REGISTER MAINTAINED U/S. 3 01 OF THE COMPANIES ACT, 1956, SURAP CLOTHING PVT. LTD. I S ONE OF THEM; AUDITOR FURTHER STATED THAT THE COMPANY HA S NOT ACCEPTED ANY DEPOSITS AND CONSEQUENTLY THE PROVISIO NS OF SEC. 58A AND 58AA AND THE RULES FRAMED THEREUNDER A RE NOT APPLICABLE AND VIDE ITS REPLY DT: 14-12-09 THE ASSESSEE HAS STATED THAT 'ON RECEIPT OF REQUEST LETTER RECEIVED FROM THAT COMPANY WE HAVE OFFER THEM OUR T ERMS AND CONDITIONS FOR ACCEPTING THE SAME. COPY OF OUR OFFER LETTER MENTIONING THE TERMS ON WHICH WE ARE READY T O ACCEPT THE SAID DEPOSIT IS ATTACH HEREWITH FOR READ Y REFERENCE. ON RECEIPT OF THE LETTER ACCEPTING OUR T ERMS AND CONDITIONS WE HAVE ACCEPT THEIR DEPOSIT. THE A.O. THEREFORE, OBSERVED THAT AS PER ASSESSEE'S SUBMISSI ON, THE ASSESSEE HAS FIXED THE TERMS AND CONDITIONS OF THE LOAN (DEPOSIT AS NARRATED BY THE ASSESSEE). HOWEVER, AUDIT IN PARA 3(C) HAS CLEARLY MENTIONED T HAT THERE ARE NO STIPULATIONS FIXED FOR PAYMENT OF PRIN CIPAL AMOUNT AND INTEREST. FURTHER, THE ASSESSEE HAS STAT ED THAT IT HAS RECEIVED DEPOSITS, THESE INTER CORPORAT E DEPOSITS ARE GOVERNED BY SEC. 58A OF THE COMPANIES ACT INVESTED TO ISSUE OF PROSPECTUS REQUIRED UNDER THE COMPANIES ACT, THE REFERENCE OF WHICH IS AS UNDER: '58A. DEPOSITS NOT BE INVITED WITHOUT ISSUING AN ADVERTISEMENT: (1) THE CENTRAL GOVT. MAY, IN CONSULTATION WITH THE RBI, PRESCRIBE THE LIMITS UP TO WHICH, THE MANNER IN WHI CH AND THE CONDITIONS SUBJECT TO WHICH DEPOSITS MAY BE INV ITED OR ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 6 ACCEPTED BY A COMPANY EITHER FROM THE PUBLIC OR FOR M ITS MEMBERS- (2) NO COMPANY SHALL INVITE, OR ALLOW ANY OTHER PER SON TO INVITE OR CAUSE TO BE INVITED ON ITS BEHALF, ANY DE POSIT UNLESS - (A) SUCH DEPOSIT IS INVITED OR IS CAUSED TO BE INVI TED IN ACCORDANCE WITH THE RULES MADE U. S.S.(L); (B) AN ADVERTISEMENT INCLUDING THEREIN A STATEMENT SHOWING A FINANCIAL POSITION OF THE COMPANY, HAS BE EN ISSUED BY THE COMPANY IN SUCH FORM AND IN SUCH MANN ER AS MAY BE PRESCRIBED (AND). THE A.O. OBSERVED THAT THE ASSESSEE HAS FAILED TO E XPLAIN AS TO ANY ADVERTISEMENT INCLUDING FINANCIAL POSITION OF THE C OMPANY WAS PUBLISHED ANYWHERE, ANY TIME AND IT IS CLEAR THAT T HE ASSESSEE HAD RECEIVED LOAN FROM THE SAID CONCERN, BUT ON RAISING THE ISSUE OF DEEMED DIVIDEND, THE ASSESSEE TOOK A STAND THAT THI S LOAN WAS NOTHING BUT A DEPOSIT. THE A.O. FURTHER CONSIDERED THE FOLLOWING OBSERVATIONS:- A) SURAP CLOTHING P. LTD. HAS GIVEN A COPY OF RESOL UTION DT: 23-0-09 TO ASSESSEE COMPANY FOR DEPOSIT PURPOSE . IN GENERAL, NO COMPANY PROVIDES A COPY OF RESOLUTION T O ANOTHER COMPANY FOR KEEPING A DEPOSIT. B) THE ASSESSEE STATED THAT DEPOSIT CAN NEVER PAYAB LE IN INSTALLMENTS. HOWEVER, THE SAID COMPANY RECEIVED BA CK DEPOSIT IN TWO PARTS. C) ASSESSEE STATED THAT INTEREST IS PAYABLE ON THE MATURITY OF DEPOSITS ONLY, HOWEVER, INTEREST OF RS. 88,130/- WAS PAYABLE AS ON 31-3-2007 AFTER DEDUCTING TDS OF RS. 25,4997/-. ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 7 D) FURTHER, IT APPEARS THAT DOCUMENTATION REGARDING DEPOSITS ARE AFTERTHOUGHT. ON PERUSAL OF THE DEBIT NOTE DT: 9-11-06 IN THE NAME OF M/S. CALCUTTA SAREES, DELHI RAISED BY THE ASSESSEE COMPANY, IT IS FOUND THAT THE ASSES SEE HAD FAX NO. 079-22110146. HOWEVER, AS PER SUBMISSIO N DT: 14-12-09, ORIGINAL COPY OF LETTER DT: 26-9-09 W RITTEN BY THE ASSESSEE COMPANY TO SURAP CLOTHING REGARDING ACCEPTANCE OF DEPOSIT REVEALS THAT FAX NO. IS 079- 22113104. SINCE BOTH FAX NOS. ARE DIFFERENT, THE RE ASON IS KNOWN TO ASSESSEE ONLY. FURTHER, THE ORIGINAL LETTE R DT: 26- 9-2006 WHICH WAS SUBMITTED BY THE ASSESSEE VIDE SUBMISSION DT: 14-12-09 APPEARS TO BE VERY FRESH AN D NEW. IT IS CLEAR THAT THE WHOLE STORY TREATING THE LOAN AS DEPOSIT IS AFTERTHOUGHT WHEN THE ISSUE OF DIVIDEND WAS RAISED. E) LETTER HEAD OF SURAP CLOTHING DT: 24-6-09 VIDE SUBMISSION DT: 14-12-08 HAD E-MAIL ADDRESS SURAPAD1(@)SANCHARNET.IN. THE ASSESSEE CAN TELL WHETHER SUCH E MAIL ADDRESS WAS THERE IN THE YEAR 2 006- 07 OR NOT. IN VIEW OF THE ABOVE NARRATED FACTS, IT WAS HELD BY THE A.O. THAT THE ASSESSEE HAS RECEIVED LOANS FROM SURAP CLOTHING PVT . LTD., DURING THE YEAR AND IT WAS NOT A DEPOSIT, AFTER DISCUSSING THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT IN DETAIL IN THE BODY OF A SST. ORDER. THE A.O. PLACED RELIANCE ON THE DECISION OF HON. SUPREME COU RT IN THE CASE OF MISS. P. SARADA VS. CIT 229 ITR 444, WHEREIN SECTIO N 2(22)(3) OF THE ACT HAS BEEN CONSIDERED. IN HIS SUPPORT, THE A.O. F URTHER RELIED ON THE FOLLOWING DECISIONS:- I) CIT VS. NALIN BEHRI LALL SINGHA (1969) U4 ITR 84 9 (SC) II) CIT VS. MTSIDET (P) LTD. (1993) 103 TAXMAN 336/ 237 ITR 35 (SC) III) SADHNA TEXTILES MILLS (P) LTD. VS. CIT (1991) 188 ITR 318 (BOM) ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 8 DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASS ESSEE HAS SUBMITTED THAT THE A.O. HAS FAILED TO APPRECIATE AS SESSEES SUBMISSION BY NOT CONSIDERING THE FACT THAT THERE I S VERY THIN LINE BETWEEN THE MEANING OF THE TERMS 'DEPOSIT' AND 'LOA N' WHICH REQUIRE VERY CLEAR UNDERSTANDING OF THE MEANING OF THE TERM S AND SITUATION UNDER WHICH THE AMOUNT IS ACCEPTED. THE PERSON WHO HAS WRITTEN THE ACCOUNTS IS NOT MUCH COMPETENT TO UNDERSTAND THE DI FFERENCE BETWEEN THE TERM LOAN AND DEPOSIT,, HENCE AS A CONS EQUENTIAL EFFECT THE AUDIT REPORT, WHICH WAS PREPARED ON THE BASIS O F ACCOUNTS REFLECTED THE SAID DEPOSIT AS A LOAN AND THIS MISTA KE WAS FIRST CAME TO THE NOTICE WHEN THE QUESTION OF DEEMED DIVIDEND WAS ARISEN AND IMMEDIATELY THEREAFTER IT HAS SUBMITTED THE CERTIFI ED COPY OF RESOLUTIONS AND LETTER WHICH CLEARLY ESTABLISHED TH E AMOUNT OF RS. 15 LAKHS WAS NOTHING BUT A DEPOSIT. IN ITS SUPPORT, TH E APPELLANT PLACED RELIANCE ON THE DECISION IN THE CASE OF KEDARNATH J UTE MFG. CO. LTD. V. CIT (1971) 82 ITR 363(SC); HINDUSTAN COCA COLA BEVE RAGES PVT. LTD. VS. DCIT - ITA NO. 1884/DEL/06. (ITAT-DEL) (20 09) 34 SOT 171. FURTHER, IT WAS CONTENDED BY THE APPELLANT THAT THE A.O. FAILED TO APPRECIATE THAT THE COMPANY DEPOSIT RULES PRESCRIBE D UNDER THE COMPANIES ACT, 1956 HAVE EXCLUDED CERTAIN TYPES OF BORROWINGS FOR WHICH THE PROCEDURE LAID DOWN IN SEC. 58A OF THE CO MPANY ACT, 1956. THESE INCLUDE THE DEPOSIT FROM ANY OTHER COMP ANY AND OR DIRECTORS, SHAREHOLDERS AND THEIR RELATIVES AND THE RE IS NO VIOLATION OF COMPANIES ACT. 5. THE LEARNED CIT(A) CONSIDERING THE SUBMISSIONS O F THE ASSESSEE AND THE MATERIAL ON RECORD AND BY FOLLOWI NG CERTAIN ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 9 DECISIONS OF DIFFERENT BENCHES OF THE TRIBUNAL HELD THAT INTER CORPORATE DEPOSITS RECEIVED BY THE ASSESSEE FROM M/S. SURAP C LOTHING PVT. LTD. ARE NOT COVERED U/S 2 (22) (E) OF THE IT ACT. HIS F INDINGS ARE REPRODUCED AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT. I HAVE PERUSED THE RE ASONS ASSIGNED BY THE A.O. BEFORE MAKING ADDITION U/S. 2( 22)(E) OF THE ACT. I HAVE ALSO PERUSED AND CONSIDERED THE CLARIFICATION AND EXPLANATION SUBMITTED BY THE APPE LLANT DURING APPELLATE PROCEEDINGS IN REFERENCE TO SUCH OBJECTIONS. BEFORE DISCUSSING THOSE SUBMISSIONS, IT IS PERTINENT TO CONSIDER THE BASIC OBJECTIVE OF PROMUL GATING SUCH PROVISIONS BY THE LEGISLATURE. HON. DELHI HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR (2009) 23 DTK 304; (2009) 181 TAXMAN, 155 AFTER EXTENSIVELY REFERRING TO THE REPORT OF THE TAXATION ENQUIRY COMMISSION AND THE SPEECH OF THE FINANCE MINISTER IN THE BUDGET WHILE INTRODUCING THE FINANCE BILL HELD THAT - A BARE READING OF THE RECOMMENDATIONS OF THE COMMISSION AND THE SPEECH OF THE THEN FINANCE MINIS TER WOULD SHOW THAT THE PURPOSE OF INSERTION OF CLAUSE (E) TO SECTION 2(6A) IN THE 1922 ACT WAS TO BRING WITHIN T HE TAX NET MONIES PAID BY CLOSELY HELD COMPANIES TO ADVANC ES TO AVOID PAYMENT OF TAX.' IT WAS IN THE SAME CASE, HON'BLE COURT FURTHER EXAMINED THE WORD USED 'LOAN' AND 'ADVANCE' USED IN SEC. 2(22) (E) OF THE ACT. THE RULE OF CONSTRUCTION OF - 1 OF WORD 'ADVANCE' WITH COMPANY OF LOAN' WAS FOUND ANSWERED BY 'NOSCITUR A SOCEOS' AS EXPLAINED BY BOTH BY THE PRI VY COUNCIL IN THE CASE OF ANGUS ROBERTSON V. GEORGE DA Y (1879) 5 AC 63 BY OBSERVING 'IT IS A LEGIMATE RULE OF CONSTRUCTION TO CONSTRUE WORD IN AN ACT OF PARLIAME NT WITH REFERENCE TO WORDS FOUND IN IMMEDIATE CONNECTION WI TH THEM' AND BY OUR SUPREME COURT IN THE CASE OF ROHIT PULP & PAPER MILLS LTD. VS. C.C.E. AIR 1991 SC 754 AND ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 10 STATE OF BOMBAY V. HOSPITAL MAZDOOR SABHA AIR 1960 SC 610. ON THESE LINES THERE ARE PLETHORA OF CASE LAWS WHER E IT WAS HELD THAT - A) INTER CORPORATE DEPOSITS ARE DIFFERENT THAN LOAN AND ADVANCES USED IN THE SECTION 2(22)(E) OF THE ACT, HENCE NOT COVERED BY THAT SECTION. (BOMBAY OIL INDUSTRIES LTD. (2009) 28 SOT 383 (MUM) B) INTER CORPORATE DEPOSIT ARE IN THE NATURE OF BUSINESS TRANSACTIONS AND DIFFERENT TRANSACTIONS AR E DIFFERENT THAN THAT OF ADVANCE AND BAN USED IN SECTION 2(22)(E) OF THE ACT. THE DEPOSIT SO ADVANCED BEING BUSINESS TRANSACTIONS ARE OUT OF THE PURVIEW OF SEC. 2(22)(E) WHICH IS A DEEMING FICTION . [(BHARAT G. GANDHI V. ACIT (2009) 178 TAXMAN 83 (MUM)] HON'BLE AHMEDABAD ITAT BENCH 'D' IN THE CASE OF DAI SY PACKERS P. LTD. VS. ACIT CIR. 1(1) BARODA (ITA NO. 1747 & 1086/AHD/2006 A.Y. 2000-01) VIDE ORDER DT: 05-06- 09 HELD THAT- 'THERE IS DISTINCTION BETWEEN DEPOSITS VIS A VIS LOANS/ADVANCES. SECTION 2(22)(E) ENACTS A DEEMING FICTION WHEREBY THE SCOPE AND AMBIT OF THE WORD DIVIDEND HAS BEEN ENLARGED TO BRING WITHIN ITS SWEEP CERTAIN PAYMENTS MADE BY A COMPANY AS PER THE SITUATION ENUMERATED IN THE SECTION. SUCH A DEEMING FICTION WOULD NOT BE GIVEN A WIDER MEANING THAN WHAT IT PURPORTS TO DO. THE PROVISIONS WOULD NECESSARILY BE ACCORDED STRICT INTERPRETATION AND T HE AMBIT OF THE FICTION WOULD NOT BE PRESSED BEYOND IT S TRUE LIMITS. THE REQUISITE CONDITION FOR INVOKING SECTION 2(22)(E) OF THE ACT IS THAT PAYMENT MUST BE BY WAY OF LOAN OR ADVANCES. SINCE THERE IS A CLEAR DISTINCTION BETWEEN THE INTER CORPORATE DEPOSITS VI S A VIS LOANS/ADVANCES, ACCORDING TO US THE ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 11 AUTHORITIES BELOW WERE NOT RIGHT IN TREATING THE SA ME AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. SINCE WE HOLD THAT ICDS DO NOT COME WITHIN THE PURVIEW OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT, THE ALTERNATIVE CONTENTION OF THE ASSESSEE NAMELY BY VIRTUE OF SECTION 2(22)(E)(II) OF THE ACT, THE UNSECURED LOANS RECEIVED BY THE ASSESSEE IS NOT 'DIVIDEND; IS NOT ADJUDICATED.' IT IS, THEREFORE, CONSIDERING THE ABOVE DISCUSSION, I AM INCLINED TO ACCEPT THE CONTENTIONS OF THE APPELLANT THAT INTER CORPORATE DEPOSITS (ICD) RECEIVED BY IT FROM M/S. SURAP CLOTHING PVT. LTD. ARE NOT COVERED WITHIN THE PURVIEW OF SECTION 2(22)(E OF THE ACT. NOW COMING TO BASIC OBJECTION RAISED BY THE A.O. AN D REPLY/CLARIFICATION OFFERED BY THE APPELLANT. THE FIRST AND FOREMOST OBJECTION RAISED BY A.O. IS IN RESPECT OF VARIOUS ILLUSTRATION IN THE TAX AUDIT RE PORT TREATING SUCH DEPOSIT AS LOANS. FURTHER, IT WAS HIG HLIGHTED THAT IN THE TAX AUDIT, IT IS MENTIONED THAT APPELLA NT COMPANY HAS NOT ACCEPTED ANY DEPOSITS AND CONSEQUENTLY THE PROVISIONS OF SEC. 58A AND 58AA AN D THE RULES FRAMED THERE UNDER ARE NOT APPLICABLE. TH E A.O. DISCUSSED IN THE AST. ORDER THE RELEVANT PART OF SE CTION 58A OF THE COMPANIES ACT. THE APPELLANT HIGHLIGHTED THAT THERE IS VERY THIN LINE DIFFERENCE BETWEEN LOANS AN D DEPOSITS AND THE ACCOUNTANT MAINTAINING BOOKS OF ACCOUNT MAY NOT BE AWARE OF SUCH TECHNICAL WITTY GR ITTY OF SUCH USE OF WORD WHICH ULTIMATELY LED TO SUCH OBSER VATION BY THE TAX AUDITOR IN THE TAX AUDIT REPORT. IT FURT HER SUBMITTED A COPY OF 'COMPANY DEPOSIT RULES' WHERE A S PER SEC. 58A OF COMPANIES ACT, 1956 WHICH HAS PUT RESTRICTIONS ON ACCEPTANCE OF DEPOSITS BY ANY COMPA NY ARE SUBJECTED TO THESE RULES. AS PER THESE RULE 3(D ) IT IS PRESCRIBED THAT 'DEPOSIT MEANS DEPOSIT OF MONEY WIT H, AND INCLUDE ANY AMOUNT BORROWED BY A COMPANY, BUT DOES NOT INCLUDE CERTAIN TYPE OF BORROWING VIZ. AMO UNT RECEIVED FROM ANY OTHER COMPANY'. IT IS, THEREFORE, MONEY ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 12 BORROWED FROM M/S. SURAP CLOTHING DOES NOT COME UND ER THE PURVIEW OF SECTION 56A OF COMPANIES ACT. AFTER PERUSAL OF APPELLANT'S REASON AND CORRESPONDING SEC TION 56A OF THE COMPANIES ACT AND RULE 3 (D), I AM INCLI NED TO ACCEPT THE APPELLANT'S EXPLANATION SATISFACTORY IN SO FAR AS IT SAYS THAT THE MONEY SO BORROWED ARE ICD AND DOES NOT COME UNDER THE PURVIEW OF SEC. 56A OF THE COMPANIES ACT AND HENCE OBSERVATION OF TAX AUDIT FOR APPLICAB ILITY OF SUCH SECTION IS NOT ADVERSE OR WRONG. NOW COMING TO ANOTHER OBJECTION RELATED TO GENUINEL Y OF DOCUMENT RELATED TO SUCH DEPOSIT BEING STATIONARY U SED HAS DETAILS OF CURRENT PERIOD (FAX NO,, E-MAIL) AND , THEREFORE, THE CONTENTS ARE CONSIDERED AS AN AFTER THOUGHT. IT IS IN THIS REGARD APPELLANT SUBMITTED T HAT SUCH EVIDENCES SO SUBMITTED ON THE LETTER HEAD OF APPELL ANT OR OF M/S. SURAP CLOTHING PVT. LTD. ARE 'CERTIFIED TRU E COPIES' AND NOT THE COPY OF ORIGINAL DOCUMENT. THESE EVIDEN CES ARE, THEREFORE, ON THE LETTER HEAD OF CURRENT YEAR BEING CERTIFIED TRUE COPIES AND HAS DETAILS IN THE FORM O F FAX NO., E-MAIL RELATED TO PRESENT PERIOD. I HAVE VERIF IED THE CONTENTION OF THE APPELLANT AND FOUND THE SAME IS T RUE AND SATISFACTORY. THESE ARE CERTIFIED TRUE COPIES O F THE EVIDENCES ON THE LETTER HEAD RELATED TO CURRENT PER IOD. IT IS, THEREFORE, THE A.O.'S OBJECTION IS NOT FOUND AS REASONABLE OBJECTION AND SAME IS REJECTED. ON THE BASIS OF ABOVE DISCUSSION, AFTER CONSIDERING THE OBJECTION RAISED BY A.O. IN THE ASST. ORDER AND APP ELLANT'S CONTENTION ALONG WITH LEGAL JURISPRUDENCE RELATED T O SECTION 2(22)(E) OF THE ACT WITH SPECIAL REFERENCE TO ICD, THE APPLICABILITY OF SECTION 2(22)(E) OF THE ACT IN THE CASE OF APPELLANT AS APPLIED BY THE A.O. IS FOUND TO BE UNJUSTIFIED AND NOT SUSTAINABLE. THE A.O. IS DIRECT ED TO DELETE SUCH ADDITION. THE APPELLANT GETS RELIEF OF RS. 15,00,000/-. 6. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. ITAT MUM BAI SPECIAL ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 13 BENCH IN THE CASE OF ACIT V BHAUMIK COLOUR (P) LTD. 118 ITR 1 CONSIDERED THE FOLLOWING FACTS: THE ASSESSEE-COMPANY, NAMELY8 BCPL, TOOK AN INTEREST BEARING LOAN OF RS.9 LAKHS FROM ANOTHER COMPANY UPPL. THE ASSESSING OFFICER NOTICED THAT THOUGH BCPL WAS NOT A SHAREHOLDER OF UPPL YET, BOTH THE COMPANIES HAD ONCE COMMON SHAREHOLDER, I.E. NARMADABEN NANDLAL TRUST (NNT), AND THAT THE SAID TRUST WAS HOLDING 20 PER CENT SHARES IN BCPL AND 10 PERCENT SHAR4ES IN UPPL, TOOK THE VIEW THAT THE IMPUGNED TRANSACTION OF LOAN WAS COVERED BY THE SECOND LIMB OF PROVISIONS OF SECTION 2 (22) (E). TH E ASSESSEES CONTENTIONS IN THIS REGARD WERE THAT THE AFORESAID SHARES WERE HELD IN THE NAMES OF THREE TRUSTEES OF NNT FOR AND ON BEHALF OF THE TRUST, THA T THE BENEFICIARIES OF THE TRUST NNT WERE FIVE IN NUMBER AND NONE OF THE TRUSTEES WERE ALSO BENEFICIARIES OF THE TRUST, THAT TO INVOKE THE SECOND LIMB OF THE PROVIS IONS OF SECTION 2 (22) (E) THE PRIMARY CONDITION WAS THA T NTT MUST BE BOTH A REGISTERED SHAREHOLDER AND ALSO BENEFICIAL SHAREHOLDER AND THAT SINCE THE TRUSTEES OF NNT HELD THE SHARES ON BEHALF OF THE TRUST ONLY AS LEGAL OWNERS AND WERE NOT THE BENEFICIAL OWNERS OF THE SHARES, THE PROVISIONS OF SECTION 2(22) (E) COU LD NOT BE INVOKED. THE ASSESSING OFFICER DID NOT AGREE WITH THE CONTENTIONS OF THE ASSESSEE AND TAXED RS. 9 LAKHS IN THE HANDS OF BCPL AS DEEMED DIVIDEND. ON APPEAL, THE COMMISSIONER (APPEALS) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER HOLDING THAT NNT WAS NOT BENEFICIAL SHAREHOLDER OF SHARES I N BCPL OR UPPL AND, THEREFORE, THE SECOND LIMB OF THE PROVISIONS OF SECTION 2 (22) (E) COULD NOT BE APPLI ED VIS--VIS THE ASSESSEE. ITAT DISMISSED THE DEPARTMENTAL APPEAL. THE OPERATI VE PORTION OF THE FINDING IS REPRODUCED AS UNDER: ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 14 IN VIEW OF THE AFORESAID, IT WAS OPINED THAT DEEME D DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER. FURTHER, THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2 (22) (E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISIONS OF SECTI ON 2 (22) (E) WOULD NOT APPLY. SIMILARLY, IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIONS OF SECTION 2 ( 22) (E) WOULD NOT APPLY [PARA 41]. 6.1 THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS RAJKUMAR SINGH AND CO. 295 ITR 9 HELD AS UNDER: HELD, (I) THAT CLAUSE (E) OF SECTION 2 (22) (E) OF THE ACT AS IT EXISTED PROVIDED THAT IF THE LOAN IS RECEIVED BY THE SHAREHOLDER, IT IS ONLY THEN THAT THE LOAN CAN BE DEEMED TO BE DIVIDEND IN HIS HANDS. THE ASSESSEE- FIRM WAS NOT THE SHAREHOLDER OF J AND THE PARTNERS OF THE FIRM WERE THE SHAREHOLDERS IN THE BOOKS OF THE COMPANY. THEREFORE THE LOAN ADVANCED BY THE COMPANY TO THE ASSESSEE COULD NOT BE DEEMED TO BE DIVIDEND INASMUCH AS THE LOAN WAS NOT TO THE SHAREHOLDER BUT TO THE ASSESSEE WHICH WAS NOT HE SHAREHOLDER IN THE BOOKS OF THE COMPANY. THE HONBLE ALLAHABAD HIGH COURT RELIED UPON THE DE CISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS SARATHY MUDALIAR (C. P.) [1972] 83 ITR 170 (SC) AND IN THE CASE OF RAMES HWARLAL SANWARMAL VS CIT [1980] 122 ITR 1 (SC) IN SUPPORT O F THEIR FINDINGS. ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 15 6.2 THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS AMBASSADOR TRAVELS PVT. LTD. 318 ITR 376 HELD THAT FINANCIAL TRANSACTIONS IN NORMAL COURSE OF BUSINESS CANNOT BE TREATED AS LOAN OR ADVANCE AND, THEREFORE, NOT TAXABLE AS DEEM ED DIVIDEND. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DECISIONS, WE ARE OF THE VIEW THE LEARNED CIT(A) RI GHTLY DELETED THE ADDITION IN THE MATTER. THE LEARNED COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE ASSESSEE RECEIVED INTER CORPORATE DEPO SITS FROM M/S. SURAP CLOTHING PVT. LTD. THE ASSESSEE COMPANY WAS N OT A REGISTERED SHAREHOLDER IN THE LENDER COMPANY. ONLY ITS TWO DIR ECTORS WERE HAVING SHAREHOLDING IN THE LENDER COMPANY AND THAT THE INTER CORPORATE DEPOSITS WERE RECEIVED IN THE ORDINARY CO URSE OF BUSINESS WHICH WERE ACCEPTED FOR A PART PERIOD AND LATER ON THE DEPOSITS WERE ALSO REPAID WITH INTEREST. THE LEARNED CIT(A) ACCEP TED THE CONTENTION OF THE ASSESSEE THAT IT RECEIVED ONLY INTER CORPORA TE DEPOSITS WHICH WERE IN THE NATURE OF BUSINESS TRANSACTION AND WERE DIFFERENT TRANSACTION THAN THAT OF ADVANCE OR LOANS AS USED I N SECTION 2 (22) (E) OF THE IT ACT. THE LEARNED CIT(A) RELIED UPON SOME DECISIONS OF DIFFERENT BENCHES OF THE TRIBUNAL INCLUDING THE DEC ISION OF ITAT AHMEDABAD BENCH IN SUPPORT OF HIS FINDINGS. THE LEA RNED CIT(A), THEREFORE, ON PROPER APPRECIATION OF THE FACTS AND THE RELEVANT CASE LAW RIGHTLY ACCEPTED THE CONTENTION OF THE ASSESSEE THAT INTER CORPORATE DEPOSITS RECEIVED FROM SURAP CLOTHING PVT . LTD. ARE NOT COVERED WITHIN THE PURVIEW OF SECTION 2 (22) (E) OF THE IT ACT. THERE IS ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 16 NO MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS AC CORDINGLY DISMISSED. 8. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. C. O. NO.285/AHD/2010 (BY ASSESSEE) 9. THE ASSESSEE IN THE CROSS OBJECTION CHALLENGED T HE ORDER OF THE LEARNED CIT(A) IN NOT ALLOWING DEPRECIATION OF RS.1,86,514/- ON CAR. THE AO DURING THE COURSE OF ASSESSMENT PROCEED INGS HAS NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION OF RS. 1,86,514/- ON CAR, WHICH WERE REGISTERED IN THE NAME OF SHRI A SHOK S. PUNJABI AND SHRI SUKHDEV S. PUNJABI, DIRECTORS OF THE ASSE SSEE COMPANY. THE AO OBSERVED THAT SINCE THE COMPANY IS NOT HAVIN G OWNERSHIP OVER THE ASSETS IN QUESTION, THE COMPANY IS NOT ELI GIBLE FOR CLAIMING DEPRECIATION ON THE SAME. VIDE ORDER SHEET ENTRY DA TED 13-11-2009, HE ASKED THE ASSESSEE TO FURNISH LOG BOOK OF CAR AN D SCOOTER, BUT THE ASSESSEE DID NOT FURNISH ANY EXPLANATION OR ANY LOG BOOK AS REQUIRED. THE AO FURTHER OBSERVED THAT THE HONBLE SUPREME CO URT IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORATION LTD., (200 1) 249 ITR 214 HAD CONSIDERED THE JUDGMENT OF THAT COURT IN MYSORE MINERALS LTD. (1999) 239 ITR 775 (SC) AND IT WAS HELD BY THE COUR T THAT THE WORD OWNED APPEARING IN SECTION 32 HAD BEEN INTERPRETE D BROADLY AND KEEPING IN VIEW THE PECULIAR CIRCUMSTANCES OF THAT CASE. THE ASSESSEE IN THAT CASE HAD ACQUIRED POSSESSION OF TH E HOUSE IN QUESTION BUT THE DEED OF CONVEYANCE WAS NOT EXECUTE D UNTIL AFTER THE COMPLETION OF THE FINANCIAL YEAR IN QUESTION. THE A SSESSEES CLAIM FOR DEPRECIATION WAS THUS ALLOWED IN THE CASE OF MYSORE MINERALS LTD. ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 17 (1999) 239 ITR 775 (SC) AND THE SAME HAS NO APPLICA TION TO THE FACTS OF THE PRESENT CASE. RELIANCE WAS PLACED UPON THE J UDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF TAMIL NADU CIV IL SUPPLIES CORPORATION LTD., (2001) 249 ITR 214 REJECTING THE SUBMISSION MADE ON BEHALF OF THE PETITIONERS AND ARGUED THAT THE CO NDITION PRECEDENT TO CLAIM OF DEPRECIATION IS OWNERSHIP OF THE ASSET. IN THE PRESENT CASE, THE REGISTERED OWNER OF THE VEHICLE IS THE DIRECTOR IN HIS ONE RIGHT AND THE VEHICLE WAS BEING USED FOR PERSONAL BENEFIT OF THE DIRECTOR AND WAS NOT REFLECTED IN THE BOOKS OF THE COMPANY AS PE RK PROVIDED TO THE DIRECTOR. IT WAS FURTHER OBSERVED BY THE AO THAT BE FORE AN ASSESSEE CAN SUSTAIN THE CLAIM FOR DEPRECIATION, IT MUST SAT ISFY THE TWIN ESSENTIALS, I.E. FIRSTLY, THE ASSETS IS WHOLLY OR P ARTLY OWNED BY THE ASSESSEE SECONDLY, THE ASSETS IS USED FOR THE PURPO SE OF BUSINESS OF THE ASSESSEE AND BOTH THE INGREDIENTS ARE CONDITION S PRECEDENT FOR SUCCESSFULLY MAKING A CLAIM WITHIN THE PROVISIONS O F SECTION 32 OF THE IT ACT. FURTHER, NO PERQUISITE VALUE WAS ADDED IN T HE REMUNERATION OF THE DIRECTORS AND NO LOG BOOK HAS BEEN MAINTAINED B Y THE ASSESSEE AND THE OWNERSHIP OF ASSETS IN HIS PERSONAL CAPACIT Y BY THE DIRECTORS CANNOT BE ASSETS DEEMED TO BE IN THE VESTED OWNERSH IP OR BENEFICIAL UTILITY OF THE COMPANY, WHICH ARE TO DISTINCT AND L EGAL ENTITY. THE AO RELIED ON THE DECISIONS OF DELHI HIGH COURT IN THE CASE OF M. M. FISHERIES PVT. LTD. VS CIT 277 ITR 204 AND NEW AMBA DI ESTATES PVT. LTD. VS STATE OF TAMIL NADU 256 ITR 64, WHEREIN IT WAS HELD THAT ONUS WAS NOT ON THE AUTHORITIES TO PROVE THAT MOTOR CAR EXPENSES WERE PARTLY FOR PERSONAL USAGE, RATHER THE ONUS LAY ON THE PETITIONER WHO CLAIMED THAT IT WAS NOT USED FOR PERSONAL USE. THE AO THEREFORE, DISALLOWED THE CLAIM OF DEPRECIATION ON VEHICLES. D URING THE COURSE OF ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 18 APPELLATE PROCEEDINGS THE ASSESSEE HAS SUBMITTED TH AT THERE IS NO REASON TO BELIEVE THAT THE ASSET IS NOT OWNED BY TH E ASSESSEE AS THE DEFINITION OF OWNERSHIP INCLUDES BENEFICIAL OWNER . IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT VARIOUS DECISIONS QU OTED BY THE AO ARE MOSTLY IN RESPECT OF THE OWNERSHIP OF IMMOVABLE PROPERTIES, WHILE IN THE CASE OF THE ASSESSEE, IT HAS BEEN WITH REGAR D TO MOVABLE PROPERTIES. INCASE OF MOVABLE PROPERTIES, THE OWNER SHIP LIES WITH THE PERSON WHO HAVE MADE THE PAYMENT OF THAT PROPERTY A ND IS ENJOYING THE BENEFIT OF THAT PROPERTY, WHILE IN CASE OF IMMO VABLE PROPERTIES, IT IS REQUIRED THAT A PERSON MUST HAVE MADE THE PAYMEN T AND IS IN POSSESSION OF THAT PROPERTY. THE CARS WERE ACTUALLY USED BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS AND THE ASSESS EE HAS DOMINANT CONTROL OVER THE ASSETS, ALL THE PAYMENTS LIKE DOWN PAYMENT, LOAN INSTALLMENTS, ETC. WERE PAID DIRECTLY BY THE ASSESSEE AND EVEN THE LOAN TAKEN FOR THE PURPOSE OF PURCHASI NG CAR WAS ALSO REFLECTED IN TH4E BALANCE SHEET AS LIABILITY. FURTH ER, THE BANK HAS TAKEN NO OBJECTION AGAINST REGISTRATION OF VEHICLE IN THE NAME OF DIRECTOR. FURTHER, THE HONBLE SUPREME COURT IN THE CASE OF MYSORE MINERALS LTD. VS CIT 239 ITR 775 HAVE HELD THAT DEP RECIATION ON BUILDING IS ALLOWED SINCE THE ASSESSEE WAS IN POSSE SSION OF PROPERTY AND DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHE RS BEING EXCLUDED THEREFROM AND HAVING RIGHT TO USE AND OCCU PY THE PROPERTY AND THEREFORE, THE ASSESSEE IS A OWNER OF BUILDING. THE ASSESSEE FURTHER SUBMITTED THAT SECTION 32 OF THE IT ACT DOE S NOT REQUIRE THE REGISTERED OWNERSHIP OF THE ASSETS AND IT REQUIRES ONLY THE OWNERSHIP OF ASSETS AND USED FOR THE PURPOSE OF BUSINESS AND BOTH THE REQUIREMENTS WERE FULFILLED IN ITS CASE. ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 19 10. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE. THE FINDINGS OF THE LEARNED CIT(A) IN PARA 2.3 OF THE IMPUGNED ORDER AR E REPRODUCED AS UNDER: 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE AND TH E SUBMISSIONS OF THE APPELLANT ALONG WITH VARIOUS CAS E LAWS AS RELIED UPON. I AM NOT INCLINED TO AGREE WITH THE VIEWS OF THE APPELLANT. THE APPELLANT HAS NOT SUBMITTED ANY REPLY OR PRESENTED ANY CASE LAW TO CONTROVERT THE CASE LA WS RELIED ON BY THE A.O. THE APPELLANT IS RELYING ON T HE CASE LAWS WHICH ARE PRIOR TO THE LATEST DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF M.M. FISHERIES PVT. LTD., (2005) 277 ITR 204 IN WHICH HON'BLE HIGH COURT DULY CONSIDERED AND DISTINGUISHED THE HON'BLE SUPREME CO URT JUDGEMENT IN THE CASE OF MYSORE MINERALS LTD. VS. C IT (1999) 239 ITR 0775 AND RELIED ON THE LATEST DECISI ON IN THE CASE OF TAMILNADU CIVIL SUPPLY CORPORATION LTD. VS. CIT (2001) 249 ITR 214 OF THE HON'BLE SUPREME COURT . HON'BLE DELHI HIGH COURT DULY CONSIDERED THE FACTS OF THE APPELLANT COMPANY IN THE CASE OF M.M. FISHERIES PVT . LTD. (SUPRA) WHICH ARE IDENTICAL THAN THAT OF THE APPELL ANT. THE APPELLANT NEITHER BEFORE THE A.O. NOR BEFORE ME SUBMITTED ANY EVIDENCES FOR USE OF THIS VEHICLE FOR THE PURPOSE OF ITS BUSINESS. THERE IS NO SUBMISSION ABO UT WHO USED THIS VEHICLE? WHETHER ANY LOG BOOK IS MAINTAINED FOR SUCH USE? WHETHER ANY PERQUISITE INC LUDED IN THE REMUNERATION OF THE PERSON WHO USED THIS CAR ? THE HON'BLE MADRAS HIGH COURT IN THE CASE OF NEW AMBADI ESTATE PVT. LTD. VS. STATE OF TAMILNADU (2002) 256 ITR 64 HELD THAT - 'EVERY PERSON INCLUDING COMPANY HAS TO ESTABLISH THAT THE EXPENDITURE CLAIMED IN ITS INCOME TAX PROCEEDINGS HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE ONUS WAS NOT ON THE I.T. AUTHORITIES TO PROVE THAT PARTL Y MOTOR CAR EXPENSES WERE FOR PERSONAL USAGE; RATHER ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 20 ONUS LAYS ON THE PETITIONER WHO CLAIMED THAT ASSET WAS USED FOR BUSINESS. ' NOW COMING TO THE ISSUE OF OWNERSHIP OF THE VEHICLE PURCHASED IN THE NAME OF DIRECTOR, HON'BLE DELHI HI GH COURT IN THE CASE OF M.M. FISHERIES PVT. LTD.,(SUPR A) HELD THAT 'THE OWNERSHIP OF AN ASSET IN HIS PERSONAL CAPACITY BY THE DIRECTOR OF THE COMPANY, CANNOT BE AN ASSET DEEMED TO BE IN THE VESTED OWNERSHIP OR BENEFICIAL UTILITY OF THE COMPANY. THEY ARE TWO DISTINCT AND INDEPENDENT LEGAL ENTITIES. THIS IS NOT A QUESTION OF LAW, BUT IS PRIMARILY A QUESTION OF FACT.' HON'BLE DELHI HIGH COURT CONSIDERED AND EXAMINED IT S OWN DECISION IN THE CASE OF B.L. PASSI (2002) 254 I TR 225 AND MYSORE MINERAL LTD. (1999) 239 ITR 775 (SC) AS RELIED BY THE ASSESSEE AND HELD THAT THEY ARE NOT APPLICABLE AND MISPLACED WITH THE FACT OF THE CASE OF THE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION AND FOLLOWING THE C ASE LAWS, SUPRA, I HOLD THAT THE A.O. IS QUITE JUSTIFIE D IN DISALLOWING THE CLAIM OF DEPRECIATION ON CAR AND SC OOTER AMOUNTING TO RS. 1,86,514/- AND THE SAME IS HEREBY UPHELD. 11. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE D O NOT FIND ANY MERIT IN THE CROSS OBJECTION OF THE ASSESSEE. THE A SSESSEE CLAIMED BEFORE THE LEARNED CIT(A) THE CARS WERE USED BY THE ASSESSEE COMPANY FOR BUSINESS PURPOSE AND HAS DOMINANT CONTR OL OVER THE ASSETS AND ALL PAYMENTS, LOAN INSTALLMENTS WERE PAI D DIRECTLY BY THE ASSESSEE AND EVEN THE SAID LOAN IS REFLECTED IN THE BALANCE SHEET AS LIABILITY. THE ASSESSEE, THEREFORE, TRIED TO CONTEN D THAT EVEN IF THE CAR WAS IN THE NAME OF THE DIRECTOR, THE ASSESSEE WOULD BE ENTITLED FOR ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 21 DEDUCTION, THOUGH THERE IS NO BAR THAT THE ASSESSEE COULD PURCHASED THE VEHICLE IN THE NAME OF THE DIRECTOR BUT THE ASS ESSEE SHALL HAVE TO PROVE ON RECORD THAT THE CARS WERE PURCHASED FROM T HE FUNDS OF THE ASSESSEE COMPANY AND THAT THE PAYMENT AND LOAN INST ALLMENTS ETC. HAVE BEEN PAID OUT OF THE FUNDS OF THE ASSESSEE COM PANY AND THAT SAME HAVE BEEN SHOWN IN THE BOOKS OF THE ASSESSEE. FURTHER, THE ASSESSEE SHALL HAVE TO PROVE THAT CARS HAVE BEEN US ED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. BUT, IN THIS C ASE, THE ASSESSEE DID NOT FILE ANY EXPLANATION BEFORE THE AO AT THE A SSESSMENT STAGE. ONLY SOME DECISIONS WERE RELIED UPON WITHOUT PRODUC ING ANY MATERIAL OR EVIDENCE TO SHOW THAT THE CARS WERE ACTUALLY OWN ED BY THE FUNDS OF THE ASSESSEE COMPANY AND WERE USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE COMPANY. SAME IS THE POSITION BEFORE T HE LEARNED CIT(A). THOUGH SPECIFIC SUBMISSIONS WERE TAKEN FOR PURCHASE OF CHARS THROUGH FUNDS OF THE ASSESSEE COMPANY, BUT NO EVIDENCE WAS FILED EVEN BEFORE THE LEARNED CIT(A). NO EVIDENCE W AS ALSO FURNISHED WHETHER THE CARS HAVE BEEN ACTUALLY USED FOR THE PU RPOSE OF THE BUSINESS OF THE ASSESSEE COMPANY. IN THE ABSENCE OF ANY EVIDENCE OR MATERIAL EVEN BEFORE US, WE DO NOT FIND IT APPRO PRIATE TO DISTURB THE FINDINGS OF THE AUTHORITIES BELOW. SINCE THE ASSESS EE FAILED TO PRODUCE SUFFICIENT AND COGENT EVIDENCE BEFORE THE A UTHORITIES BELOW IN SUPPORT OF THE CONTENTION SO RAISED BEFORE THEM AND FURTHER NO EVIDENCE IS PRODUCED BEFORE US IN SUPPORT OF ANY OF THE CONTENTION, THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE RS OF THE AUTHORITIES BELOW. WE ACCORDINGLY, CONFIRM THE ORDERS OF THE AU THORITIES BELOW AND DISMISS THE CROSS OBJECTION OF THE ASSESSEE ON THIS GROUND. ITA NO.2491/AHD/2010 AND C.O. NO.285/AHD/2010 ACIT, (OSD) CIR-8, AHMEDABAD VS M/S. S. DEV FASHION 22 12. ON OTHER GROUNDS, THE ASSESSEE SUPPORTED THE OR DER OF THE LEARNED CIT(A) IN DELETING THE ADDITION U/S 2 (22) (E) OF THE IT ACT ON WHICH WE HAVE ALREADY DISMISSED THE DEPARTMENTAL AP PEAL. 13. IN THE RESULT, THERE IS NO MERIT IN THE CROSS O BJECTION OF THE ASSESSEE AND THE SAME IS ACCORDINGLY DISMISSED. 14. IN THE RESULT, THE DEPARTMENTAL APPEAL AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE, BOTH ARE DISMISSED. ORDER PRONOUNCED ON 13-05-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 13-05-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD