M/s Chandra Developers Pvt. Ltd., Bangalore V. ACIT, Bangalore

ITA 461/BANG/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 8672 (ITAT-BANGALORE)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-08-2010
• Assessment Year: 2007-2008
• Appeal Filed On: 05-04-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SWATI S PATIL CITIIDR
• Assessee Lawyers: B P SACHIN KUMAR
• Keywords: Search and seizure; Deemed dividend; Block assessment; Commercial expediency; Documents seized
• Section: 143(3); 153A; 234B; 54; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ITA NOS. 458 TO 461/BANG/2010 ASSESSMENT YEARS : 2004-05 TO 2007-08 M/S. CHANDRA DEVELOPERS PVT. LTD., LAKE VIEW BUILDING, NO.66/1-4, A BLOCK, 8 TH FLOOR, BAGMANE TECH PARK, C.V. RAMAN NAGAR, BANGALORE. : APPELLANT VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(3), BANGALORE. : RESPONDENT APPELLANT BY : SHRI B.P. SACHIN KUMAR, C.A. RESPONDENT BY : SMT. SWATI S. PATIL, CIT-II(DR) O R D E R PER A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER THESE FOUR APPEALS OF THE ASSESSEE COMPANY ARE DIR ECTED AGAINST THE CONSOLIDATED ORDER OF THE LD. CIT (A)-VI, BANGA LORE, IN ITA NOS: 248, 249, 250 & 251 / ACIT CC 2(3)/ CIT (A)-VI/ 2008-09 DATED: 2.2.2010 FOR THE ASSESSMENT YEARS 2004-05, 2005-06, 2006-07 & 2007-0 8 RESPECTIVELY. 2. THE ASSESSEE COMPANY [THE ASSESSEE IN SHORT] HAS RAISED IDENTICAL FIVE GROUNDS IN A NARRATIVE MANNER FOR AL L THE AYS UNDER CHALLENGE. ITA NO.458-461/BANG/10 PAGE 2 OF 32 FOR THE SAKE OF PROPER APPRECIATION OF FACTS, THE I SSUES ARE REFORMULATED, IN A CONCISE MANNER, AS UNDER: (I) THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE AO I N INITIATING THE PROCEEDING U/S 153C OF THE ACT FOR THE AYS 2004 -05, 05-06, 06-07 AND 07-08; (II) THE CIT(A) ERRED IN SUSTAINING THE APPLICABILITY OF THE PROVISIONS OF S.2(22)(E) OF THE ACT; - THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE TRANS ACTIONS BETWEEN THE ASSESSEE AND BAGMANE DEVELOPERS (P) LTD [BDPL] WERE IN THE COURSE OF BUSINESS ACTIVITIES AND THAT THE AMOUNT R ECEIVED WAS NOT IN THE NATURE OF LOANS AND ADVANCES; (III) THE CIT(A) ERRED IN DIRECTING THE AO TO COMPUTE THE CURRENT YEARS PROFIT; & (IV) THE CIT(A) ERRED IN UPHOLDING THE LEVY OF INTEREST U/S 234B OF THE ACT. 3. AS POINTED OUT EARLIER, THE ISSUES RAISED IN TH ESE APPEALS WERE SIMILAR AND INTER-LINKED; THEY WERE HEARD, CON SIDERED AND DISPOSED OFF IN THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AN D CLARITY. 4. WITH REGARD TO THE CONCLUSION OF ASSESSMENTS U/ S 143(3) R.W.S. 153C OF THE ACT FOR THE AYS 2004-05, 05-06 A ND 06-07 RESPECTIVELY WHICH WERE SUSTAINED BY THE LD. CIT(A), IT WAS CONT ENDED BY THE LD. A R THAT THE PROVISIONS OF S.153C OF THE ACT WERE NOT A TTRACTED TO THE ASSESSEE SINCE NOTHING INCRIMINATING RELATING TO THE ASSESSE E HAVE BEEN FOUND AT THE TIME OF SEARCH, THAT ONLY THE REGULAR BOOKS OF ACCO UNTS WERE FOUND AND SEIZED DURING THE COURSE OF SEARCH AND, THEREFORE, THE AO OUGHT NOT TO HAVE PROCEEDED TO INVOKE THE PROVISIONS OF S.153C O F THE ACT AND THAT THE LD. CIT (A) HAD GROSSLY ERRED IN OUT-RIGHTLY REJECT ING THE CASE LAWS ON WHICH ITA NO.458-461/BANG/10 PAGE 3 OF 32 THE ASSESSEE HAD PLACED STRONG RELIANCE. IT WAS, TH EREFORE, PLEADED THAT THE ORDERS OF THE AO WERE OPPOSED TO LAW WHICH REQUIRE TO BE SUMMARILY ANNULLED. 4.1. THE LD. D R PRESENT DURING THE COURSE OF HEAR ING WAS VEHEMENT IN HER SUBMISSION THAT THE AO WAS WITHIN H IS DOMAIN TO INVOKE THE PROVISIONS OF S.153C OF THE ACT WHICH HAS BEEN JUDICIOUSLY RATIFIED BY THE LD. CIT (A) AND, THUS, IT WAS SUBMITTED, THE AS SESSEE SHOULD HAVE NO GRIEVANCE ON THIS POINT. 4.2. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS AND ALSO CRITICALLY PERUSED THE RELEVANT RECORDS. AT THE OU TSET, WE WOULD LIKE TO POINT OUT THAT THE ASSESSMENT FOR THE ASSESSMENT YEAR 200 7-08 WAS CONCLUDED U/S 143(3) OF THE ACT AND AS SUCH NO NOTICE U/S 153 A R.W.S 153C OF THE ACT WAS SLAPPED ON THE ASSESSEE. INCIDENTALLY, THIS I SSUE WAS ALSO NOT RAISED BY THE ASSESSEE BEFORE THE LD. CIT (A). THEREFORE, THE GROUND RAISED BEFORE US FOR THE AY 2007-08 THAT THE CIT(A) ERRED IN UPHOLDING THE STAND OF THE AO IN INITIATING THE PROCEEDING U/S 153C OF THE ACT IS MISCONCEIVED AND, ACCORDINGLY, DISMISSED AS NOT MAINTAINABLE. 4.3. WITH DUE RESPECTS, WE HAVE PERUSED THE RULING OF THE HONBLE APEX COURT IN THE CASE OF MANISH MAHESHWARI V. ACIT & ANR., REPORTED IN (2007) 289 ITR 341 (SC) WHEREIN THE ISSUE BEFORE TH E HONBLE COURT WAS BLOCK ASSESSMENT (SEARCH AND SEIZURE) PROCEEDINGS U /S 158BD OF THE ACT. IN THE INSTANT CASE, THE ISSUE, IN BRIEF, WAS THAT THERE WAS AN ACTION U/S 132 OF THE ACT IN THE CASE OF BAGMANE DEVELOPERS PVT. L TD. ON 14.9.2006 IN THE PREMISES OF YOUSUFF SHERIFF A.K.A. BABU WHEREIN CER TAIN DOCUMENTS BELONG ITA NO.458-461/BANG/10 PAGE 4 OF 32 TO THE ASSESSEE WERE UNEARTHED. CONSEQUENTLY, A NO TICE U/S 153A R.W.S.153C OF THE ACT WAS ISSUED BY INVOKING THE PR OVISIONS OF S.153C OF THE ACT. THIS ACTION OF THE AO HAS BEEN HOTLY CONT ESTED BY THE ASSESSEE. 4.4. WE SHALL HAVE A GLANCE OF WHAT SECTION 153C O F THE ACT PRECISELY SAYS: 153C (1) NOTWITHSTANDING ANYTHING CONTAINED IN SEC TION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 1 53, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULLION, JEWEL LERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS S EIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A, THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASS ETS SEIZED OR REQUISITIONED SHALL BE HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON AND THAT ASSESS ING OFFICER SHALL PROCEED AGAINST EACH SUCH OTHER PERSON AND ISSUE SUCH OTHER PERSON NOTICE AND ASSESS OR REASSESS INCOME OF SUCH OTHER PERSON IN A CCORDANCE WITH THE PROVISIONS OF SECTION 153A. 4.5. AS RIGHTLY HIGHLIGHTED BY THE LD. CIT (A), TH E REQUIREMENT OF HANDING OVER THE BOOKS OF ACCOUNT TO THE AO HAVING JURISDICTION OVER THE OTHER PERSON DID NOT ARISE IN THE CASE ON HAND FOR A SIMPLE REASON THAT THE SAME AO WHO WAS HAVING JURISDICTION OVER THE PERSON SEARCHED U/S 132 OF THE ACT I.E., BAGMANE DEVELOPERS PVT. LTD. AND THE OTHER PERSON I.E., THE ASSESSEE AND AS SUCH THERE WAS NO NEED OF HANDING O VER THE BOOKS OF ACCOUNTS/DOCUMENTS SEIZED TO ANY OTHER AO. THE OTH ER ARGUMENT OF THE ASSESSEE THAT NO INCRIMINATING DOCUMENTS WERE UNEAR THED PERTAINING TO THE ASSESSEE DURING THE SEARCH EXCEPT REGULAR BOOKS OF ACCOUNT AND, THUS, THE INITIATION OF THE PROCEEDINGS U/S 153C OF THE ACT I LLEGAL ETC DOESNT HOLD WATER SINCE THE PROVISIONS OF S.153C (1) OF THE ACT MAKE IT EXPLICITLY CLEAR THAT WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY M ONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOO KS OF ACCOUNT OR ITA NO.458-461/BANG/10 PAGE 5 OF 32 DOCUMENTS SEIZED OR REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 153A. 4.6. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERE D VIEW THAT THE AO WAS WELL WITHIN HIS REALM TO RESORT TO ISSUE OF NOTICES U/S 153C OF THE ACT FOR THE AYS 2004-05, 2005-06 AND 2006-07 UNDER CHALLENGE AND, ACCORDINGLY, THE ASSESSEES OBJECTION IS NOT SUSTAI NABLE AND, THUS, DISMISSED. 5. WITH REGARD TO THE ASSESSEES GRIEVANCE IN APPL YING THE PROVISIONS OF S.2 (22) (E) OF THE ACT BY THE AO BY TREATING THE AMOUNTS RECEIVED UNDER CONTRACTUAL TERMS AS LOANS FOR THE AYS UNDER DISPUTE, THE ISSUE, IN BRIEF, WAS THAT DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE AO NOTICED THAT SRI RAJA BAGMANE WHO WAS THE BENEFI CIAL OWNER OF THE SHARES HOLDING 99% SHARES IN THE CASE OF BDPL WAS ALSO HOLDING BENEFICIAL INTEREST IN THE ASSESSEE COMPANY IN TERM S OF S.2 (32) OF THE ACT I.E., THE BENEFICIAL OWNER OF SHARE IN THE ASSESSE E COMPANY CARRYING NOT LESS THAN 20% VOTING POWER HE WAS HOLDING 90% OF EQUITY SHARES. ACCORDING TO THE AO, BDPL WHO WAS HAVING ACCUMULATE D PROFITS IN ALL THE ABOVE AYS HAD SHOWN UNSECURED LOANS IN ITS BOOKS OF ACCOUNT IN THE NAME OF THE ASSESSEE FOR THE AYS UNDER DISPUTE AND, THUS, TREATED THE UNSECURED LOANS SHOWN BY BDPL TO THE EXTENT OF ACCU MULATED PROFITS OF BDPL AFTER ADJUSTING THE DEEMED DIVIDENDS IN THE CASE OF RAJA BAGAMANE OF THE RESPECTIVE AYS IN THE HANDS OF TH E ASSESSEE AS DEEMED DIVIDENDS U/S 2(22)(E) OF THE ACT. AFTER AD JUSTING THE LOANS AND ADVANCES GIVEN BY BDPL TO RAJA BAGMANE ASSESSED AS DEEMED DIVIDEND ITA NO.458-461/BANG/10 PAGE 6 OF 32 FROM ACCUMULATED PROFITS (COMPUTING THE ACCUMULATED PROFITS AVAILABLE TO THE ASSESSEE) OF BDPL, ADJUSTED THE LOANS AND ADVAN CES GIVEN TO THE ASSESSEE, THE AO TREATED THE SAME AS DEEMED DIVIDEN D U/S 2 (22)(E) OF THE ACT. 5.1. ACCORDINGLY, THE AO HAD, AFTER BRUSHING ASID E THE CONTENTIONS PUT FORTH BY THE ASSESSEE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, ASSESSED THE UNSECURED LOANS GIVEN BY BDPL TO THE ASSESSEE OF RS.5.44 CRORES, RS.96.2 LAKHS, RS.26.96 LAKHS AND RS.5.09 CRORES FOR THE ASSESSMENT YEARS 2004.05, 2005.06, 2 006.07 AND 2007.08 RESPECTIVELY. 6. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUE FOR A LL THE AYS UNDER CHALLENGE BEFORE THE CIT (A) FOR REDRESSAL. EXTENSIVELY QUOTING THE REASONS ADDUCED BY THE AO IN HIS IMPUGNED ORDERS AN D ALSO MENTIONING THAT THE AO HAD ELABORATELY DISCUSSED ALL THE ARGUM ENTS AND JUDICIAL PRONOUNCEMENTS WHICH HAVE BEEN REITERATED DURING TH E COURSE OF APPELLATE PROCEEDINGS, THE CIT (A) OPINED THAT THE CONCLUSION DRAWN BY THE AO WERE LOGICAL, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. HE, FURTHER, RECORDED THAT SINCE THE ARGUMENTS OF THE APPELLANT HAVE ALREADY BEEN CONSIDERED BY THE AO, THE SAME DID NOT REQUIRE FURT HER ELABORATION. HOWEVER, HE WENT ON FURTHER TO UPHOLD THE STAND OF THE AO IN INVOKING THE PROVISIONS OF S.2 (22)(E) OF THE ACT ON THE GROUNDS THAT (I) EXCEPT THE ALLEGED AGREEMENT, THE ASSESSEE FAILED T O PRODUCE ANY OTHER EVIDENCE TO PROVE THAT THE ADVANCES GIVEN WER E FOR THE PURPOSE OF THE BUSINESS OF BDPL; (II) MOU (SIC) AGREEMENT WAS PRODUCED ONLY ON 15.12.098 AND IT WAS NEITHER A REGISTERED DOCUMENT NOR ENTERED BY AN IN DEPENDENT ITA NO.458-461/BANG/10 PAGE 7 OF 32 PERSON BECAUSE THE DOCUMENT WAS SIGNED BY HUSBAND A ND WIFE AND, THEREFORE, SELF SERVING DOCUMENT; & (III) EVEN IF THE MOU WAS IN EXISTENCE, IT DID NOT ALTER THE NATURE OF TRANSACTIONS WHICH HAVE BEEN SHOWN BY THE ASSESSEE IN THE FORM OF UNSECURED LOAN 6.1. BY DISTINGUISHING THE CASE LAWS ON WHICH THE ASSESSEE HAD PLACED ITS FAITH, THE LD. CIT (A) SIDED WITH THE AO WHO TOOK SANCTUARY IN RULING OF THE HONBLE HIGHEST JUDICIARY OF THE LAND IN THE CASE OF MISS. P SARADA V. CIT REPORTED IN 229 ITR 444 (SC) AND CONC LUDED THAT THE ASSESSING OFFICER WAS RIGHT IN INVOKING PROVISIONS OF SECTION 2(22)(E) OF THE INCOME-TAX ACT FOR THE ABOVE ASSESSMENT YEARS. 7. DISILLUSIONED WITH THE FINDINGS OF THE LD. CIT (A) CITED SUPRA, THE ASSESSEE HAS COME UP WITH THE PRESENT APPEALS. DURING THE COURSE OF HEARING, THE STAND OF THE AUTHORITIES BELOW WAS VEH EMENTLY CONTESTED BY THE LD. AR WITH HIS LENGTHY SUBMISSION, THE FOCAL P OINT OF WHICH, IS SUMMARIZED AS UNDER: (I) THE AMOUNTS PAID BY BDPL WERE IN THE NORMAL COURSE OF BUSINESS AND, THEREFORE, WHAT WAS TAKEN BY THE ASSE SSEE FROM BDPL WAS NOT A LOAN OR ADVANCE. AMOUNTS GIVEN TO S ISTER CONCERNS WERE FOR ALLOTMENT OF BUILT-UP AREA IN THE BUILDINGS WHICH THEY DEVELOP; - THE SISTER CONCERNS WERE NOTHING BUT THE SPECIAL PU RPOSE VEHICLES [SPV] FORMED BY THE PROMOTERS TO ARRANGE FUNDS FOR DIFFERENT PROJECTS BEING EXECUTED BY THEM. EQUITY PARTNERS LOOK OR PROJECT SPECIFIC SPV TO INVEST AS THEY WOULD NOT GENERALLY INVEST IN HOLDING COMPANY FOR OBVIOUS REASONS BECAUSE OF EXISTING LOA N COMMITMENTS, TAX DUES ARISING OUT OF PAST TRANSACTI ONS, PENDING LEGAL ISSUES ETC., THE BANKS ALSO HAVE PER COMPANY EXPOSURE TO FUND THEIR PROJECTS. BY CREATING MORE COMPANIES, P ROMOTERS WILL BE IN A POSITION TO RAISE MORE FUNDS FROM BANKS. THIS COMMERCIAL FITNESS AND BUSINESS EXIGENCY HAD PROMOTED THE ASSE SSEE TO CREATE MORE COMPANIES; ITA NO.458-461/BANG/10 PAGE 8 OF 32 (II) THE MOMENT BDPL DECIDED TO ALLOCATE FUNDS, IT ENTE RED INTO AN AGREEMENT WITH THE ASSESSEE WHEREIN THE PURPOSE INT ENDED AND THE TERMS AND CONDITIONS HAVE BEEN IMPLICITLY EARMA RKED; - BDPL ENTERED INTO AN AGREEMENT WITH THE ASSESSEE AN D ALLOCATED FUNDS FOR THE PURPOSE OF ACQUIRING THE PROPERTY. H OWEVER, THE AO TREATED THE SAME AS NOT RELATING TO BUSINESS. BDPL HAD, IN FACT, FUNDED THE AMOUNTS AT ARMS LENGTH BASIS WITH AN INT ENTION TO MAKE OR EARN PROFITS FROM SUCH VENTURE AND ON A COMMERCI AL UNDERSTANDING. THIS COMMERCIAL UNDERSTANDING HAS BE EN ENACTED DURING THE COURSE OF BUSINESS AND FOR THE PURPOSES OF BUSINESS ALONE WHICH WAS WELL OUTSIDE THE AMBIT OF DEEMED DI VIDEND; - THE MONIES TAKEN FROM BDPL AND UTILIZED BY THE ASSE SSEE FOR THE INTENDED PURPOSE WHICH HAS NOT BEEN DISPUTED BY THE AO. BASED ON THE GROUND REALITIES, THE ASSESSEE WAS FREE TO ADOP T HIS/ITS OWN METHOD OF CARRYING ON THE BUSINESS; - RELIES ON (A) S.A. BUILDERS V. CIT 288 ITR 1 (SC ) (B) CIT V. SASSOON DAVID 118 ITR 261 (SC) (III) THE AOS REASON FOR REJECTING THE AGREEMENT WAS TH AT IT WAS NOT FOUND AT THE TIME OF SEARCH. IT WAS NOT AS IF THE SEARCH PARTY WAS EXPECTED TO RECORD/SEIZE EVERY PAPER ON WHICH IT LA YS ITS HANDS. THIS AGREEMENT WAS KEPT ALONG WITH THE OTHER ORIGIN AL BELONGINGS OF THE ASSESSEE AND THE SEARCHING PARTY S REASONING IN NOT SEIZING THIS AGREEMENT CANNOT NOW BE SPECULA TED; AND THE WORST, THE ASSESSEE CANNOT BE FOUND FAULT WITH EIT HER; - JUST BECAUSE THE SAID DOCUMENT WAS NOT SEIZED BY TH E SEARCH PARTY, DOESNT MEAN TO CONCLUDE (AS THE AO DID) THAT THE D OCUMENT DID NOT EXIST AT ALL. THE AO HAD NOT PROVED WITH ANY DOCUM ENTARY EVIDENCE EXCEPT ALLEGING THAT THE DOCUMENT WAS NOT GENUINE; - NO AGREEMENT NEEDS TO BE REDUCED IN WRITING AND IT CAN EVEN BE ORAL. EVEN IF AN AGREEMENT WAS REDUCED IN WRITING, IT DOESNT REQUIRE TO BE REGISTERED UNDER S.17 OF THE REGISTRA TION ACT; - IN FACT, ALL THE AGREEMENTS WERE REDUCED IN WRITING ON STAMP PAPERS, JUST BECAUSE THEY WERE NOT REGISTERED, THERE CAN BE NO REASON TO REJECT THEM; - THE OTHER REASONING OF THE AO THAT AS PER SPECIFIC RELIEF ACT (SRA), THE AGREEMENTS WERE TIME-BARRED. THE LIMITA TION STARTS FROM THE DAY OF DEFAULT AND NOT EARLIER AND EVEN IF NO R EMEDY WAS ITA NO.458-461/BANG/10 PAGE 9 OF 32 AVAILABLE UNDER SRA, THE AGGRIEVED PARTY CAN HAVE R ECOURSE TO NORMAL PROVISIONS OF THE CIVIL PROCEDURE CODE; (IV) THE REASONING OF THE AO THAT THE AMOUNTS GIVEN BY B DPL WERE PROFITS WHICH THE COMPANY COULD HAVE DISTRIBUTED TO ITS SHAREHOLDERS WAS UNFOUNDED AS THE SAME WAS UTILIZED ONLY TO MAKE THE MAXIMUM POSSIBLE EFFORTS FOR INVESTMENTS I N LAND AND WOULD LIKE TO CONSERVE THE RESOURCES AND, THUS, DIS TRIBUTION OF DIVIDENDS WOULD BE ITS LAST PRIORITY, PARTICULARLY WHEN THERE WERE HUGE BORROWALS; - THE AOS PRESUMPTION THAT THE FUNDS TAKEN WITH NO INTEREST OR END DATE BY THE ASSESSEE WAS ONE OF THE FACTORS WHICH LED TO PROVE THAT IT BEING AN ADVANCE OR LOAN WAS UNFOUNDED SINCE THE AM OUNT WAS HELD BY THE ASSESSEE FOR PROCUREMENT OF PROPERTIES ON BEHALF OF THE COMPANY AND AS SUCH THERE WAS NO QUESTION OF PAYIN G ANY INTEREST; - ACCORDING TO THE AO, THE ONLY EXCEPTION WAS IN RESP ECT OF MONEY ADVANCED BY A COMPANY CARRYING ON MONEY LENDING B USINESS. THE QUESTION OF EXCEPTION WILL CROP UP ONLY AFTER CONSI DERING THE VITAL QUESTION AS TO WHETHER THE AMOUNT WAS AN ADVANCE OR A LOAN OR OTHERWISE. - A NUMBER OF CASE LAWS RELIED ON BY THE AO WERE NOT APPLICABLE FOR THE REASONS THAT (A) ACIT V. SMT. LAKSHMI KUTTI NARAYANAN 112 TTJ 396 (I TAT KOCHI) THE MAIN ISSUE IN THAT CASE WAS THAT BO OK ENTRIES WERE RELATING TO EARLIER YEARS. BUT THE PRINCIPLE LAID DOWN THER EIN HAD BEEN LOST SIGHT OF BY THE AO. (B)NAGINDAS KAPADIA 177 ITR 393 (BOM) (C)AMBASSADOR TRAVELS 173 TAXMAN 407 (DEL ) (D) ARDEE FINVEST (P) LTD. 79 ITD 547 (ITA T, DELHI BENCH) & (E) SEASMIST PROPERTIES PVT. LTD. 1 SOT 14 2 (MUM) WERE HELD TO BE NOT APPLICABLE BECAUSE THE SCHEDUL E TO THE BALANCE SHEETS REFLECT THOSE AMOUNTS AS UNSECURED LOANS A ND, THEREFORE, IT WAS NOT IN THE NATURE OF ANY TRADE ADVANCE OR ANY PAYME NT MADE IN CONNECTION WITH BUSINESS OF THE COMPANY GIVING THE LOAN; - CASE LAWS RELIES ON (BY THE ASSESSEE) (A) CIT V. CREATIVE DYEING AND PRINTING PVT. LTD. 318 I TR 476 (DEL); ITA NO.458-461/BANG/10 PAGE 10 OF 32 (B) NH SECURITIES LTD. V. DCIT 11 SOT 302 (MUM) - MERELY BECAUSE THE SUM WAS SHOWN AS UNSECURED LOAN IN THE BOOKS OF ACCOUNTS CANNOT BE CONCLUDED THAT IT WAS DEEMED DIVIDEND. IT WAS A SETTLED LAW THAT IN BOOK-KEEPING, THE ENTRIE S IN THE BOOKS OF ACCOUNTS CANNOT GO TO DECIDE THE AMBIT OF TAXATION RELIES ON A. FORT PROPERTIES PVT. LIMITED 208 ITR 232 (BOM) B. KEDARNATH JUTE MANUFACTURING CO. LTD. 82 ITR 363 (SC) C. KASTURI ESTATES (P) LTD. 62 ITR 578 (MAD) D. G.VENKATASWAMI NAIDU 35 ITR 594 (SC) E. SULTAN BROTHERS 51 ITR 353 (SC) F. CIT V. EXPRESS NEWSPAPERS 53 ITR 250 (SC) - THE QUESTION OF DEEMED DIVIDEND CAN ARISE ONLY IN T HE HANDS OF A SHARE HOLDER HAVING SUBSTANTIAL INTEREST IN THE LEN DING COMPANY. THE ASSESSEE WAS NOT A SHAREHOLDER IN BDPL FROM WHO M THE ALLEGED ADVANCE HAD BEEN RECEIVED. RELIES ON ACIT V. BHAUMIK COLOUR (P) LTD 120 TTJ 865 (MUM) - IT IS COMMON KNOWLEDGE THAT IN JOURNAL ENTRIES THER E IS NEITHER FLOW OUT OR FLOW IN OF FUNDS. THERE WAS NO DEEMED DIVID ENDS TO BE TAXED AT ALL IN THE AY 2005-06. THE CASES RELIED BY THE AO HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE. RELI ES ON - G.R.GOVINDARAJULU NAIDU V. CIT 90 ITR 13 (MAD); - FOR AY 2006-07: WITH REGARD TO THE REASONING OF THE AO FOR REJECTING THE PLEA OF REDUCTION IN THE SHARE HOLDIN G OF RAJA BAGMANE IN THE ASSESSEE COMPANY WAS THAT THE TRANSF ER WAS NOT GENUINE AND THE REASON GIVEN FOR ARRIVING AT SUCH A CONCLUSION WAS THAT THE ASSESSEE HAD NOT RECEIVED THE CONSIDERATIO N FOR THE TRANSFER OF SHARE, BUT, IT WAS ONLY A JOURNAL ENTRY, THE CON TENTION WAS THAT - THE SALES OF SHARES HAVE BEEN DISCLOSED IN THE BALA NCE SHEETS OF RAJA BAGMANE AND SMT. VASUNDHARA RAJA AS ON 31.3.20 06. EVEN AN IMMOVABLE PROPERTY CAN BE TRANSFERRED FOR A CONS IDERATION PAID, PROMISED, PARTLY PAID AND PARTLY PROMISED AS PER S. 54 OF THE TRANSFER OF PROPERTY ACT. FURTHER, THERE WAS A RUN NING ACCOUNT OF SMT. VASUNDHARA RAJA IN BOOKS OF RAJA BAGMANE AND, THEREFORE, ITA NO.458-461/BANG/10 PAGE 11 OF 32 THE CONSIDERATION DUE WAS DEBITED TO HER ACCOUNT. SIMILARLY, IN THE ACCOUNT OF RAJA BAGMANE IN THE BOOKS OF SMT. VASUND HARA RAJA, CREDIT ENTRIES WERE PASSED AND THUS, THERE WAS NOTH ING AMISS ABOUT IT; - RAJA BAGMANE WAS NOT HAVING 10% SHAREHOLDING IN THE ASSESSEE COMPANY THROUGHOUT THE YEAR. FOR THE APPLICABILITY OF S.2 (22)(E), IT WAS NECESSARY THAT THE SHARE-HOLDER SHOULD HAVE 10% EQUITY SHARE CAPITAL IN BOTH THE CONCERNS THE CONCERN WHICH LE NT THE MONEY AND THE CONCERN TO WHOM MONEY HAD BEEN LENT. THOUG H RAJA BAGMANE DID HOLD MORE THAN 10% SHARE IN BDPL THROUG HOUT THE YEAR, HE DID NOT HOLD 10% SHARE IN THE ASSESSEE COM PANY THROUGHOUT THE YEAR. IT IS SETTLED LAW THAT THE RE LEVANT SHARE HOLDER SHOULD NOT ONLY BE A REGISTERED SHARE HOLDER BUT A PERSON HAVING BENEFICIAL INTEREST. THUS, THE PROVISIONS OF S.2 (22)(E) WILL GET ATTRACTED ONLY IF THE CONCERNED PERSON WAS NOT ONLY A REGISTERED SHAREHOLDER BUT ALSO A BENEFICIAL SHAREHOLDER HOLDI NG NOT LESS THAN 10% OF THE SHARE; 7.1. ON THE OTHER HAND, THE LD. D.R. WAS VERY EMPH ATIC IN HER URGE THAT THE ISSUE IN DISPUTE HAS BEEN EXTENSIVEL Y ANALYZED BY THE AO AND ALSO DRAWING STRENGTH FROM VARIOUS JUDICIAL PRO NOUNCEMENTS ARRIVED AT A CONCLUSION THAT THE ENTIRE AMOUNTS RECEIVED FROM BDPL AS LOANS FOR THE AYS UNDER CHALLENGE AND WAS RIGHTLY TREATED THEM A S DEEMED DIVIDENDS IN THE HANDS OF THE ASSESSEE BY BRINGING THEM TO T AX NET UNDER THE HEAD INCOME FROM OTHER SOURCES. THE LEARNED FIRST APP ELLATE AUTHORITY HAD, AFTER DUE CONSIDERATION OF RIVAL SUBMISSIONS, SUBST ANTIATED THE AOS ACTION WHICH VINDICATED THE STAND OF THE AO ON THIS POINT. IT WAS, THEREFORE, VEHEMENTLY URGED THAT THE ACTION OF THE AUTHORITIES BELOW REQUIRES TO BE UPHELD. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, DILIGENTLY PERUSED THE RELEVANT RECORDS, THE VARIOUS JUDICIAL PRONOUNCEMENTS ON WHICH EITHER PARTY HAD PLACED THEIR FAITH AND ALSO THE VOLUMINOUS PAPER ITA NO.458-461/BANG/10 PAGE 12 OF 32 BOOKS IN VOLUMES [I, II, III & IV RUNNING INTO HUN DREDS OF PAGES IN ITS GROUP OF CASES] FURNISHED BY THE LD. AR DURING THE COURSE OF HEARING PROCEEDINGS. 8.1. ON A CRITICAL EXAMINATION OF THE RELEVANT IMP UGNED ASSESSMENT ORDERS, THE REASONS FOR HAVING ARRIVED AT SUCH A CONCLUSION THAT THOSE AMOUNTS WERE TO BE TREATED AS DEEMED DIV IDENDS U/S 2 (22)(E) OF THE ACT FOR THE AYS UNDER DISPUTE, CAN BE CATEGORIZ ED AS UNDER: (I) THE ASSESSEE IN ITS BALANCE SHEETS IN SCHEDULE 2 HA D SHOWN THOSE AMOUNTS UNDER THE HEAD UNSECURED LOANS; - IN THE BALANCE SHEETS OF BDPL FOR THE AYS UNDER DIS PUTE, AMOUNTS RECEIVABLE FROM THE ASSESSEE HAVE BEEN SHOWN UNDER THE HEAD LOANS AND ADVANCES; - THE BALANCE SHEETS OF BDPL SHOW THE ACCUMULATED PRO FITS FOR THE RELEVANT ASSESSMENT YEARS; (II) THE ASSESSEE HAD FAILED TO SUBSTANTIATE ITS CLAIM T HAT THE FUNDS WERE RECEIVED FROM BDPL FOR BUSINESS EXPEDIENCY AN D WERE IN THE NATURE OF CONTRACTUAL PAYMENTS; - THE AGREEMENT DATED: 13.12.2002 PRODUCED TO SUBSTAN TIATE ITS CLAIM THAT THE FUNDS WERE FLOWN FROM BDPL FOR BUSINESS EX IGENCIES AND WERE IN THE NATURE OF CONTRACTUAL PAYMENTS APPEARS TO BE AN AFTER THOUGHT SINCE IT WAS NOT IN EXISTENCE AT THE TIME O F SEARCH OPERATION; - THE EVIDENCE PRODUCED IN THE FORM OF AN AGREEMENT S IGNED BY RAJA BAGMANE AND HIS WIFE SMT VASUNDHARA RAJA WAS TO BE AN AFTER THOUGHT TO GO SCOT-FREE; (III) THE JOURNAL ENTRIES PASSED IN VARIOUS ASSESSMENT YE ARS IN THE CASE OF BDPL RESULTED INTO THE PERSONAL BENEFIT TO THE A SSESSEE; - BDPL WHO ADVANCED THE LOAN TO THE ASSESSEE WAS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING AND, THEREFORE, THE LOAN GIVEN TO THE ASSESSEE COMES UNDER THE PURVIEW OF S.2 (22)(E) OF THE ACT; 8.2. THE REASONING OF THE LD. CIT (A) WAS THAT ITA NO.458-461/BANG/10 PAGE 13 OF 32 (I) EXCEPT THE ALLEGED AGREEMENT, NO OTHER EVIDENCE WAS ADVANCED TO PROVE THAT THE ADVANCES GIVEN WERE FOR THE PURPOSE OF THE BUSINESS OF BDPL; (II) THE ALLEGED AGREEMENT WAS PRODUCED BEFORE THE AO ON LY ON 15.12.2008 WHICH WAS NEITHER A REGISTERED DOCUMENT NOR A DOCUMENT ENTERED INTO BY AN INDEPENDENT PERSON, BU T, WAS BETWEEN A HUSBAND AND WIFE AND, THEREFORE, SELF SER VING DOCUMENT; & (III) THE CASE LAWS RELIED ON BY THE ASSESSEE HAS NOT COM E TO ITS RESCUE AS THEY WERE DISTINGUISHABLE. 9. ON ANALYZING THE REASONS ATTRIBUTED BY THE AUTH ORITIES BELOW, THE FOLLOWING CRUCIAL POINTS WERE EMERGED THAT (1) BOTH THE COMPANIES - BDPL AND THE ASSESSEE COM PANY GOVERNED BY THE BOARD OF DIRECTORS - WERE IN THE BUSINESSES OF (I) REAL ESTATE OF ACQUIRING LANDS AND DEVELOPING THEM INTO BUILDINGS; AND (II) OTHER BEING A DEVELOPER OF DEVELOPING TECH PARKS ETC., SINCE B OTH THE PARTIES WERE IN THE SAME LINE OF BUSINESS REAL ESTATE AND DEVELO PING OF TECH. PARK - THEY HAVE ENTERED INTO NEGOTIATIONS AND SCRIPTED THE TER MS AND CONDITIONS WHICH WERE REDUCED THROUGH AN AGREEMENT (EXECUTED) DATED : 13.11.2002 [SOURCE: P 184 OF PB AR], ACCORDING TO WHICH, FOR P ROCUREMENT OF LANDS AND DEVELOPMENT OF THE SAME INTO COMMERCIAL USE WAS TO BE EXECUTED BY THE ASSESSEE FOR WHICH NECESSARY FUNDS WERE PROVIDED TO THE ASSESSEE UNTIL SUCH A TIME BDPL HAD ARRANGED FINANCE FOR ITS PROJ ECTS FROM OTHER SOURCES SUCH AS BANKS ETC.,. THE RELEVANT CLAUSES 10 AND 11 OF THE SAID AGREEMENT ARE REPRODUCED, FOR APPRECIATION OF FACTS, AS UNDER : 10. THE SECOND PARTY SHALL ADVANCE FUNDS TO THE FI RST PARTY FROM TIME TO TIME FOR ACQUIRING THE PROPERTIES AND SHALL FINANC E THE CONSTRUCTION TILL SUCH TIME THE FIRST PARTY IS ABLE TO SECURE FINANCE FROM THE BANKS FOR THE PROJECT OR FIND AN INVESTOR FOR THE PROJECT. 11. ON COMPLETION OF THE CONSTRUCTION ON THE PROPE RTIES ACQUIRED, THE FIRST PARTY SHALL ASSIGN THE AREA ON THE BASIS OF COST + 4% MARGIN TO THE SECOND PARTY FOR THE AMOUNTS PAID BY THE SECOND PARTY TO T HE FIRST PARTY PURSUANT TO ITA NO.458-461/BANG/10 PAGE 14 OF 32 THE ABOVE ARRANGEMENT ENTERED. THE ALLOTMENT OF SP ACE IS IRREVOCABLE. IN THIS CONNECTION, THE FIRST PARTY SHALL IN CLOSE CO- ORDINATION WITH THE SECOND PARTY FREEZE THE COST OF PROJECT PER SQ. FEET AND S HALL ALLOW THE REPRESENTATIVES OF THE SECOND PARTY FOR PERIODICAL ACCESS TO ITS ACCOUNTS. AS COULD BE SEEN FROM THE AGREEMENT CITED SUP RA, THE PURPOSE INTENDED AND THE TERMS AND CONDITIONS HAVE BEEN DUL Y EARMARKED. THIS HAS NEITHER BEEN DISPUTED BY THE AO NOR BY THE FIRS T APPELLATE AUTHORITY. THE AOS SOLE OBJECTION WAS THAT SUCH AMOUNTS HAVE BEEN SHOWN UNDER THE HEAD UNSECURED LOANS IN ITS BALANCE SHEETS. IN THIS CONNECTION, WE WOULD LIKE TO POINT OUT THAT THE FUNDS FLOWN THROUG H FROM BDPL TO THE ASSESSEE COMPANY HAVE NOT BEEN DISPUTED, BUT, THE D ISPUTE REVOLVED ONLY WITH REGARD TO THE NOMENCLATURE IN THE BALANCE SH EETS OF THE ASSESSEE. IN THE BALANCE-SHEETS, THE FUNDS RECEIVED COULD HAV E BEEN SHOWN INADVERTENTLY AS UNSECURED LOANS OR ADVANCES BY THE PERSONS WHO WERE AT THE HELM OF AFFAIRS IN THE ACCOUNTING SECTION OF THE ASSESSEE WHICH, IN OUR CONSIDERED VIEW, DOESNT ALTER THE NATURE AND C HARACTER OF THE TRANSFER OF FUNDS WHICH TOOK PLACE AND IT CANNOT BE A SOLE R EASON TO CATEGORIZE THAT THE FUNDS WERE UNSECURED LOANS AND, THUS, THE PR OVISIONS OF S.2 (22)(E) OF THE ACT HAVE COME TO PLAY A ROLE. IT COULD BE SEEN THAT THE FUNDS HAVE BEEN PROVIDED WITH AN INTENTION TO INDULGE IN SUCH A VENTURE DURING THE COURSE OF BUSINESS EXPEDIENCY AS EVIDENCED IN THE A GREEMENT ENTERED INTO. IN THIS CONNECTION, IT IS MORE APPROP RIATE TO HAVE A GLIMPSE OF THE RULING OF THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS V. CIT REPORTED IN 288 ITR 1 (SC) WHEREIN THE HONBLE COUR T, IN ITS INFINITE WISDOM, HAD OBSERVED THUS ITA NO.458-461/BANG/10 PAGE 15 OF 32 THE EXPRESSION COMMERCIAL EXPEDIENCY IS ONE OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRED UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS BU SINESS EXPENDITURE IF IT WAS INCURRED ON GROUNDS OF COMMERCIAL EXPEDIENCY..THAT THE BORROWED AMOUNT I S NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BU T HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT REL EVANT. WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COM MERCIAL EXPEDIENCY AND NOT FROM THE POINT OF WHETHER THE AM OUNT WAS ADVANCED FOR EARNING PROFITS. WITH HIGHEST REGARDS, WE WOULD LIKE TO POINT T HAT THE ASSESSEE HAD RECEIVED FUNDS AS A MEASURE OF COMMERCIAL EXPED IENCY OF THIS VENTURE WHICH, IN ANY STRETCH OF IMAGINATION, CAN BE TERMED AS EITHER ADVANCE OR LOAN AS ALLEGED BY THE REVENUE. WHILE DECIDING TH E ISSUE IN THE CASE OF S.A.BUILDERS CITED SUPRA, THE HONBLE SUPREME COURT HAD PUTS ITS SEAL OF APPROVAL TO THE RATIO LAID DOWN BY THE HONBLE DELH I HIGH COURT IN THE CASE OF CIT V. DALMIA CEMENT REPORTED IN 254 ITR 377 (DE L) WHEREIN THE HONBLE COURT HELD THAT THE AUTHORITIES MUST NOT LOOK AT THE MATTER FROM T HEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN. AS ALREADY STAT ED ABOVE, WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SIST ER CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS . (2) THE AOS ANOTHER CONTENTION WAS THAT THE ASS ESSEE WAS UNABLE TO SUBSTANTIATE ITS CLAIM THAT THE FUNDS WERE GIVEN FO R BUSINESS EXIGENCIES AND WAS IN THE NATURE OF CONTRACTUAL PAYMENTS. IN THIS CONNECTION, WE WOULD LIKE TO MENTION HERE THAT THE BALANCE-SHEETS, JOURN AL ENTRIES IN THE BOOKS OF ACCOUNT AMPLY MAKE IT CLEAR THAT THE FUNDS WERE PRO VIDED DURING THE COURSE OF BUSINESS.. ITA NO.458-461/BANG/10 PAGE 16 OF 32 (3) THE OTHER REASONING OF THE AO WHICH WAS RATI FIED BY THE LEARNED FIRST APPELLATE AUTHORITY THAT THE ALLEGED NON-REGISTERED AGREEMENT WAS PRODUCED BEFORE THE AO ONLY ON 15.12.2008 AND SIGNE D BY HUSBAND AND WIFE [RAJA BAGMANE AND SMT. VASUNDHARA RAJA] WHICH WAS NOTHING BUT AN AFTER THOUGHT AND SO ON AND SO FORTH. WITH REGARD TO THE CIT(A)S ARGUMENT THAT TH E AGREEMENT DT.13.11.2002 WAS PRODUCED BY THE ASSESSEE AS A PIE CE OF EVIDENCE ONLY ON 15.12.2008 BEFORE THE AO EVEN THOUGH THE HEARING WAS GOING ON AND ALSO WHEN THE AO CONTEMPLATED TO TREAT THE SAME AS DEEMED DIVIDEND BY ISSUANCE OF A SHOW-CAUSE NOTICE ETC., IT MAY NOT B E OUT PLACE TO BRING ON RECORD THAT THE ASSESSEE HAD IN FACT PRODUCED THE E VIDENCE IN THE MIDST OF ASSESSMENT PROCEEDINGS I.E., ON 15.12.2008 AND, THUS, THIS COULD NOT BE A SOUND REASON TO PUT THE VERY EXISTENCE OF THE AGRE EMENT ITSELF UNDER THE SCANNER. IN A NUT-SHELL, THE AUTHORITIES BELOW HAVE FAILE D TO BRING ON RECORD ANY CREDIBLE DOCUMENTARY EVIDENCE TO PROVE T HAT THE ACTION OF THE ASSESSEE WAS NOTHING BUT AN AFTER THOUGHT AND THE D OCUMENT ITSELF WAS SELF SERVING ETC., MERELY MAKING A SWEEPING REM ARK ON THE GENUINENESS OF THE VERY EXISTENCE OF AN AGREEMENT WITHOUT AN IN DISPUTABLE EVIDENCE, IN OUR VIEW, IS LACKING CONVICTION. ANALYZING THE OTHER REASONING OF THE LD. CIT (A) THAT THE AGREEMENT WAS NEITHER A REGISTERED DOCUMENT NOR A D OCUMENT ENTERED INTO BY AN INDEPENDENT PERSON BECAUSE THE DOCUMENT HAS B EEN AUTHENTICATED BY HUSBAND AND WIFE, IT WAS NOTICED THAT THE FUNDAM ENTAL FACT OF THE ISSUE ITA NO.458-461/BANG/10 PAGE 17 OF 32 HAS BEEN LOST SIGHT OF, IN THE SENSE THAT THE AGREE MENT WAS EXECUTED NOT BETWEEN RAJA BAGMANE AND MRS. VASUNDHARA RAJA IN TH E STATUS OF A WIFE AND A HUSBAND AS HAS BEEN PROJECTED, BUT, REPRESENT ING TWO LIMITED COMPANIES. NO DOUBT, WIFE AND HUSBAND HAVE REPRESE NTED THEIR RESPECTIVE COMPANIES IN THE CAPACITY OF MANAGING DIRECTOR AN D AUTHORIZED SIGNATORY RESPECTIVELY AND, THUS, THE QUESTION OF MARITAL RELATIONSHIP SHOULD NOT HAVE BEEN DRAGGED IN TO DOUBT THE BONA FIDE OF THE AGREEMENT ITSELF. THE AGREEMENT HAS NOT BEEN ENTERED INTO BY RAJA BAG MANE AND MRS. VASUNDHARA RAJA IN THE STATUS OF HUSBAND AND WIFE, BUT, IN THE CAPACITY OF MANAGING DIRECTOR AND AUTHORIZED SIGNATORY REPRESEN TING THEIR RESPECTIVE COMPANIES GOVERNED BY THE BOARD OF DIRECTORS. THER E WAS ALSO NO LEGAL IMPEDIMENT TO SUGGEST THAT AN AGREEMENT COULD NOT B E ENTERED INTO BY THE HUSBAND AND WIFE WHEN THEY WERE REPRESENTING THEIR RESPECTIVE COMPANIES/ORGANIZATIONS ETC., (4) THE OTHER REASONING OF THE AO WAS THAT BDPL WHICH ADVANCED THE ALLEGED LOANS TO THE ASSESSEE NOT ENGAGED IN THE B USINESS OF MONEY LENDING AND, THEREFORE, THE LOAN GIVEN TO THE ASSES SEE COMES UNDER THE PURVIEW OF S.2 (22)(E) OF THE ACT. WE WOULD LIKE T O REITERATE THAT THE BDPL WAS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING, B UT, THE FUNDS SO ALLOCATED TO THE ASSESSEE DURING THE COURSE OF BUSI NESS WHICH PURELY ON BUSINESS EXIGENCY AND, THUS, THE AMOUNTS SO FUNDED DO NOT FALL WITHIN THE SPHERE OF ADVANCE OR LOAN , AS THE CASE MAY BE, SO AS TO BRING IT UNDER THE PURVIEW OF S. 2 (22)(E) OF THE ACT. ITA NO.458-461/BANG/10 PAGE 18 OF 32 (5) WE ARE IN TOTAL DISAGREEMENT WITH THE L D. CIT (A)S PERCEPTION THAT THE ASSESSEES RELIANCE ON THE RULING OF HONBLE SU PREME COURT IN THE CASE OF S.A. BUILDERS V. CIT CITED SUPRA WAS NOT APPLICA BLE. NO DOUBT, THE ISSUE WAS WHETHER INTEREST ON BORROWED CAPITAL ALLOWABLE OR NOT. HOWEVER, THE LD. CIT (A) HAD FAILED TO NOTICE, PERHAPS BY OVERSI GHT, THE CONCEPT AND THE RATIO L AID DOWN BY THE HONBLE COURT WHILE DECIDING THE I SSUE. FOR THE SAKE OF READY REFERENCE, WE REPRODUCE THE RELEVANT PORTION OF THE RULING OF THE HONBLE COURT THAT IT WAS REQUIRED TO BE ENQUIRED AS TO WHETHER THE INTEREST-FREE LOAN WAS GIVEN TO THE SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY. IF IT IS SO, INTEREST ON BORROWED FUNDS IS TO BE AL LOWED IT, FURTHER, WENT ON TO OBSERVE THAT THE AUTHORITIES SHOULD EXAMINE THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY T O ITS SISTER CONCERN AND WHAT THE SISTER CONCERN DID WITH THIS MONEY IN ORDE R TO DECIDE WHETHER IT WAS FOR COMMERCIAL EXPEDIENCY. THUS, THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE CITED SUPRA IS FIT IN TO THE ISSUE ON HAND. ONE SHOULD ANALYZE THE ISSUE, KEEPING IN VIEW THE PROCE DURE LAID DOWN BY THE HONBLE SUPREME COURT, WHETHER THE FUNDS RECEIVED W AS DURING THE COURSE OF BUSINESS OR OTHERWISE. AS THE TRANSACTION TOOK PLACE DURING THE COURSE OF BUSINESS AND IN THE BUSINESS EXIGENCY, WE ARE OF THE FIRM VIEW THAT THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS CITED SUPRA IS ABSOLUTELY APPLICABLE TO THE FACTS O F THE ISSUE ON HAND. (6) THE AO HAD PLACED RELIANCE ON THE RULING O F THE HONBLE APEX COURT IN THE CASE OF CIT V. MYSODET (P) LTD. (1999) 237 I TR 35 (SC) TO DRIVE ITA NO.458-461/BANG/10 PAGE 19 OF 32 HOME HIS POINT. WE HAVE DILIGENTLY PERUSED THE OBS ERVATION OF THE HONBLE COURT WHEREIN IT WAS RULED THAT A PERUSAL OF SECTION 2(22)(E) SHOWS THAT FOR THE P URPOSE OF THE ACT, ANY PAYMENT MADE BY A COMPANY OF ANY SUM OF MONEY BY WA Y OF ADVANCE OR LOAN TO ITS SHAREHOLDERS IS DEEMED TO BE A DIVIDEND . SINCE THE ACT HAS NOT PROVIDED FOR ANY OTHER DEFINITION OF THE WORD DIVI DEND EXCEPT THE ONES ENUMERATED IN SECTION 2(22), IT SHOULD BE CONSTRUED THAT THIS DEFINITION WOULD BE APPLICABLE TO ALL PROVISIONS WHICH CONTAIN THE TERM DIVIDEND IN THE ACT. WITH RESPECTS, WE WOULD LIKE TO MENTION HERE THAT THE HONBLE COURT HAD OBSERVED ON A PERUSAL OF S.2 (22) (E ) ANY PAYMENT MADE BY A COMPANY OF ANY SUM OF MONEY BY WAY OF ADVANCE OR LOAN TO ITS SHAREHOLDERS IS DEEMED TO BE A DIVIDEND . THE LITERALLY MEANING OF ANY SUM OF MONEY BY WAY OF ADVANCE OR LOAN TO ITS SHAREHOLDERS , IT IS DEEMED TO BE A DIVIDEND WHEREAS IN THE CASE ON HAND, THE AMOUNTS RECEIVED W ERE IN THE NORMAL COURSE OF BUSINESS AND FOR THE BUSINESS EXIGENCY AND, THEREFORE, IT CANNOT BE TERMED AS ADVANCE OR LOAN SO AS TO INVOKE THE PROVISIONS OF S.2 (22)(E) OF THE ACT. WITH DUE REG ARDS, WE REITERATE THAT THE FINDING OF THE HONBLE SUPREME COURT REFERRED SUPRA HAS NO APPLICATION TO THE FACTS OF THE ISSUE ON HAND. SIMILARLY, THE CASE LAW [ SMT TARULATA SHYAM V. CIT (1977) 108 ITR 345 (SC)] RELIED ON THE AO HAS NO RELEVANCE FOR THE REASONS RECORDED SUPRA. (7) IN THE CASE OF MS. P SARADA V. CIT REPORTED IN 229 ITR 444 (SC), THE ISSUE BEFORE THE HIGHEST JUDICIARY OF THE LAND WAS THAT WHETHER, THE WITHDRAWALS MADE BY THE ASSESSEE FROM UNIVERSAL RAD IATORS PRIVATE ITA NO.458-461/BANG/10 PAGE 20 OF 32 LIMITED TOTALING RS. 93,027 CAN BE ASSESSED IN THE HANDS OF THE ASSESSEE UNDER SECTION 2(22)(E) OF THE ACT FOR THE YEAR 1973 -74 ? AFTER DUE CONSIDERATION OF THE FACTS OF THE CASE, THE HONBLE COURT WAS PLEASED TO RULE THAT - THE WITHDRAWALS MADE BY THE APPELLANT FROM THE COM PANY AMOUNTED TO GRANT OF LOAN OR ADVANCE BY THE COMPANY TO THE SHAR EHOLDER. THE LEGAL FICTION CAME INTO PLAY AS SOON AS THE MONIES WERE P AID BY THE COMPANY TO THE APPELLANT. THE ASSESSEE MUST BE DEEMED TO HAVE RECEIVED DIVIDENDS ON THE DATES ON WHICH SHE WITHDREW THE AFORESAID AMOUN TS OF MONEY FROM THE COMPANY. THE LOAN OR ADVANCE TAKEN FROM THE COMPANY MAY HAVE BEEN ULTIMATELY REPAID OR ADJUSTED, BUT THAT WILL NOT AL TER THE FACT THAT THE ASSESSEE, IN THE EYE OF LAW, HAD RECEIVED DIVIDEND FROM THE COMPANY DURING THE RELEVANT ACCOUNTING PERIOD. WITH HIGHEST REGARDS, WE WOULD LIKE TO POINT OUT THAT THE ISSUE BEFORE THE HONBLE APEX COURT WAS ON THE DIFFERENT FOOTING WHICH HAS NO RELEVANCE TO THE ISSUE ON HAND ON THE VERY GROUND T HAT THE ASSESSEE HAD NOT RECEIVED ANY LOAN OR ADVANCE FOR ITS OWN BENEFIT, BUT, THE FUNDS WERE PROVIDED FOR THE EXECUTION SPECIFIC PURPOSE ON BEHA LF OF BDPL. THUS, IN OUR CONSIDERED VIEW, THE CASE LAW CITED BY THE AUTH ORITIES BELOW IS DISTINGUISHABLE. WITH DUE RESPECTS, WE WOULD LIKE TO MAKE IT C LEAR THAT NONE OF THE THREE CONDITIONS PRESCRIBED BY THE HONBLE COUR T ARE APPLICABLE TO THE CASE ON HAND, NAMELY, (1) NO PAYMENTS WERE MADE TO THE ASSESSEE BY WAY OF ADVANCE OR LOAN BY BDPL, BUT, FUNDS WERE ALL OCATED FOR EXECUTION OF WORK ASSIGNED TO THE ASSESSEE ON ITS BEHALF; (2) NO PAYMENTS WERE MADE ON ITS BEHALF; AND (3) PAYMENTS MADE WERE NOT FOR ANYBODYS ITA NO.458-461/BANG/10 PAGE 21 OF 32 INDIVIDUAL BENEFIT. THE PAYMENTS IN QUESTION WERE PROVIDED DUE TO BUSINESS EXIGENCIES OF BDPL AND THE FUNDS SO PROVID ED FOR THE SOLE BENEFIT OF BDPL AND NOT TO INDIVIDUAL BENEFIT OF A SHAREHOLDER AND, THEREFORE, THE QUESTION OF APPLICABILITY OF THE PRO VISIONS OF S.2 (22)(E) OF THE ACT DOESNT ARISE. WE ARE, THEREFORE, OF THE CONSIDERED VIEW THAT TH E CASE LAWS RELIED ON BY THE AUTHORITIES HAVE NO RELEVANC E TO THE PRESENT ISSUE. 9.4. THE HONBLE DELHI HIGH COURT IN ITS RECENT JUDGMENT IN THE CASE OF CIT V. CREATIVE DYEING AND PRINTING PVT. LI MITED REPORTED IN 318 ITR 476 (DEL) RULED THAT SECTION 2 (22) (E) OF THE ACT CAN BE APPLIED TO LOANS OR ADVANCES SIMPLICITER AND NOT TO THOSE TRANSACTIONS CARRIED OUT IN THE COURSE OF BUSINESS AS SUCH. IN THE COURSE OF C ARRYING ON BUSINESS TRANSACTION BETWEEN A COMPANY AND A STOCKHOLDER, TH E COMPANY MAY BE REQUIRED TO GIVE ADVANCE IN MUTUAL INTEREST. THERE IS NO LEGAL BAR IN HAVING SUCH TRANSACTION. WHAT IS TO BE ASCERTAINED IS -W HAT IS THE PURPOSE OF SUCH ADVANCE? IF THE AMOUNT IS GIVEN AS ADVANCE SI MPLICITER OR AS SUCH PER SE WITHOUT ANY FURTHER OBLIGATION BEHIND RECEIV ING SUCH ADVANCES, MAY BE TREATED AS DEEMED DIVIDEND, BUT, IF IT IS OTHERWISE , THE AMOUNT GIVEN CANNOT BE BRANDED AS ADVANCES WITHIN THE MEANING OF DEEMED DIVIDEND UNDER SECTION 2 (22) (E). IN RENDERING THIS DECISION, THE HONBLE HIGH COURT HAD PLACED RELIANCE IN THE DECISION OF THE CASE OF CIT V. RAJ KUMAR (2009) 318 ITR 462 (DEL), CIT V. AMBASSADOR TRAVELS (P.) LTD. (2009) 3 18 ITR 376 AND CIT V. NAGIN DAS M. KAPADIA (1989) 177 ITR 393)(BOM). ITA NO.458-461/BANG/10 PAGE 22 OF 32 WE REPRODUCE THE RELEVANT PORTION OF THE FINDING IN THE CASE OF CIT V. CREATIVE DYEING AND PRINTING P. LTD. FOR REFERENCE: BEFORE US, THE LEARNED COUNSEL FOR THE APPELLANT/R EVENUE HAS CONTENDED THAT THE PRESENT CASE IS A CASE OF DEEMED DIVIDEND INASMUCH AS M/S. PEE EMPRO EXPORTS PVT. LTD. HAS GIVEN A LOAN TO THE ASS ESSEE-COMPANY BUT THE LENDING COMPANY, NAMELY, M/S. PEE EMPRO EXPORTS PVT . LTD. IS NOT INTO THE BUSINESS OF MONEY LENDING AS REQUIRED BY SECTION 2( 22)(E)(II). THE COUNSEL FOR THE RESPONDENT, ON THE OTHER HAND, HAS REFERRED TO TWO RECENT DIVISION BENCH JUDGMENTS OF THIS COURT REPORTED AS CIT V. RA J KUMAR [2009] 181 TAXMAN 155 AND CIT V. AMBASSADOR TRAVELS (P.) LTD. [2008] 173 TAXMAN 407 TO CONTEND THAT MERELY BECAUSE A LOAN IS GIVEN BY M /S. PEE EMPRO EXPORTS PVT. LTD. TO THE ASSESSEE-COMPANY WOULD NOT MEAN THAT THE SAME WOULD BECOME A DEEMED DIVIDEND INASMUCH AS MONEYS A RE PAID FOR TRANSACTIONS WHICH ARE BUSINESS TRANSACTIONS/COMMER CIAL TRANSACTIONS AND, THEREFORE SUCH TRANSACTIONS CANNOT FALL UNDER THE E XPRESSION DEEMED DIVIDEND WITHIN THE PROVISION OF SECTION 2(22)(E). BEFORE WE REFER TO THE RIVAL CONTENTIONS OF THE PAR TIES, WE WOULD LIKE TO REPRODUCE THE FOLLOWING FINDING OF FACTS ARRIVED AT BY THE TRIBUNAL : 7.5 IN THE PRESENT CASE THE AMOUNT PAID BY M/S. PE E EMPRO EXPORTS TO THE APPELLANT-COMPANY DOES NOT BEAR THE CHARACTERISTIC OF LOANS AND ADVANCES. THE AMOUNT HAS BEEN PAID BY M/S. PEE EMPRO EXPORTS IN ITS OWN INTEREST AND THAT TOO FOR THE PURPOSE OF BUSINESS BECAUSE TH E ULTIMATE BENEFICIARY OF THE PROPOSED EXPANSION OF PLANT AND MACHINERY IS M/ S. PEE EMPRO EXPORTS ITSELF. M/S. PEE EMPRO EXPORTS HAS NOT MADE THE PAY MENT TO THE APPELLANT- COMPANY FOR THE INDIVIDUAL BENEFIT OF MR. R.S. UPPA L AND MR. P.M.S. UPPAL AND ON THE CONTRARY THESE TWO DIRECTORS HAVE ALSO P ROVIDED FUNDS TO THE APPELLANT-COMPANY AS OWNERS OF THE COMPANY AS ALSO MADE BY M/S. PEE EMPRO EXPORTS. THE ASSESSEE UNDERTOOK EXPANSION OF ITS CAPACITY, W HICH WAS IN MUTUAL INTEREST OF ASSESSEE AS WELL PEE EMPRO EXPORTS. IF THE ASSESSEE HAS NOT UNDERTAKEN SUCH EXPANSION, NO ADVANCE COULD HAVE BE EN MADE TO IT OR THAT PEE EMPRO EXPORTS WOULD NOT HAVE DISTRIBUTED AS DIV IDEND TO ITS SHAREHOLDERS. THUS, BUT FOR THE ADVANCES, THE AMOUN T OF ADVANCES COULD NOT HAVE REACHED ASSESSEE AT ALL. WE THEREFORE, DELETE THE ADDITIONS AS MADE BY THE ASSESSING OFFICER AS THE AMOUNT RECEIVED BY ASS ESSEE IS NOT DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE COUNSEL FOR THE REVENUE HAS ALSO FURTHER STATED THAT IT IS NOT IN DISPUTE THAT THE MONIES WHICH HAVE BEEN ADVANCED TO THE ASSESSEE-COMPANY BY M/S. PEE EMPRO EXPORTS PVT. LTD. HAVE NOT TO BE REPAID BUT HAVE TO BE ITA NO.458-461/BANG/10 PAGE 23 OF 32 ADJUSTED AGAINST THE DUES PAYABLE BY M/S. PEE EMPRO EXPORTS PVT. LTD. TO THE ASSESSEE-COMPANY IN THE SUBSEQUENT YEARS FOR TH E JOB WORK OF PRINTING AND DYEING WHICH IS DONE BY THE ASSESSEE-COMPANY FO R M/S. PEE EMPRO EXPORTS PVT. LTD. WE FIND THAT THE TRIBUNAL IN THE PRESENT CASE HAS V ERY EXTENSIVELY DEALT WITH LEGISLATIVE INTENTION OF INTRODUCING SECTION 2 (22)(E) AND HAS REFERRED TO SUCH LEGISLATIVE INTENTION BY REFERENCE TO SUPREME COURT JUDGMENT IN THE CASE OF NAVNIT LAL C. JAVERI V. K.K. SEN [1965] 5 6 ITR 198 WHERE A SIMILAR PROVISION OF THE INCOME-TAX ACT, 1922 I.E., SECTION 2(6A)(E) WAS IN ISSUE BY REPRODUCING THE RELEVANT PARA IN NAVNIT LAL C. JAVE RIS CASE (SUPRA) AS UNDER : IN DEALING WITH MR. PATHAKS ARGUMENT IN THE PRESE NT CASE, LET AS RECALL THE RELEVANT FACTS. THE COMPANIES TO WHICH THE IMPU GNED SECTION APPLIES ARE COMPANIES IN WHICH AT LEAST 75 PER CENT OF THE VOTI NG POWER LIES IN THE HANDS OF OTHER THAN THE PUBLIC, AND THAT MEANS THAT THE C OMPANIES ARE CONTROLLED BY A GROUP OF PERSONS ALLIED TOGETHER AND HAVING TH E SAME INTEREST. IN THE CASE OF SUCH COMPANIES, THE CONTROLLING GROUP CAN D O WHAT IT LIKES WITH THE MANAGEMENT OF THE COMPANY, ITS AFFAIRS AND ITS PROF ITS WITHIN THE LIMITS OF THE COMPANIES ACT. IT IS FOR THIS GROUP TO DETERMINE WH ETHER THE PROFITS MADE BY THE COMPANY SHOULD BE DISTRIBUTED AS DIVIDENDS OR N OT. THE DECLARATION OF DIVIDEND IS ENTIRELY WITHIN THE DISCRETION OF THIS GROUP. WHEN THE LEGISLATURE REALIZED THAT THOUGH MONEY WAS REASONABLY AVAILABLE WITH THE COMPANY IN THE FORM OF PROFITS, THOSE IN CHARGE OF THE COMPANY DELIBERATELY REFUSED TO DISTRIBUTE IT AS DIVIDENDS TO THE SHAREHOLDERS, BUT ADOPTED THE DEVICE OF ADVANCING THE SAID ACCUMULATED PROFITS BY WAY OF LO AN OR ADVANCE TO ONE OF ITS SHAREHOLDERS, IT WAS PLAIN THAT THE OBJECT OF S UCH A LOAN OR ADVANCE WAS TO EVADE THE PAYMENT OF TAX ON ACCUMULATED PROFITS UNDER SECTION 23A. IT WILL BE REMEMBERED THAT AN ADVANCE OR LOAN WHICH FALLS W ITHIN THE MISCHIEF OF THE IMPUGNED SECTION IS ADVANCE OR LOAN MADE BY A C OMPANY WHICH DOES NOT NORMALLY DEAL IN MONEY-LENDING, AND IT IS MADE WITH THE FULL KNOWLEDGE OF THE PROVISIONS CONTAINED IN THE IMPUGNED SECTION. T HE OBJECT OF KEEPING ACCUMULATED PROFITS WITHOUT DISTRIBUTING THEM OBVIO USLY IS TO TAKE THE BENEFIT OF THE LOWER RATE OF SUPER-TAX PRESCRIBED FOR COMPA NIES. THIS OBJECT WAS DEFEATED BY SECTION 23A WHICH PROVIDES THAT IN THE CASE OF UNDISTRIBUTED PROFITS, TAX WOULD BE LEVIED ON THE SHAREHOLDERS ON THE BASIS THAT THE ACCUMULATED PROFITS WILL BE DEEMED TO HAVE BEEN DIS TRIBUTED AGAINST THEM. SIMILARLY, SECTION 12(1B) PROVIDES THAT IF A CONTRO LLED COMPANY ADOPTS THE DEVICE OF MAKING A LOAN OR ADVANCE TO ONE OF ITS SH AREHOLDERS SUCH SHAREHOLDERS WILL BE DEEMED TO HAVE RECEIVED THE SA ID AMOUNT OUT OF THE ACCUMULATED PROFITS AND WOULD BE LIABLE TO PAY TAX ON THE BASIS THAT HE HAS RECEIVED THE SAID LOAN BY WAY OF DIVIDEND. IT IS CL EAR THAT WHEN SUCH A DEVICE IS ADOPTED BY A CONTROLLED COMPANY, THE CONTROLLING GROUP CONSISTING OF SHAREHOLDERS HAVE DELIBERATELY, DECIDED TO ADOPT TH E DEVICE OF MAKING A LOAN OR ADVANCE. SUCH AN ARRANGEMENT IS INTENDED TO EVAD E THE APPLICATION OF ITA NO.458-461/BANG/10 PAGE 24 OF 32 SECTION 23A. THE LOAN MAY CARRY INTEREST AND THE SA ID INTEREST MAY BE RECEIVED BY THE COMPANY; BUT THE MAIN OBJECT UNDERL YING THE LOAN IS TO AVOID PAYMENT OF TAX..... . THE TRIBUNAL HAS ALSO REFERRED TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. NAGINDAS M. KAPADIA [19 89] 177 ITR 393 1 IN WHICH IT WAS HELD THAT BUSINESS TRANSACTIONS ARE OU TSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. IN THE SAID CASE, THE COMPANY IN WHICH KAPADIA WAS HAVING SUBSTANTIAL INTEREST HAD PAID VARIOUS AM OUNT TO KAPADIA. THE TRIBUNAL HAD FOUND THAT KAPADIA HAD BUSINESS TRANSA CTIONS WITH THE COMPANY AND ON VERIFICATION OF THE ACCOUNTS, THE TR IBUNAL DELETED THE AMOUNTS WHICH WERE RELATING TO THE BUSINESS TRANSAC TIONS AND WHICH FINDING WAS UPHELD BY THE HIGH COURT. IN THE PRESENT CASE THE TRIBUNAL ON CONSIDER ING DECISIONS IN VARIOUS CASES HELD AS UNDER : FROM THE RATIO LAID DOWN IN ABOVE CASES AND ON THE BASIS OF JUDICIAL INTERPRETATION OF WORDS, LOANS OR ADVANCES, IT CAN BE HELD THAT SECTION 2(22)(E) CAN BE APPLIED TO LOANS OR ADVANCES SI MPLICITER AND NOT TO THOSE TRANSACTIONS CARRIED OUT IN COURSE OF BUSINESS AS S UCH. IN THE COURSE OF CARRYING ON BUSINESS TRANSACTION BETWEEN A COMPANY AND A STOCKHOLDER, THE COMPANY MAY BE REQUIRED TO GIVE ADVANCE IN MUTUAL I NTEREST. THERE IS NO LEGAL BAR IN HAVING SUCH TRANSACTION. WHAT IS TO BE ASCERTAINED IS WHAT IS THE PURPOSE OF SUCH ADVANCE. IF THE AMOUNT IS GIVEN AS ADVANCE SIMPLICITER OR AS SUCH PER SE WITHOUT ANY FURTHER OBLIGATION BEHIND R ECEIVING SUCH ADVANCES, MAY BE TREATED IS DEEMED DIVIDEND, BUT IF IT IS O THERWISE, THE AMOUNT GIVEN CANNOT BE BRANDED AS ADVANCES WITHIN THE MEANING OF DEEMED DIVIDEND UNDER SECTION 2(22)(E). JUST AS PER CLAUSE (II) OF SECTION 2(22)(E), DIVIDEND IS NOT TO INCLUDE ADVANCE OR LOAN MADE BY A COMPANY IN THE ORDINARY COURSE OF BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIA L PART OF THE BUSINESS OF THE COMPANY, ADVANCE IN THE ORDINARY COURSE OF CARR YING ON BUSINESS CANNOT BE CONSIDERED AS DIVIDEND WITHIN THE MEANING OF S ECTION 2(22)(E). BY GRANTING ADVANCE IF THE BUSINESS PURPOSE OF THE COM PANY IS SERVED AND WHICH IS NOT THE SUM, WHICH IT OTHERWISE WOULD HAVE DISTRIBUTED AS DIVIDEND, CANNOT BE BROUGHT WITHIN THE DEEMING PROVISION OF T REATING SUCH ADVANCE AS DEEMED DIVIDEND. WE AGREE WITH THE AFORESAID OBSERVATIONS. THE FIN DING OF FACTS, ARRIVED AT BY THE TRIBUNAL, IN THE PRESENT CASE, IS THAT THE TRANSACTION IN QUESTION WAS A BUSINESS TRANSACTION AND WHICH TRANS ACTION WOULD HAVE BENEFITED BOTH THE ASSESSEE-COMPANY AND M/S. PEE EM PRO EXPORTS PVT. LTD. IN FACT, AS STATED ABOVE, THE COUNSEL FOR THE APPEL LANT HAS CONCEDED THAT THE ITA NO.458-461/BANG/10 PAGE 25 OF 32 AMOUNT IS IN FACT NOT A LOAN BUT ONLY AN ADVANCE BE CAUSE THE AMOUNT PAID TO THE ASSESSEE-COMPANY WOULD BE ADJUSTED AGAINST THE ENTITLEMENT OF MONEYS OF THE ASSESSEE-COMPANY PAYABLE BY M/S. PEE EMPRO E XPORTS PVT. LTD. IN THE SUBSEQUENT YEARS. THE COUNSEL FOR THE APPELLANT HAS VERY STRENUOUSL Y URGED THAT NEITHER THE TRIBUNAL NOR THE JUDGMENT OF THIS COURT IN RAJ KUMARS CASE (2009) 318 ITR 462 (DELHI); (2009) 181 TAXMAN 155 DEALS WITH T HAT PART OF THE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2(22)(E ) WHICH STATES THAT DEEMED DIVIDEND DOES NOT INCLUDE AN ADVANCE OR LOAN MADE TO A SHAREHOLDER BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY [SECTION 2(22)(E)(II)], I.E., THERE IS NO DEEMED DIVIDEND O NLY IF THE LENDING OF MONEYS IS BY A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF MONEY-LENDING. DILATING FURTHER THE COUNSEL FOR THE APPELLANT CONT ENDED THAT SINCE M/S. PEE EMPRO EXPORTS PVT. LTD. IS NOT INTO THE BUSINESS OF LENDING OF MONEY, THE PAYMENTS MADE BY IT TO THE ASSESSEE-COMPANY WOULD, THEREFORE, BE COVERED BY SECTION 2(22)(E)(II) AND CONSEQUENTLY PAYMENTS E VEN FOR THE BUSINESS TRANSACTIONS WOULD BE A DEEMED DIVIDEND. WE DO NOT AGREE. THE TRIBUNAL HAS DEALT WITH THIS ASPECT AS REPRODUCED IN PARA (9 ) ABOVE. THE PROVISION OF SECTION 2(22)(E)(II) IS BASICALLY IN THE NATURE OF AN EXPLANATION. THAT CANNOT, HOWEVER, HAVE BEARING ON INTERPRETATION OF THE MAIN PROVISION OF SECTION 2(22)(E) AND ONCE IT IS HELD THAT THE BUSINESS TRAN SACTIONS DOES NOT FALL WITHIN SECTION 2(22)(E), WE NEED NOT TO GO FURTHER TO SECTION 2(22)(E)(II). THE PROVISION OF SECTION 2(22)(E)(II) GIVES AN EXAMPLE ONLY OF ONE OF THE SITUATIONS WHERE THE LOAN/ADVANCE WILL NOT BE TREAT ED AS A DEEMED DIVIDEND, BUT THAT IS ALL. THE SAME CANNOT BE EXPANDED FURTHE R TO TAKE AWAY THE BASIC MEANING, INTENT AND PURPORT OF THE MAIN PART OF SEC TION 2(22)(E). WE FEEL THAT THIS INTERPRETATION OF OURS IS IN ACCORDANCE W ITH THE LEGISLATIVE INTENTION OF INTRODUCING SECTION 2(22)(E) AND WHICH HAS BEEN EXTENSIVELY DEALT WITH BY THIS COURT IN THE JUDGMENT IN RAJ KUMARS CASE [200 9] 318 ITR 462 (DELHI); [2009] 181 TAXMAN 155. THIS COURT IN RAJ KUMARS C ASE (SUPRA) EXTENSIVELY REFERRED TO THE REPORT OF THE TAXATION ENQUIRY COMMISSION AND THE SPEECH OF THE FINANCE MINISTER IN THE BUDGET WH ILE INTRODUCING THE FINANCE BILL. ULTIMATELY, THIS COURT IN THE SAID JU DGMENT HELD AS UNDER (PAGE 473) : A BARE READING OF THE RECOMMENDATIONS OF THE COMM ISSION AND THE SPEECH OF THE THEN FINANCE MINISTER WOULD SHOW THAT THE PU RPOSE OF INSERTION OF CLAUSE (E) TO SECTION 2(6A) IN THE 1922 ACT WAS TO BRING WITHIN THE TAX NET MONIES PAID BY CLOSELY HELD COMPANIES TO THEIR PRIN CIPAL SHAREHOLDERS IN THE GUISE OF LOANS AND ADVANCES TO AVOID PAYMENT OF TAX . THEREFORE, IF THE SAID BACKGROUND IS KEPT IN MIND, IT IS CLEAR THAT SUB- CLAUSE (E) OF SECTION 2(22) OF THE ACT, WHICH IS PA RIMATERIA WITH CLAUSE (E) OF SECTION 2(6A) OF THE 1922 ACT, PLAINLY SEEKS TO BRI NG WITHIN THE TAX NET ITA NO.458-461/BANG/10 PAGE 26 OF 32 ACCUMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSEL Y HELD COMPANIES TO ITS SHAREHOLDERS IN THE FORM OF LOANS. THE PURPOSE BEIN G THAT PERSONS WHO MANAGE SUCH CLOSELY HELD COMPANIES SHOULD NOT ARRAN GE THEIR AFFAIRS IN A MANNER THAT THEY ASSIST THE SHAREHOLDERS IN AVOIDIN G THE PAYMENT OF TAXES BY HAVING THESE COMPANIES PAY OR DISTRIBUTE, WHAT WOUL D LEGITIMATELY BE DIVIDEND IN THE HANDS OF THE SHAREHOLDERS, MONEY IN THE FORM OF AN ADVANCE OR LOAN. IF THIS PURPOSE IS KEPT IN MIND THEN, IN OUR VIEW, THE WORD ADVANCE HAS TO BE READ IN CONJUNCTION WITH THE WORD LOAN. USUALLY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES POSITIVE ACT OF LENDING C OUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS LOAN: IT GENERALLY C ARRIES AN INTEREST AND THERE IS AN OBLIGATION OF REPAYMENT. ON THE OTHER HAND, I N ITS WIDEST MEANING THE TERM ADVANCE MAY OR MAY NOT INCLUDE LENDING. THE WORD ADVANCE IF NOT FOUND IN THE COMPANY OF OR IN CONJUNCTION WITH A WO RD LOAN MAY OR MAY NOT INCLUDE THE OBLIGATION OF REPAYMENT. IF IT DOES THEN IT WOULD BE A LOAN. THUS, ARISES THE CONUNDRUM AS TO WHAT MEANING ONE W OULD ATTRIBUTE TO THE TERM ADVANCE. THE RULE OF CONSTRUCTION TO OUR MIN DS WHICH ANSWERS THIS CONUNDRUM IS NOSCITUR A SOCIIS. THE SALE RULE HAS BEEN EXPLAINED BOTH BY THE PRIVY COUNCIL IN THE CASE OF ANGUS ROBERTSON V. GEORGE DAY [1879] 5 AC 63 BY OBSERVING IT IS A LEGITIMATE RULE OF CONS TRUCTION TO CONSTRUE WORDS IN AN ACT OF PARLIAMENT WITH REFERENCE TO WORDS FOU ND IN IMMEDIATE CONNECTION WITH THEM AND OUR SUPREME COURT IN THE CASE OF ROHIT PULP AND PAPER MILLS LTD. V. COLLECTOR OF CENTRAL EXCISE, AI R 1991 SC 754 AND STATE OF BOMBAY V. HOSPITAL MAZDOOR SABHA, AIR 1960 SC 61 0. THEREFORE, WE HOLD THAT THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE AMOUNTS ADVANCED FOR BUSINESS TRANSACTION BETWEEN T HE PARTIES, NAMELY, THE ASSESSEE-COMPANY AND M/S. PEE EMPRO EXPORTS PVT. LT D. WAS NOT SUCH TO FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2(22)(E). THE PRESENT APPEAL IS, THEREFORE, DISMISSED. 9.5. FURTHER, S. 2(22)(E) BRINGS IN A DEEMING FICT ION. IT PROVIDES IN CERTAIN CIRCUMSTANCES AN ADVANCE OR LOAN IS TREATED AS DIVIDEND IN THE HANDS OF THE SHAREHOLDER. ADVANCES AND LOANS HAVE TO BE INTERPRETED IN ITS TRUE SENSE. ANY PAYMENT MADE OUT OF BUSINESS EXPED IENCY DOES NOT FALL WITHIN THE AMBIT OF ADVANCES AND LOANS, THOUGH THE ACCOUNTING ENTRIES ARE PASSED AS SUCH. THE TRUE NATURE OF THE TRANSACTION HAS TO BE SEEN AS TO WHETHER THE TRANSACTION IS ATTRIBUTABLE TO BE A LOA N OR AN ADVANCE. IN ITA NO.458-461/BANG/10 PAGE 27 OF 32 CONSTRUING A DEEMING FICTION, IT IS NOT TO BE EXTEN DED BEYOND THE PURPOSE FOR WHICH THE DEEMING FICTION IS CREATED OR BEYOND THE LANGUAGE OF THE SECTION. IN INTERPRETING A DEEMING FICTION, THE IN TENTION OF THE LEGISLATURE HAS TO BE GIVEN DUE IMPORTANCE. THE FICTION SHOULD NOT BE EXTRAPOLATED BEYOND THE PURPOSE FOR WHICH THE LEGISLATION IS BRO UGHT IN. ON INTERPRETATION OF A LEGAL FICTION, IT WAS HELD IN CONTROLLER OF ESTATE DUTY V. KRISHNA KUMARI DEVI (173 ITR 561) THAT THE COURT SHOULD ASCERTAIN THE PURPOSE FOR WHICH THE FICTION IS CREATED AND AFTER DOING SO, ASSUME ALL FACTS WHICH ARE INCIDENTAL TO GIVE IN EFFECT TO THE FICTI ON. IN CIT V. HINDUSTAN PETROLEUM CORPORATION LTD. (187 ITR 1) (BOM) , IT WAS HELD THAT A LEGAL FICTION HAS TO BE CARRIED TO ITS LOGICAL CONCLUSION , BUT, ONLY WITHIN THE PARAMETERS OF THE PURPOSE FOR WHICH A FICTION IS CR EATED. MOREOVER, AS FAR AS POSSIBLE, THE LEGAL FICTION SHOULD NOT BE GIVEN A MEANING SO AS TO CAUSE INJUSTICE. THUS, IT IS OBVIOUS THAT THE FICTION CRE ATED IN SECTION 2(22)(E) ONLY REFERS TO PURE ADVANCES OR LOANS. ANY AMOUNT PAID ON ACCOUNT OF GENUINE BUSINESS TRANSACTION BETWEEN THE ENTITIES FALLS OUT SIDE THE AMBIT OF SECTION 2(22)(E). AS A RESULT OF GLOBALIZATION DURING THE RECENT PAST, VARIOUS GIANT INFRASTRUCTURE PROJECTS HAVE SPRUNG UP AND MANY ARE IN THE PIPELINE. MULTI- VARIOUS ACTIVITIES ARE INVOLVED IN PROMOTING THESE GIANT PROJECTS. ALL THESE ACTIVITIES COLLECTIVELY STRIVE TO COMPLETE THE PROJ ECTS. EACH ACTIVITY IS DISTINCT IN CHARACTER. FOR EACH ACTIVITY, DIFFERENT KINDS OF COMMERCIAL AGREEMENTS AND TECHNICAL AGREEMENTS ARE REQUIRED. THE FINANCIAL STRUCTURE OF EVERY ACTIVITY DIFFERS. THE RISK AND REWARD INV OLVED IN EVERY ACTIVITY ALSO DIFFERS. IN ORDER TO MEET SUCH COMPLEX CONSTRAINTS , THE FLAGSHIP COMPANY/THE PROMOTER MAY CREATE VARIOUS DISTINCT EN TITIES BEING SPECIAL ITA NO.458-461/BANG/10 PAGE 28 OF 32 UTILITY VEHICLES (SUV) TO DEAL IN EACH OF THESE ACT IVITIES INDEPENDENTLY. THE PROMOTER ALONG WITH THESE SUV JOINTLY WORKS TO COMP LETE THE OVER-ALL PROJECT. IN SUCH SITUATION, FUNDS BEING THE BLOODL INE FOR ALL THESE ENTITIES FLOW FROM ONE ENTITY TO THE OTHER. SUCH TRANSFER O F FUNDS ARISING OUT OF COMMERCIAL EXPEDIENCY MAY NOT BE IN THE NATURE OF ADVANCES OR LOAN IN ALL CIRCUMSTANCES. 9.6. TAKING INTO ACCOUNT THE FACTS AND THE CIRCUMS TANCES OF THE ISSUE WHICH HAS BEEN ELABORATELY ANALYZED IN THE FO RE-GOING PARAGRAPHS, WE ARE OF THE FIRM VIEW THAT (I) THE ASSESSEE HAD FURNISHED THE DOCUMENTARY EV IDENCE BY MEANS OF AN AGREEMENT ENTERED INTO AND THAT THE AMOUNTS RECEIVED DURING THE COURSE OF BUSINESS AND DUE TO BUSINESS EXIGENCY; (II) THE NOMENCLATURE UNSECURED LOAN AND ADVANC E, PERHAPS INADVERTENTLY, SHOWN IN THE BALANCE SHEETS SHALL NO T ALTER THE CHARACTER OF THE PURPOSE FOR WHICH THE AMOUNTS RECE IVED; (IV) THE SWEEPING REMARK OF THE AUTHORITIES BELOW THAT T HE AGREEMENT ENTERED INTO BY THE PARTIES CONCERNED WAS AN AFTER- THOUGHT AND THAT THE AGREEMENT SO ENTERED BETWEEN A HUSBAND AND WIFE ETC., WILL NOT STAND THE TESTIMONY OF LAW UNLESS IT HAS BEEN BACKED WITH CLINCHING DOCUMENTARY EVIDENCE; (V) THE AUTHORITIES ALLEGATION THAT THE JOURNAL ENTRIES PASSED IN VARIOUS ASSESSMENT YEARS IN THE CASE OF BDPL RESULT ED INTO THE PERSONAL BENEFIT TO THE ASSESSEE ETC., WILL NOT HOL D WATER UNLESS IT HAS BEEN PROVED SO WITH DOCUMENTARY EVIDENCE; (VI) NO DOUBT, BDPL WAS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING AND, THUS, IT COULD BE TERMED THAT THE AMO UNTS SO RECEIVED COME UNDER THE AMBIT OF S. 2(22)(E) OF THE ACT PROVIDED THE AMOUNTS WERE IN THE NATURE OF ADVANCE OR LOAN. INCIDENTALLY, THIS HAS NOT BEEN IMPLICITLY PROVED B Y THE REVENUE; (VII) THE CLINCHING EVIDENCE IN THE FORM OF AN AGREEMENT ENTERED INTO WITH BDPL AS PRODUCED BY THE ASSESSEE HAS NOT BEEN REBUTTED ITA NO.458-461/BANG/10 PAGE 29 OF 32 WITH ANY CONCRETE PROOF. THE ONUS RATHER PLACED AT THE DOORSTEP OF THE REVENUE HAS NOT BEEN DULY DISCHARGED; (VIII) WHEN AN AGREEMENT IN QUESTION WAS BETWEEN TWO LIMI TED COMPANIES, THOUGH RAJA BAGMANE AND MRS. VASUNDHARA RAJA REPRESENTED THEIR RESPECTIVE COMPANIES IN THE CAPAC ITY OF MANAGING DIRECTOR AND AUTHORIZED SIGNATORY, THE IR PERSONAL MARITAL RELATIONSHIP DOESNT COME INTO F ORE. (IX) WITH REGARD TO THE AOS REASONING (FOR THE AY 2006- 07) THAT TRANSFER OF SHARES BY RAJA BAGMANE IN FAVOUR OF MRS . VASUNDHARA RAJA WAS NOT REAL TRANSFER BUT A DEVICE TO REDUCE THE NUMBER OF SHARES SO THAT HE WAS NOT TREATED AS A SHARE HOLDER HAVING SUBSTANTIAL INTEREST ETC., WE FIND THAT - - THE SALES OF SHARES HAVE BEEN DISCLOSED IN THE BALA NCE SHEETS OF RAJA BAGMANE AND SMT. VASUNDHARA RAJA AS ON 31.3.2006. T HERE WAS A RUNNING ACCOUNT OF SMT. VASUNDHARA RAJA IN BOOKS OF RAJA BAGMANE AND, THEREFORE, THE CONSIDERATION DUE WAS DEBITED T O HER ACCOUNT. SIMILARLY, IN THE ACCOUNT OF RAJA BAGMANE IN THE BO OKS OF SMT. VASUNDHARA RAJA, CREDIT ENTRIES WERE PASSED; - RAJA BAGMANE WAS NOT HAVING 10% SHAREHOLDING IN TH E ASSESSEE COMPANY THROUGHOUT THE YEAR. THOUGH RAJA BAGMANE DI D HOLD MORE THAN 10% SHARE IN BDPL THROUGHOUT THE YEAR, HE DID NOT HOLD 10% SHARE IN THE ASSESSEE COMPANY THROUGHOUT THE YEAR. THUS, THE PROVISIONS OF S.2 (22)(E) WILL GET ATTRACTED ONLY I F THE CONCERNED PERSON WAS NOT ONLY A REGISTERED SHAREHOLDER BUT AL SO A BENEFICIAL SHAREHOLDER HOLDING NOT LESS THAN 10% OF THE SHARE; - EVIDENCE FOR TRANSFER OF SHARES FROM RAJA BAGMANE TO SMT.VASUNDHARA RAJA IN THE CASE OF THE ASSESSEE WAS PRODUCED IN THE FORM OF REGISTRAR OF COMPANIES CERTIFICATE ANNUA L RETURN OF THE ASSESSEE FOR THE YEAR 2005-06 [SOURCE: P 87 94 PB AR ] AND ALSO THE COMPANY SECRETARY [REGISTRAR OF COMPANIES] IN HIS LETTER DATED: 28.11.2008 [P 120 OF PB AR] HAD AUTHENTICATED THE SHAREHOLDING PATTERN AS ON 31.3.2006 AS UNDER: ITA NO.458-461/BANG/10 PAGE 30 OF 32 SL.NO. NAME OF THE SHARE- HOLDER NUMBER OF SHARES % OF SHAREHOLDING 01 RAJA BAGMANE 900 9 02 MRS.VASUNDHARA RAJA 9100 91 (IX) TO REBUT THE REVENUES ALLEGATIONS, THE CONTEN TIONS OF THE ASSESSEE WERE THAT A.Y. 2004-05: RS.5.44 CRORES WAS GIVEN BY BDPL TO ENABLE THE ASSESSEE TO ACQUIRE THE LAND BEING AUCTIONED BY NGE L ON ITS BEHALF FOR DEVELOPMENT AS PER THE AGREEMENT ENTERED INTO. RS.4.89 CRORES WAS PAID TO NGEF BEING EMD AND FIRST INSTALLMENT. HOWEVER, THE EMPLOYEES TOOK UP THE ISSUE BEFORE THE HIGH COURT A GAINST SUCH AUCTION. CONSEQUENT ON THE RULING OF THE HONBLE HI GH COURT AGAINST SUCH AUCTION, THE SAID AMOUNT WAS REFUNDED TO BDPL BY THE ASSESSEE [ANNEXURE III OF BRIEF NOTE AR ] A.Y. 2005-06 & 06-07: THE ASSESSEE WAS IN RECEIPT OF RS.96.3 LAKHS AND RS.26.95 LAKHS DURING THE AYS 05-06 AND 06-07 FROM BDPL TO MEET THE LEGAL AND OTHER EXPENSES IN CONNECTION WIT H THE NGEF LAND DISPUTE. A.Y. 2007-08 : OUT OF RS.6.18 CRORES RECEIVED FROM BDPL TO FACI LITATE THE ASSESSEE TO PARTICIPATE IN VARIOUS AUCTIONS TO ACQUIRE THE PROPERTIES FOR DEVELOPMENT ON BEHALF OF BDPL. HOWE VER, RS.4.9 CRORES WAS RETURNED TO BDPL DUE TO UNSUCCESSFUL IN AUCTIONS AND FOR THE BALANCE AMOUNT OF RS.1.25 CRORES, A PROPERTY AT HYDERABAD WAS PROCURED - ALLOTMENT LETTER AND POSSESSION MEMO FROM OFFICIAL LIQUIDATOR, H. COURT OF A.P. PLACED AT ANNEXURE IV OF BRIEF NOTE OF AR . ACCORDING TO THE LD. A.R, THIS PROPERTY IS YET T O BE REGISTERED AND DEVELOPED. IN A NUT-SHELL , THE ABOVE DOCUMENTARY PROOFS PRODUCED BY THE ASSE SSEE BELIE THE STAND OF THE REVENUE ON THIS POINT. 9.7 TO SUM UP, WE ARE OF THE UNANIMOUS VIEW THAT T HE AO WAS NOT JUSTIFIED IN INVOKING THE PROVISIONS OF S.2 (22 )(E) OF THE ACT IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS UNDER DISPUTE. THE LD. ITA NO.458-461/BANG/10 PAGE 31 OF 32 CIT (A)S STAND IN UPHOLDING THE FINDINGS OF THE AO WAS ALSO NOT JUSTIFIABLE FOR THE REASONS RECORDED SUPRA . IT IS ORDERED ACCORDINGLY. 10. THE ISSUE OF APPLICABILITY OF S.2 (22)(E) OF T HE ACT IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE FOR THE REA SONS RECORDED IN THE FORE-GOING PARAGRAPHS, THE ASSESSEES OTHER GRIEVA NCE THAT THE CIT(A) ERRED IN NOT REDUCING THE ACTUAL TAX LIABILITY OF T HE RELEVANT CURRENT YEAR FROM THE PROFITS OF THAT YEAR FOR THE PURPOSES OF C OMPUTATION OF ACCUMULATED PROFITS HAS NOT BEEN ADDRESSED TO. 11. THE LAST GROUND OF THE ASSESSEE THAT THE CIT(A ) ERRED IN UPHOLDING THE LEVY OF INTEREST U/S 234B OF THE ACT IS NOT MAINTAINABLE AS CHARGING OF INTEREST U/S 234B OF THE ACT IS MANDATO RY AND CONSEQUENTIAL IN NATURE. THIS GROUND IS, THEREFORE, DISMISSED. 12. IN THE RESULT , THE ASSESSEES APPEALS FOR THE ASSESSMENT YEARS 200 4- 05, 2005-06, 2006-07 & 2007-08 ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF NOVEMBER, 2010. SD/- SD/- ( GEORGE GEORGE K. ) (A. MOHAN ALANKAMONY ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 12 TH NOVEMBER, 2010. DS/- ITA NO.458-461/BANG/10 PAGE 32 OF 32 COPY TO: BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE. 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE