RAVINDRA R. FOTEDAR, MUMBAI V. ASST CIT 10(2), MUMBAI

ITA 6778/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9715 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-12-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 25-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend; Accommodation entries; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI P K BANSAL, VICE PRESIDENT & SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO.6778/MUM/2013 ASSESSMENT YEAR : 2010 2011 RAVINDRA R FOTEDAR 7 BHARAT TIRTH SOCIETY, SION TROMBAY ROAD, CHEMBUR, MUMBAI 400 071 PAN AACPF1616R VS. ACIT 10(2) MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANUJ KISNADWALA RESPONDENT BY : SHRI PURUSHOTTAM KUMAR DATE OF HEARING : 31. 08 .2017 DATE OF PRONOUNCEMENT : 11 .0 9 .2017 O R D E R PER P K BANSAL, VICE-PRESIDENT: THIS APPEAL HAS BEEN FILED BY THE AGAINST THE ORDER OF THE CIT(A) - 22, MUMBAI, DATED 07.12.2012, FOR A.Y.2010 -11. THE ON LY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE SUSTENANCE OF THE ADDITION U/ S. 2(22)(E) MADE BY THE ASSESSING OFFICER AMOUNTING TO ` 88,22,785/-, WHICH CONSISTS OF THE FOLLOWING: I. ADVANCE GIVEN BY FLAMINGO ADDITIVES & COLOURANTS PV T. LTD TO FLAMINGO POLYCOLOURS PVT. LTD. ` 48,50,000/- II. ADVANCE GIVEN BY FLAMINGO ADDITIVES & COLOURANTS PV T. LTD TO GENESIS NUTECH PVT. LTD. ` 38,60,000/- ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 2 III. AMOUNT PAID BY FLAMINGO ADDITIVES & COLOURANTS PVT. LTD TO FLAMINGO POLYCOLOURS PVT. LTD. AGAINST CREDIT BALAN CE ` 1,09,785 IV. AMOUNT PAID BY FLAMINGO POLYCOLOURS PVT. LTD TO M/S . GENESIS NEUTECH PVT LTD ` 3000. IN THE ALTERNATIVE, THE ASSESSEE HAS TAKEN ONE MORE GROUND THAT IN CASE THE AMOUNT IS TREATED TO BE DEEMED DIVIDEND IT SHOULD B E RESTRICTED TO THE EXTENT OF ACCUMULATED PROFIT AMOUNTING TO ` 78,50,414/-. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT FLAMING O ADDITIVES & COLOURANTS PVT. LTD HAD ADVANCED ` 48,50,000/- TO FLAMINGO POLYCOLOURS PVT. LTD., FLAMINGO ADDITIVES & COLOURANTS PVT. LTD HAD ADVANCED ` 38,60,000/- TO GENESIS NUTECH PVT. LTD., FLAMINGO POLYCOLOURS PVT. LTD HAD ADVANCED ` 3000/- TO M/S. GENESIS NEUTECH PVT LTD. HE NOTED T HAT THE ASSESSEE HAD SUBSTANTIAL INTEREST IN THE FOLLOWING COMPANIES NAME OF THE PARTY % OF SHARE HOLDING FLAMINGO POLY COLORS PVT. LTD 47.3% GENESIS NUTECH PVT. LTD 25% FLAMINGO ADDITIVES AND COLOURANTS PVT LTD 48% THE ASSESSING OFFICER WAS THEREFORE OF THE VIEW THA T THE AMOUNT SO ADVANCED IS TO BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) O F THE ACT. ACCORDINGLY, HE ASKED THE ASSESSEE WHY THE SAID AMOUNT MAY NOT BE T REATED AS DEEMED DIVIDEND. THE ASSESSEE INITIALLY CONTENDED THAT UN DER NO CIRCUMSTANCES THE ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 3 AGGREGATE AMOUNT OF LOAN/ADVANCES OF ` 87,10,000/- CAN BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. IN THIS REGARD RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS: ACIT VS. BHAUMIK COLOUR PRIVATE LTD. 118 ITD 1 CIT VS UNIVERSAL MEDICARE PVT LTD 190 TAXMAN 144 (B OM) CIT VS HOTEL HILTOP 217 CTR 527 (RAJ) THE ASSESSEE HAS ALSO TAKEN A PLEA THAT THE ACCOUNT S BETWEEN THESE COMPANIES SHOULD BE TREATED AS CURRENT ACCOUNT AND THE TRANSACTIONS TEMPORARY IN NATURE. THE ASSESSING OFFICER REJECTE D THE PLEA OF THE ASSESSEE BY REFERRING TO SECTION 2(22)(E), ACCORDING TO WHIC H ANY LOAN OR DEPOSIT GIVEN BY A COMPANY TO A SHARE HOLDER, WHO IS HOLDING NOT LESS THAN 10% OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST, SUCH LOAN OR DEPOSIT IS DEEMED TO BE A DIVIDEND FROM THE ACCUMULATED PROFIT S OF THE COMPANY. THE ASSESSING OFFICER THEREFORE, AFTER ANALYZING THE SO URCE OF SURPLUS OF THE COMPANY, ULTIMATELY TOOK A VIEW THAT THE AFORE LOAN OF ` 88,22,785/- IS DEEMED DIVIDEND WITHIN THE PURVIEW OF SECTION 2(22) (E) OF THE ACT. 3. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER BY ALLOWING RELIEF OF ` 18,761/- TO THE ASSESSEE. ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 4 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y CONSIDERED THE SAME ALONG WITH THE ORDERS OF THE AUTHORITIES BELOW. TH E ONLY ISSUE RELATES TO THE ADDITION MADE U/S. 2(22)(E) OF THE ACT AMOUNTING TO ` 88,22,785/-. THE BREAKUP OF WHICH IS AS UNDER: A) LOAN GIVEN BY M/S. FLAMINGO ADDITIVES AND COLOUR ANTS PVT LTD TO M/S. FLAMINGO POLYCOLOURS PVT LTD ` 48,50,000 B) LOAN GIVEN BY M/S. FLAMINGO ADDITIVES AND COLOUR ANTS PVT LTD TO M/S. GENESIS NEUTECH PVT. LTD ` 38,60,000 C) AMOUNT PAID BY M/S. FLAMINGO ADDITIVES AND COLOU RANTS PVT LTD TO M/S. FLAMINGO POLYCOLOURS PVT. LTD AGAIN ST THE CREDIT BALANCE ` 1,09,785 D) AMOUNT PAID BY M/S. FLAMINGO POLYCOLOURS PVT LTD TO M/S. GENESIS NEUTECH PVT LTD IN THE TRADING TRANSAC TION ` 3,000 IT IS NOT DENIED THAT THE ASSESSEE HAS SUBSTANTIAL INTEREST IN THESE COMPANIES AS DETAILED BELOW: NAME OF THE PARTY % OF SHARE HOLDING FLAMINGO POLY COLORS PVT. LTD 47.3% GENESIS NUTECH PVT. LTD 25% FLAMINGO ADDITIVES AND COLOURANTS PVT LTD 48% BEFORE DECIDING THE ISSUE WHETHER THE SAID AMOUNT C AN BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE IT ACT OR NOT, IN OUR OPINION, IT IS NECESSARY TO LOOK INTO THE PROVISIONS OF SECTION 2(22)(E), WHICH STIPULATES AS UNDER: ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 5 '(E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF A NY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF TH E COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MA Y, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, B EING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT B EING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CO NCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN T HIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEF IT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE CO MPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS.' 4.1 THIS SECTION WHICH IS EQUIVALENT TO SECTION 2( 6A)(E) OF THE INCOME-TAX ACT, 1922 WAS FOR THE FIRST TIME INTRODUCED AS BY THE FINANCE ACT, 1955 WHICH STATES AS FOLLOWS : (A) 'ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN W HICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED WITHIN THE MEAN ING OF SECTION 23A, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF A SHAREHOLDER, TO TH E EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULA TED PROFITS.' 4.2 PRIOR TO 1 ST APRIL 1988, SECTION 2(22) OF THE INCOME-TAX ACT, 1 961 DEFINES DIVIDEND AS FOLLOWS: 'SECTION 2(22) 'DIVIDEND' INCLUDES (A) TO (D) .. (E) ANY PAYMENT MADE BY A COMPANY, NOT BEING A COM PANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF A NY SUM (WHETHER ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 6 AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY, OR ANY P AYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEF IT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS.' 4.3 UNDER THE INCOME-TAX ACT, 1922, TWO CATEGORIES OF PAYMENT WERE CONSIDERED AS DIVIDEND VIZ. (A) ANY PAYMENT BY WAY OF ADVANCE OR LOAN TO A SHAR EHOLDER , OR (B) ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FO R THE INDIVIDUAL BENEFIT OF A SHAREHOLDER. 4.4 IN THE 1961 ACT, FOR THESE VERY SAME PAYMENTS A N ADDITIONAL CONDITION WAS INTRODUCED THAT THE PAYMENT SHOULD BE TO A SHAR EHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES AND WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY I.E. A SHAREHOLDING WHICH CARRIES NOT L ESS THAN 20% OF THE VOTING POWER. THIS PERCENTAGE OF VOTING POWER WAS R EDUCED FROM 20% TO 10% WITH EFFECT FROM 1ST APRIL, 1988 BY THE 1987 AM ENDMENT. BY THE VERY SAME AMENDMENT, PAYMENT TO ANY CONCERN IN WHICH SU CH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTI AL INTEREST WAS ALSO CONSIDERED AS DIVIDEND. AS PER SECTION 2(32) THE EX PRESSION 'PERSON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY', IN RELATION TO A COMPANY, MEANS A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES, NOT B EING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RI GHT TO PARTICIPATE IN PROFITS, ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 7 CARRYING NOT LESS THAN 20% OF THE VOTING POWER. 'SU CH SHAREHOLDER' IS THE SHAREHOLDER WHO IS A REGISTERED AND A BENEFICIAL HO LDER OF SHARES HOLDING 10% VOTING POWER. 4.5 THROUGH THIS SUB-CLAUSE, DEEMING FICTION IS CRE ATED WHEREBY THE SCOPE AND AMBIT OF THE WORD DIVIDEND HAS BEEN ENLARGED TO BRING WITHIN ITS COVER LOANS GRANTED BY CLOSELY HELD COMPANIES TO THEIR SH AREHOLDERS. IN ORDER TO HAVE A CHECK ON SIMILAR TRANSACTIONS, THE LEGISLATI ON WIDENS THE SCOPE OF THE TERM DIVIDEND TO INCLUDE LOANS GRANTED TO SHAREHO LDER BY THE CLOSELY HELD COMPANIES. THE WORD DEEMED HAS NOT BEEN DEFINED A NYWHERE IN THE ACT. NEITHER HAS THE WORD BEEN USED IN SECTION 2(22)(E). DEEMED DIVIDEND IS THEREFORE A LEGAL FICTION CREATED WHEREIN CERTAIN P AYMENTS BY COMPANIES ARE DEEMED TO BE DIVIDENDS. THIS IS A SETTLED LAW IN VI EW OF THE DECISIONS OF APEX COURT IN THE CASE OF STATE OF BOMBAY VS. PANDURANG VINAYAK CHAPHALKAR (1953) SCR 773 THAT LEGAL FICTIONS ARE CREATED ONLY FOR A DEFINITE PURPOSE AND THEY ARE LIMITED TO THE PURPOSE FOR WHICH THEY ARE CREATED AND CANNOT EXTEND BEYOND THEIR LEGITIMATE FIELD. THE LEGAL FICTION IS OF COURSE TO BE CARRIED TO ITS LOGICAL CONCLUSION, BUT THAT MUST BE WITHIN THE FRA MEWORK OF THE PURPOSE FOR WHICH IT IS CREATED. THE COURTS MUST ASSUME THAT SU CH A STATE OF AFFAIRS EXISTS AS REAL, AND SHOULD IMAGINE AS REAL THE CONSEQUENCE S AND INCIDENTS WHICH INVARIABLY FLOW THEREFROM, AND GIVE EFFECT TO THEM. FURTHER, A DEEMING PROVISION MAY BE INTENDED TO ENLARGE THE MEANING OF A PARTICULAR WORD OR TO ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 8 INCLUDE MATTERS WHICH OTHERWISE MAY OR MAY NOT FALL WITHIN THE MAIN PROVISION [ REFER: G. VISWANATHAN VS. HONBLE SPEAK ER, TAMIL NADU LEGISLATIVE ASSEMBLY (1996) 2 SCC 353 (SC)]. 4.6 THIS PROVISION, THUS, WOULD NECESSARILY BE ACCO RDED STRICT INTERPRETATION AND THE AMBIT OF THE FICTION WOULD NOT BE PRESSED B EYOND ITS TRUE LIMITS. IT IS NOW A WELL SETTLED LAW THAT THE FICTION IS TO BE CA RRIED TO ITS LOGICAL END HOWEVER, AT THE SAME TIME, IT CAN ALSO NOT BE EXPAN DED SO AS TO INCLUDE THE FACTS WHICH REQUIRE SUBSTANTIAL MODIFICATION AS COM PARED TO THE FACTS TO BE CAPTURED AS PRESCRIBED BY THE LEGISLATURE. 4.7 FROM THE READING OF SECTION 2(22)(E), IT IS APP ARENT THAT IT HAS THE EFFECT OF BRINGING TO TAX AS DIVIDEND BELOW REFERRE D TYPES OF PAYMENTS MADE BY A COMPANY: ANY PAYMENT OF ANY SUM (WHETHER AS REPRESENTING A P ART OF THE ASSETS OF THE COMPANY OR OTHERWISE) BY WAY OF ADVAN CE OR LOAN TO A SHAREHOLDER (EXTENDED TO PAYMENT TO CONCERNS I N WHICH SHAREHOLDER HOLDS SUBSTANTIAL INTEREST); ANY PAYMENT ON BEHALF OF SUCH SHAREHOLDER; ANY PAYMENT FOR THE INDIVIDUAL BENEFIT OF SUCH SHAR EHOLDER. 4.8 ANY OF THE ABOVE REFERRED PAYMENTS WOULD BE TAX ED UNDER THIS SUB- CLAUSE IF FOLLOWING THREE CONDITIONS ARE FULFILLED: THE COMPANY NOT TO BE THE ONE IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED WITHIN THE MEANING OF SEC TION 2(18); IF THE ADVANCE OR LOAN IS MADE AFTER 31 MAY, 1987 T O A SHAREHOLDER WHO BENEFICIALLY OWNS AT LEAST 10 PER C ENT OF THE EQUITY CAPITAL, OR TO A CONCERN IN WHICH HE IS MEMB ER / PARTNER ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 9 AND IS BENEFICIALLY ENTITLED TO NOT LESS THAN 20% O F INCOME OF THE CONCERN. THE COMPANY SHOULD POSSESS ACCUMULATED PROFITS AT T HE TIME IT MAKES THE PAYMENT, THE PAYMENT BEING DEEMED TO BE D IVIDEND ONLY TO THE EXTENT OF SUCH PROFITS. 4.9 SECTION ALSO PRESCRIBES AN EXCEPTION TO THE ABO VE RULE. SUCH EXCEPTION APPLIES WHERE TWO CUMULATIVE CONDITIONS ARE SATISFI ED FIRSTLY, THE LOAN SHOULD HAVE BEEN MADE BY THE COMP ANY IN THE ORDINARY COURSE OF ITS BUSINESS, AND SECONDLY, MONEY LENDING SHOULD BE A SUBSTANTIAL PAR T OF THE COMPANYS BUSINESS. 4.10 FURTHER, THE SECTION ALSO GIVES RELIEF BY PROV IDING THAT ANY SUBSEQUENT DIVIDEND DECLARED BY THE COMPANY AND SET-OFF AGAINS T THE LOAN OR ADVANCE, WHICH HAS BEEN DEEMED AS DIVIDEND UNDER SUB-CLAUS E (E), THEN TO THE EXTENT OF SUCH SET-OFF, IT WOULD NOT BE AGAIN TREATED AS D IVIDEND. THAT IS TO SAY, IF THE DIVIDEND IS NOT SO SET OFF BUT IS PAID TO THE S HAREHOLDER WHILE THE LOAN REMAINS OUTSTANDING, THE BENEFIT OF SUB-CL (III) CA NNOT BE OBTAINED. 4.11 IN THE ACT, THE WORD 'SHAREHOLDER' IS FOLLOWED BY THE EXPRESSION 'BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES'. TH IS EXPRESSION USED IN SECTION 2(22)(E) BOTH IN THE ACT, AND IN THE AMENDE D PROVISIONS WITH EFFECT FROM 1ST APRIL, 1988 ONLY QUALIFIES THE WORD 'SHARE HOLDER' AND DOES NOT IN ANY WAY ALTER THE POSITION THAT THE SHAREHOLDER HAS TO BE A REGISTERED SHAREHOLDER. THIS PROVISION ALSO DOES NOT REDUCE TH E REQUIREMENT OF BEING A REGISTERED SHAREHOLDER TO A REQUIREMENT OF MERELY H OLDING A BENEFICIAL ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 10 INTEREST IN THE SHARES WITHOUT BEING A REGISTERED H OLDER OF SHARES. THE EXPRESSION 'BEING A PERSON WHO IS THE BENEFICIAL OW NER OF SHARES' IS THEREFORE A FURTHER REQUIREMENT BEFORE A SHAREHOLDER CAN BE S AID TO FALL WITHIN THE PARAMETERS OF SECTION 2(22)(E) OF THE ACT. IN THE A CT, SECTION 2(22)(E) IMPOSES A FURTHER CONDITION THAT THE SHAREHOLDER HA S ALSO TO BE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIX ED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER. 4.12 THE EXPRESSION 'SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES' REFERRED TO IN SECTION 2(22)(E) RE FERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER, THE N THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIONS O F SECTION 2(22)(E) WILL NOT APPLY. MUMBAI ITAT SPECIAL BENCH IN THE CASE OF ACI T VS. BHAUMIK COLOUR P. LTD., 313 ITR (AT) 147 (MUMBAI) [SB] HAS HELD THAT FOR THE PURPOSE OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) THE SHAREHOL DER MUST BE BOTH REGISTERED AND BENEFICIAL SHAREHOLDER ON WHICH THE LD. AR HAS HEAVILY RELIED.- 4.13 UNTIL 1987, ONLY PAYMENTS TO SHAREHOLDERS WERE DEEMED AS DIVIDEND UNDER SUB-CLAUSE (E). HOWEVER, WITH EFFECT FROM 1ST APRIL, 1988, PAYMENT TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER O R A PARTNER AND IN WHICH ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 11 HE HAS A SUBSTANTIAL INTEREST WAS ALSO INCLUDED IN DEEMING FICTION OF SECTION 2(22)(E). EXPLANATION 3 TO SECTION 2(22) DECLARES THAT A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIME DURING THE PREVIOUS YEAR, BENEFI CIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN. IN RELATION TO A COMPANY, SECTION 2(32) DEFINES THE EXPRESSION 'PERS ON WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY', TO MEAN A PERSON WHO IS T HE BENEFICIAL OWNER OF SHARES, NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS, CARRYING NOT LESS THAN 20% OF THE VOTING POWER. 4.14 IF THE PAYMENT IS TO A CONCERN, THEN SUCH A PE RSON SHOULD ALSO BE A MEMBER OR A PARTNER IN THE SAID CONCERN, HOLDING SU BSTANTIAL INTEREST IN THE CONCERN. IN CASE THE CONCERN IS A COMPANY, THEN HE MUST BE THE OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE O F DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN 20% OF THE VOTING POWER. IF THE CONCERN IS NOT A COMPANY, HE M UST AT ANY TIME DURING THE PREVIOUS YEAR, BE BENEFICIALLY ENTITLED TO NOT LESS THAN 20% OF THE INCOME OF SUCH CONCERN. 4.15 'SUCH SHAREHOLDER' IS THE SHAREHOLDER WHO IS A REGISTERED AND A BENEFICIAL HOLDER OF SHARES HOLDING 10% VOTING POWE R. THEREFORE, THE ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 12 EXPANDED MEANING OF DIVIDEND AS APPLIED TO PAYMEN TS TO EVEN NON- SHAREHOLDER WOULD BE APPLICABLE IF ALL OF THE FOLLO WING CONDITIONS ARE FULFILLED- (A) THE PERSON IS A REGISTERED SHAREHOLDER OF THE COMPA NY (B) THE PERSON IS BENEFICIALLY ENTITLED TO SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH O R WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS T HAN TEN PER CENT OF THE VOTING POWER OF THE COMPANY; (C) THE PERSON IS A MEMBER OR PARTNER IN OTHER CONCERN (D) THE PERSON HAS SUBSTANTIAL INTEREST IN THE CONCERN REFERRED TO IN CLAUSE (C) ABOVE. 5. IN CASE OF ACIT VS. BHAUMIK COLOUR P. LTD. 313 I TR 146 (AT). THE SPECIAL BENCH HELD THAT THE PROVISIONS OF SECTION 2 (22)(E) DO NOT SPELL OUT AS TO WHETHER THE INCOME HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER OR THE CONCERN (NON SHAREHOLDER). IT FURTHER OBSERVED THAT SINCE THE PROVISIONS ARE AMBIGUOUS, IT IS THEREFORE NECESSARY TO EXAMINE THE INTENTION BEHIND ENACTING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IN F URTHERANCE IT WAS STATED THAT THE INTENTION BEHIND THE PROVISIONS OF SECTION 2(22 )(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMING PROVISIONS AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHIC H ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST, IS BASED ON THE PRESUMPTION T HAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO THE SHAREHOLD ERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. THE INTENTION OF THE LE GISLATURE IS THEREFORE TO TAX DIVIDEND ONLY IN THE HANDS OF THE SHAREHOLDER AND N OT IN THE HANDS OF THE CONCERN AND ACCORDINGLY IT HELD THAT DEEMED DIVIDEN D UNDER SECTION 2(22)(E) ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 13 OF THE ACT CAN BE ASSESSED ONLY IN THE HANDS OF A S HAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF ANY OTHER PERSON. 6. WE NOTED, MUMBAI HIGH COURT, IN ITS DECISION IN CASE OF CIT VS. UNIVERSAL MEDICARE PRIVATE LIMITED (324 ITR 263), A PPROVED THE POSITION TAKEN BY THE SPECIAL BENCH DECISION IN CASE OF ACIT VS. BHAUMIK COLOUR P. LTD. (SUPRA) HOLDING THAT THE DEFINITION DOES NOT A LTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREH OLDER. IT FURTHER OBSERVED THAT THE EFFECT OF CLAUSE (E) OF SECTION 2(22) IS T O BROADEN THE AMBIT OF THE EXPRESSION 'DIVIDEND' BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE O N BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER AND THEREBY IT HAS TO BE TAXED IN THE HANDS OF SHAREHOLDER. NO CONTRARY DECISION WAS BROUGHT T O OUR KNOWLEDGE. IN VIEW OF THE DECISION OF MUMBAI HIGH COURT AND THAT OF SP ECIAL BENCH, WE HOLD THAT THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND CAN BE M ADE IN THE HANDS OF THE ASSESSEE PROVIDED THE CASE FALLS WITHIN THE FOUR CO RNER OF SECTION 2(22)(E) OF THE INCOME TAX ACT. THUS THIS PLEA OF THE ASSESSEE STAND DISMISSED. 7. NOW, WE WILL TAKE UP THE CONTENTION OF THE ASSES SEE WHETHER THE AMOUNT RECEIVED BY THE ASSESSEE WAS A TRADE ADVANCE /LOANS OR NOT. IN ITS WIDEST MEANING THE TERM ADVANCE MAY OR MAY NOT IN CLUDE LENDING, HOWEVER, SINCE THE TERM ADVANCE HAS BEEN USED IN CONJUNCTION WITH THE TERM LOAN, IT SHOULD ALSO GET MEANING AKIN TO LO AN. THEREFORE, A REASONABLE ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 14 INTERPRETATION OF THE TERM ADVANCE COULD MEAN SUC H ADVANCE WHICH CARRIED WITH IT AN OBLIGATION OF REPAYMENT. IT IS IN THIS R EGARD, THE JUDICIARIES HAVE CONSISTENTLY TAKEN A VIEW THAT TRADE ADVANCES MADE FOR PROCURING/ SECURING GOODS OR SERVICES, IT WOULD NOT ATTRACT PROVISIONS OF SECTION 2(22)(E). 8. THIS IS SETTLED LAW IN VIEW OF THE DECISION OF H ON'BLE APEX COURT IN CIT VS. DAULAT RAM RAWATMULL [1973] 87 ITR 349 (SC)THAT APPARENT IS REAL. ONUS IS ON THE PARTY WHO ALLEGES APPARENT IS NOT REAL. IN VIEW OF THE SETTLED POSITION OF VARIOUS DECISIONS, THE TRADE ADVANCE CA NNOT BE REGARDED TO BE THE TRANSACTION FALLING WITHIN THE MEANING OF SECTION 2 (22)(E) OF THE ACT. HON'BLE ALLAHABAD HIGH COURT HAS TAKEN THE SIMILAR VIEW IN THE CASE OF CIT VS. ATUL ENGINEERING UDYOG [2015] 228 TAXMAN 295 (ALL). 9. THIS VIEW HAS BEEN TAKEN BY HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. RAJ KUMAR, 318 ITR 462 (DELHI). SIMILAR VIE W HAS BEEN TAKEN BY THE MUMBAI HIGH COURT IN THE CASE OF CIT VS. NAGINDAS M . KAPADIA, 177 ITR 393 (BOM) IN WHICH IT WAS HELD THAT ADVANCE RECEIVED TO PURCHASE THE MATERIAL FOR THE PURPOSE OF EXECUTING THE JOB WORK ENTRUSTED TO THE ASSESSEE IS A TRADE ADVANCE AND WILL NOT FALL WITHIN THE AMBIT OF SECTI ON 2(22)(E). IN THE CASE OF CIT VS. AMBASSADOR TRAVELS P. LTD., 318 ITR 376 (DE LHI), THE HONBLE DELHI HIGH COURT HAS TAKEN THE VIEW THAT THE BUSINESS TRA NSACTION ENTERED INTO BY THE ASSESSEE COULD NOT BE TREATED AS LOANS OR AD VANCES WITHIN THE MEANING OF SECTION 2(22)(E). THIS DECISION WAS FOL LOWED BY THE DELHI HIGH ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 15 COURT IN THE CASE OF CIT VS. CREATIVE DYEING AND PR INTING P. LTD., 318 ITR 476 (DELHI). IN THIS CASE, AN ADVANCE BY ASSESSEE, ENG AGED IN THE BUSINESS OF A DYEING AND PRINTING OF CLOTH TO A SISTER CONCERN HA VING AN ANCILLARY UNIT OF BOTH THE ASSESSEE AND SISTER COMPANY STRIVING FOR EXPORT AND MADE INTERNATIONAL STANDARD WAS NOT REGARDED TO BE DEEME D DIVIDEND UNDER SECTION 2(22)(E). RAJASTHAN HIGH COURT ALSO HAS TAKEN THE SAME VIEW IN THE CASE OF CIT VS. HOTEL HILLTOP 313 ITR 116(RAJ.). 10. NOW COMING TO THE FACTS OF THE ASSESSEE. SO FA R AS THE SUM OF ` 48,50,000/- IS CONCERNED, THIS AMOUNT HAS BEEN PAID BY FLAMINGO ADDITIVES & COLOURANTS PVT. LTD TO FLAMINGO POLYCOLOURS PVT. LTD. IN FLAMINGO ADDITIVES & COLOURANTS PVT. LTD THE ASSESSEE HAS 48% SHARE HO LDING WHILE IN FLAMINGO POLYCOLOURS PVT. LTD., THE SHARE HOLDING OF THE ASS ESSEE IS 47.3%. APPARENTLY, IF THE PAYMENT HAS BEEN GIVEN BY FLAMIN GO ADDITIVES & COLOURANTS PVT. LTD TO FLAMINGO POLYCOLOURS PVT. LT D. AS LOAN OR ADVANCES, THIS WILL BE COVERED U/S. 2(22)(E). BUT FROM THE COPY OF LEDGER ACCOUNT OF FLAMINGO ADDITIVES & COLOURANTS PVT. LTD., IN THE B OOKS OF FLAMINGO POLYCOLOURS PVT. LTD., IT IS APPARENT THAT TO THAT EXTENT PAYMENT HAS BEEN MADE AND RECEIVED BY BOTH THE COMPANIES FROM EACH O THER, WHICH THE LEARNED AR BEFORE US VEHEMENTLY CONTENDED THAT THES E ARE DEBIT AND CREDIT TRANSACTIONS BETWEEN THE ASSOCIATE CONCERNS AND IT IS NOT IN THE NATURE OF LOANS AND ADVANCES. FROM THE COPY OF ACCOUNT, IT IS ALSO APPARENT THAT FOR ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 16 SOME TIME THE PAYMENT HAS BEEN GIVEN BUT SUBSEQUENT LY THE PAYMENT HAS BEEN RECEIVED BACK. THE LEARNED AR IN THIS REGARD VEHEMENTLY RELIED ON THE ORDER OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SCHUTZ DISHMAN BIO-TECH PVT. LTD. IT APPEAL NO.958 & 959 OF 2015, JUDGMENT DATED 21.12.2015. WE NOTED UNDER PARA 3 AND 4 IT HAS BEE N HELD AS UNDER:, JUDGMENT DATED 21.12.2015. WE NOTED UNDER PARA 3 A ND 4 IT HAS BEEN HELD AS UNDER: '3. THE COMMISSIONER (APPEALS) HOWEVER, DELETED THE ORDER OF THE ASSESSING OFFICER MAKING THE FOLLOWING OBSERVAT IONS: 6. I HAVE CAREFULLY CONSIDERED IMPUGNED ORDERS AND THE SUBMISSIONS OF THE APPELLANT. I AM OF THE VIEW THA T THE PROVISIONS OF S.2(22)(E) OF THE ACT ARE NOT APPLICA BLE AT ALL AND THEREFORE THE QUESTION OF DEDUCTION OF TAX AT S OURCE DOES NOT ARISE AND THEREFORE THE LIABILITY U/S.201( 1) AND 201(A) OF THE ACT ALSO DOES NOT ARISE. FOR BOTH THE YEARS UNDER CONSIDERATION, I HAVE PERUSED THE COPIES OF T HE LEDGER ACCOUNTS PLACED ON RECORD. IT CAN BE SEEN THAT THER E ARE LARGE NUMBER OF DEBIT AND CREDIT TRANSACTIONS. MEAN ING THEREBY, THE APPELLANT HAS GIVEN AND RECEIVED FUNDS AS AND WHEN REQUIRED TO AND FROM ITS ASSOCIATE CONCERN. I T IS NOT AN ACCOUNT WHEREBY LOANS AND ADVANCES HAVE BEEN GIV EN TO THE ASSOCIATE CONCERNS. IT IS AN ACCOUNT WHICH IS IN THE NATURE OF CURRENT ADJUSTMENT ACCOMMODATION ACCOUNT WHEREIN THERE IS A MOVEMENT OF FUND IN BOTH WAYS, O N NEED BASIS. UNLIKE TRANSACTIONS OF LOANS AND ADVANCES, I N THIS KIND OF CURRENT ADJUSTMENT ACCOMMODATION ACCOUNT, THE MOVEMENT OF FUNDS IS BOTH WAYS AND THE SAME IS MORE IN THE NATURE OF CURRENT ACCOUNT RATHER THAN A LOAN AC COUNT. TRANSACTIONS IN THE NATURE OF LOANS AND ADVANCES AR E USUALLY VERY FEW AND FOR A LONGER DURATION. IN THE FACTS OF THE PRESENT CASE, THE NATURE OF THE TRANSACTION IS IN THE ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 17 FORM OF CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT AN D THEREFORE, THE SAME IS NOT A TRANSACTION IN THE NAT URE OF LOANS AND ADVANCES. IN THE ABSENCE OF ANY LOANS AND ADVANCES, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN RESPECT OF DEEMED DIVIDED ARE NOT ATTRACTED AND THE REFORE, THE QUESTION OF DEDUCTION OF TAX AT SOURCE ALSO WOU LD NOT ARISE. THIS VIEW IS SUPPORTED BY THE FOLLOWING DIRE CT DECISIONS : CIT VS. CREATIVE DYEING & PRINGINT (P) LTD. 318 ITR 476 (DEL) CIT VS. RAJ KUMAR 318 ITR 462 (DEL) NH SECURITIES LTD V. DCIT (2007) 11 SOT 302 (BOM) ACIT V. GLOBAL AGENCIES(P) LTD. (2005) 87 TTJ 1086( DELHI) CIT V. NAGINDAS M. KAPADIA (1989) 177 ITR 393 (BOM) EVEN OTHERWISE, IF THE TRANSACTIONS ARE NOT IN THE NATURE OF CURRENT ACCOMMODATION ADJUSTMENT ACCOUNT, THE SAME ARE IN THE NATURE OF DEPOSITS AS IT APPARENT FROM THE NOMENCLATURE OF THE LEDGER ACCOUNT. IF THE TRANSACT IONS ARE IN THE NATURE OF DEPOSITS AND THE SAME ARE BETWEEN TWO CORPORATE, IT IS NOTHING BUT INTER CORPORATE DEPOSI TS (ICD) WHICH IN ANY CASE WOULD BE OUTSIDE THE PURVIEW OF S ECTION 2(22)(E) OF THE ACT. THIS VIEW SUPPORTED BY THE FOL LOWING DIRECT FINDING DECISIONS OF THE ITATS. M/S UTKARSH FINCAP (P) LTD., V ITO 1288 ITR 38 ON. (TRI. AHMEDABAD) M/S. BOMBAY OIL INDUSTRIES LTD, V. DCIT, CENTRAL CI RCLE-35 MUMBAI 128 SOT 383 (MUM.)' 4. IT CAN THUS BE SEEN THAT THE COMMISSIONER AS A M ATTER OF FACT FOUND THAT THE PAYMENTS WERE NET IN THE NATURE OF CURRENT ADJUSTMENT. THERE WAS MOVEMENT OF FUND BOTH WAYS ON NEED BASIS. THE TRANSACTIONS IN THE NATURE OF LO ANS AND ADVANCES ARE USUALLY VERY FEW IN NUMBER WHEREAS IN THE PRESENT CASE, SUCH TRANSACTIONS ARE IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ENTRIES. THE COMMISSIONER THEREFORE, HELD THAT THE TRANSACTIONS WERE NOT IN T HE NATURE OF LOANS AND ADVANCES. THE REVENUE CARRIED THE MATTER IN APPEAL. THE TRIBUNAL CONCURRED WITH THE VIEW OF THE CIT ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 18 (APPEALS) AND HELD THAT THE AMOUNTS WERE NOT IN THE NATURE OF INTER CORPORATE DEPOSITS AND WERE THEREFORE, NOT TO BE TREATED AS LOANS OR ADVANCES AS CONTEMPLATED IN SEC TION 2(22)(E) OF THE ACT. ON THE BASIS OF THIS JUDGMENT, IT IS APPARENT THAT IF THERE ARE TRANSACTIONS IN THE FORM OF CURRENT ACCOMMODATION ENTRIES, THEY CAN NOT BE REGARDING TO BE LOANS AND ADVANCES. 11. WE HAVE ALSO NOTED THAT SIMILAR VIEW HAS BEEN T AKEN BY HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SURAJ D EV DADA [367 ITR 78], WHEREIN, IT HAS BEEN HELD AS UNDER: 10. FROM THE ABOVE, IT EMERGES THAT THE COMMISSION ER OF INCOME-TAX (APPEALS) AND THE TRIBUNAL HAD CONCURREN TLY RECORDED THAT THE ASSESSEE HAD RUNNING ACCOUNT WITH THE COMP ANYM/S. DADA MOTORS PVT. LTD. AND HAD BEEN ADVANCING MONEY TO IT. IT WAS FURTHER OBSERVED THAT THE PROVISIONS OF SECTION 2(2 2) (E) OF THE ACT WERE NOT ATTRACTED IN THE PRESENT CASE; THIS PROVIS ION WAS INSERTED TO STOP THE MISUSE BY THE ASSESSEE BY TAKING THE FU NDS OUT OF THE COMPANY BY WAY OF LOAN ADVANCES INSTEAD OF DIVIDEND AND THEREBY AVOID TAX. IN THE PRESENT CASE, THE ASSESSEE HAD IN FACT ADVANCED MONEY TO THE COMPANY AND THERE WAS CREDIT FOR ONLY 55 DAYS FOR WHICH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT COULD NOT BE INVOKED THESE FINDINGS WERE NOT SHOWN TO BE ERRONEO US OR PERVERSE IN ANY MANNER. 11. IN VIEW OF THE ABOVE, NO SUBSTANTIAL QUESTION O F LAW ARISES IN THIS APPEAL. CONSEQUENTLY, FINDING NO MERIT IN THE APPEAL, THE SAME IS HEREBY DISMISSED. 12. FURTHER, WE ALSO NOTED THAT THE G BENCH OF TH IS TRIBUNAL, VIDE ITS ORDER DATED 25.08.2010, IN ITA NOS. 4869 TO 4872/MU M/2009 IN THE CASE OF ACKRUTI CITY LTD. VS. DCIT HAS OBSERVED AS UNDER: ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 19 59. WE NOW EXAMINE WHETHER THE FINANCIAL TRANSACTI ONS BETWEEN SISTER CONCERNS, WHICH ARE ADMITTEDLY WORKING TOGET HER IN MANY CASES FOR THE SAME PROJECT, AFTER DIVIDING THEIR FU NCTIONS, THROUGH UNDER THE SAME MANAGEMENT, CAN BE CONSIDERED LOANS OR ADVANCES. EVERY FINANCIAL TRANSACTION CANNOT BE A L OAN OR ADVANCE. COMMERCIAL EXPEDIENCY, BUSINESS NECESSITY AND EMERG ENCY NEEDS RESULT IN FINANCIAL ACCOMMODATION BETWEEN SISTER CO NCERNS. THIS CANNOT BE TERMED EITHER A LOAN OR AN ADVANCE. THESE TRANSFER OF FUNDS ARE WITH THE OBJECT OF ACHIEVING A COMMON OBJ ECTIVE. 60. IN THE CASE OF M/S CHANDRA CEMENT VS. DCIT 68 T TJ (JAIPUR) 35, THE JAIPUR BENCH HELD AS FOLLOWS : WHEN ONE SINGLE INDIVIDUAL IS MANAGING THE AFFAIR S OF TWO CONCERNS AND THE DECISION TO TRANSFER THE FUNDS FRO M ONE CONCERN TO ANOTHER OR TO REPAY THE FUNDS COULD HAVE BEEN SAID TO HAVE BEEN LARGELY INFLUENCED BY THE SAME INDIVIDUAL, IT CANNO T BE SAID THAT TRANSACTION PARTAKE THE NATURE OF EITHER DEPOSIT OR LOAN. THE HONBLE MADHYA PRADESH HIGH COURT HAS IN THE CASE O F PATIRAM JAIN HELD THAT : IT HAS ALSO BEEN ACCEPTED BY THE RESPONDENTS THAT T HE TRANSACTIONS MADE BETWEEN THE TWO SISTER CONCERNS WERE UNDER EXC EPTIONAL CIRCUMSTANCES TO ACCOMMODATE THE EMERGENCY NEEDS OF THE SISTER CONCERN FOR A VERY SHORT AND TEMPORARY PERIOD. AS S UCH, IT DID NOT AMOUNT TO A LOAN OR DEPOSIT AS DEFINED UNDER SECTIO N 269SS OF THE INCOME-TAX ACT. THE COCHIN BENCH OF THE TRIBUNAL IN MUTHOOT M. GEOR GE BANKERS VS. ACIT (1994) 47 TTJ (COCHIN) 435 HELD AS UNDER : AGAINST THE BACKGROUND, WE EXAMINE THE TRANSACTION S BETWEEN THE SISTER CONCERNS AND THE ASSESSEE THERE ARE TRANSFER OF FUNDS FROM AND TO THE SISTER CONCERNS. THERE IS NO EVIDENCE TO SHOW THAT MONEY WAS LOANED OR KEPT DEPOSITED FOR A FIXED PERI OD OR REPAYABLE ON DEMAND. FURTHER, THE SISTER CONCERNS AND THE ASS ESSEE ARE OWNED BY THE SAME FAMILY GROUP OF PEOPLE WITH A COM MON MANAGING PARTNER WITH CENTRALISED ACCOUNTS UNDER TH E SAME ROOF. TRANSFER OF FUNDS HAS TAKEN PLACE IN A WHIMSICAL MA NNER. THEREFORE, IT IS RATHER DIFFICULT TO SAY THAT THE T RANSACTIONS ARE IN THE NATURE OF DEPOSITS OR LOANS WITH CERTAIN CONDITIONS ATTACHED TO THEM, EITHER AS REGARDS THE PERIOD OF SUCH DEPOSITS OR LOANS OR WITH REGARD TO THEIR REPAYMENTS. FROM THE COPIES OF THE ACCOUNTS ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 20 FURNISHED BEFORE US ALL THAT CAN BE GATHERED IS THA T FUNDS HAVE BEEN TRANSFERRED FROM AND TO THE SISTER CONCERNS AS AND WHEN REQUIRED AND SINCE THE MANAGING PARTNER IS COMMON TO ALL THE SISTER CONCERNS, THE DECISION TO TRANSFER THE FUNDS FROM O NE CONCERN TO ANOTHER CONCERN OR TO REPAY THE FUNDS COULD BE SAID TO HAVE BEEN LARGELY INFLUENCED BY THE SAME INDIVIDUAL. IN OTHER WORDS, THE DECISION TO GIVE AND THE DECISION TO TAKE RESTED WI TH EITHER THE SAME GROUP OF PEOPLE OR WITH THE SAME INDIVIDUAL. I N SUCH CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE TRANSAC TION INTERSE BETWEEN THE SISTER CONCERNS AND THE ASSESSEE CAN NO T PARTAKE OR THE NATURE OF EITHER DEPOSIT OR LOAN THOUGH INT EREST MIGHT HAVE BEEN PAID ON THE SAME. EXCEPTING FOR THE TRANSFER O F FUNDS BEING WITNESSED IN THE BOOKS OF ACCOUNT OF THE CONCERNED FIRMS, NO MATERIAL IS ON RECORD TO SHOW ISSUE OF RECEIPT OR P RONOTE IN EVIDENCE OF ACCEPTING DEPOSITS OR LOANS AS UNDERSTOOD IN COM MON PARLANCE. IT ONLY REPRESENTS DIVERSION OF FUNDS FROM ONE CONC ERN TO ANOTHER DEPENDING UPON THE EXIGENCIES OF THE BUSINESS. FROM THE ABOVE, IT IS CLEAR THAT TRANSACTION BETWEE N SISTER CONCERNS ARE JUST DIVERSION OF FUNDS FOR MEETING VISTITUDES OF BUSINESS AND ARE NEITHER LOANS OR ADVANCES. THESE DECISIONS SUPP ORT THE VIEW THAT CURRENT ACCOUNT TRANSACTIONS BETWEEN THE SISTE R CONCERNS CANNOT BE CALLED LOANS OR ADVANCES FOR THE PURPOSE OF INVOKING SECTION 2(22)(E). THE TERM ADVANCES IN THIS SECTI ON IS USED ALONG WITH THE WORD LOAN AND THIS WORD DOES NOT INCLUDE TRANSFER OF FUNDS FOR TRADE OR BUSINESS ADVANCES AS HELD BY THE HONBLE DELHI HIGH COURT IN CIT V. RAJKUMAR (2009) 181 TAXMAN 155 (DEL.). 61. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. AMBASSADOR TRAVELS P. LTD. (2009) 318 ITR 376 (DEL) HELD THAT WHEN THE ASSESSEE ENTERED INTO NORMAL BUSINESS TRANSACTION A S A PART OF DAY TO DAY BUSINESS ACTIVITY, THIS CANNOT BE TREATED AS LOANS OR AS ADVANCES. THE MUMBAI A BENCH OF THE TRIBUNAL IN T HE CASE OF N.H. SECURITIES LTD. VS. DCIT REPORTED IN 11 SOT 302 HEL D THAT WHERE PAYMENTS ARE MADE BY A COMPANY IN THE COURSE OF CAR RYING ON ITS REGULAR BUSINESS THROUGH A MUTUAL, OPEN AND CURRENT ACCOUNT TO A RELATED PARTY DO NOT COME UNDER THE PURVIEW OF SECT ION 2(22)(E). APPLYING THE PROPOSITIONS LAID DOWN IN THESE CASE L AWS FOR THE FACTS OF THE CASE, WE ACCEPT THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE TRANSACTIONS BETWEEN THESE SISTER CONCERNS ARE BUSINESS TRANSACTIONS AND ARE GUIDED BY COMMERCIAL EXPEDIENCY AND ARE MERE DIVERSION OF FUNDS AND ARE NEITHER A L OAN OR ADVANCE ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 21 AS CONTEMPLATED U/S 2(22)(E). THUS THIS GROUND OF T HE ASSESSEE IS ALLOWED. 12. FROM THE COPY OF ACCOUNT OF BOTH THE COMPANIES, WHICH IS AVAILABLE AT PAGES 1 AND 9 OF THE PAPER BOOK, IT IS APPARENTLY C LEAR CUT CASE OF CURRENT ADJUSTMENT ACCOMMODATION AND MOVEMENT OF FUNDS IN B OTH WAYS AND, THEREFORE, IT IS IN THE NATURE OF CURRENT ACCOUNT O F ONE COMPANY WITH THE OTHER COMPANY RATHER THAN A LOAN ACCOUNT. THE LEAR NED DR VEHEMENTLY CONTENDED BEFORE US THAT THIS ISSUE BE RESTORED TO THE FILE OF THE ASSESSING OFFICER AS THE ASSESSEE AS RAISED THIS CONTENTION F OR THE FIRST TIME BEFORE THIS TRIBUNAL AND NO SUCH CONTENTION WAS RAISED BEFORE A NY OTHER AUTHORITY. WE NOTED THAT THE ASSESSEE HAS RAISED THIS CONTENTION EVEN BEFORE THE ASSESSING OFFICER, WHICH IS CLEAR FROM PARA 4.3.3 OF THE ASSE SSMENT ORDER. THE ASSESSING OFFICER HAS OBSERVED THE PLEA OF THE ASSESSEE THAT THE ACCOUNTS BETWEEN THESE COMPANIES SHOULD BE TREATED AS CURRENT ACCOUN T AND THE TRANSACTIONS ARE TEMPORARY IN NATURE CANNOT BE ACCEPTED. ON TH IS BASIS, WE REJECT THE PLEA OF THE LEARNED DR. NO CONTRARY DECISION WAS B ROUGHT TO OUR KNOWLEDGE. RESPECTFULLY, FOLLOWING THE DECISION OF HONBLE GUJ ARAT HIGH COURT IN THE CASE OF SCHUTZ DISHMAN BIO-TECH P LTD (SUPRA), WE HOLD T HAT THE SUM OF ` 48,50,000/- CANNOT BE TREATED AS DEEMED DIVIDEND U/ S. 2(22)(E) OF THE ACT. 13. NOW COMING TO THE SUM OF ` 36,60,000/-, WHICH WAS PAID BY FLAMINGO ADDITIVES & COLOURANTS PVT. LTD TO GENESIS NUTECH P VT. LTD. THE ASSESSEE IS ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 22 HAVING 48% SHARE HOLDING IN FLAMINGO ADDITIVES & CO LOURANTS PVT. LTD AND 25% SHARE HOLDING IN GNESIS NUTECH PVT. LTD. AGAIN THE LEARNED AR BEFORE US HAS TAKEN THE SAME CONTENTION AS HAS BEEN TAKEN IN RESPECT OF THE AMOUNT PAID BY FLAMINGO ADDITIVES & COLOURANTS PVT. LTD TO FLAMINGO POLYCOLOURS PVT. LTD., AND FOR THIS OUR ATTENTION WAS DRAWN TO PAGES 4 AND 5 OF THE PAPER- BOOK. FROM THE COPY OF THE ACCOUNT, WE DO AGREE WI TH THE LEARNED AR THAT THERE ARE DEBIT AND CREDIT TRANSACTIONS BETWEEN BOT H THE COMPANIES. THE COMPANIES HAS GIVEN AND RECEIVED FUNDS AS AND WHEN REQUIRED TO AND FROM ITS ASSOCIATE CONCERN. THE ACCOUNT HERE ALSO APPEA RED TO BE IN THE NATURE OF CURRENT ADJUSTMENT ACCOMMODATION ACCOUNT WHERE THER E IS MOVEMENT OF FUNDS IN BOTH WAYS ON NEED BASIS. THESE TRANSACTIO NS, AS HAS BEEN HELD BY US IN THE PRECEDING PARAGRAPHS, FOLLOWING THE DECIS ION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF SCHUTZ DISHMAN BIO-TECH P LTD (SUPRA), WE HOLD THAT THE SUM OF CAN ALSO NOT BE REGARDED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. WE HOLD ACCORDINGLY, AND, THEREFORE DELET E THE ADDITION OF ` 38,60,000/-. 14. NOW COMING TO THE SUM OF ` 1,09,785/- PAID BY FLAMINGO ADDITIVES AND COLOURANTS PVT. LTD. TO FLAMINGO POLYCOLOURS PVT. L TD. THE COPY OF ACCOUNT IS AVAILABLE AT PAGE 2 OF THE PAPER-BOOK, FROM WHICH I T IS APPARENT THAT THE SUM REPRESENTS THREE AMOUNTS I.E. ` 89,774/-, ` 18761/- AND ` 1,250/- OUT OF WHICH THE AMOUNT TO THE EXTENT OF ` 18,761 HAS ALREADY BEEN DELETED BY THE ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 23 CIT(A) TO WHICH WE AGREE. NOW THE BALANCE AMOUNT I N THE GROUND TAKEN BY THE ASSESSEE SHOULD HAVE BEEN IN RESPECT OF ` 89,774/- AND ` 1,250/-. THE REVENUE IS NOT IN ANY APPEAL AGAINST THE SUM OF ` 18,761/-. WE, THEREFORE, RESTRICT THE SOURCE TO THE SUM OF ` 89,774/- AND ` 1,250/-. WE NOTED FROM THE COPY OF THE ACCOUNT OF THE SUBMISSIONS MADE BY THE ASSESSEE THE FACT THAT THESE AMOUNTS WERE RECEIVED BY CUSTOMERS OF FL AMINGO POLYCOLOURS PVT. LTD VIZ SHREE MOTHER PLAST IN FAVOUR OF FLAMINGO AD DITIVES AND COLOURANTS PVT. LTD. SINCE THE CHEQUE HAS BEEN DRAWN IN THE NAME O F FLAMINGO ADDITIVES AND COLOURANTS PVT., THEREFORE A CHEQUE WAS ISSUED IN FAVOUR OF FLAMINGO POLYCOLOURS PVT. LTD. THIS AMOUNT IN OUR VIEW CANN OT BE REGARDED AS LOAN AND ADVANCES WITHIN THE AMBIT OF SECTION 2(22)(E). WE, ACCORDINGLY, DELETE THE ADDITION IN RESPECT OF ` 89,774/- AND ` 1,250/-. THUS, IN FACT, THE WHOLE ADDITION OF ` 1,09,785/- STANDS DELETED. 15. NOW COMING TO THE SUM OF ` 3000/-, WHICH WAS THE AMOUNT PAID BY FLAMINGO POLYCOLOURS PVT. LTD TO M/S. GENESIS NUTEC H PVT. LTD. IN THIS REGARD WE HAVE GONE THOUGH THE COPY OF ACCOUNT AVAILABLE L AT PAGE 1 OF THE PAPER- BOOK. FROM THE ACCOUNT, IT IS APPARENT THAT AS ON 01.04.2009, THERE WAS A OPENING BALANCE OF ` 3,000/- AGAINST WHICH ON 10.09.2009 A CHEQUE BEARI NG NO.180322 WAS PAID TO S.P. ENTERPRISE. SINCE THE C HEQUE HAS TO BE PAID BY FLAMINGO POLYCOLOURS PVT. LTD BUT WRONGLY PAID OUT OF GENESIS NUTECH PVT. LTD., LATER ON FLAMINGO POLYCOLOURS PVT. LTD REPAID TO GENESIS NUTECH PVT. LTD. ITA NO.6778/MUM/2013 SHRI RAVINDRA R FOTEDAR 24 THUS, THIS PAYMENT IS NOTHING BUT REPAYMENT OF THE DUES BY FLAMINGO POLYCOLOURS PVT. LTD. TO GENESIS NUTECH PVT. LTD. THUS THIS PAYMENT CANNOT BE REGARDED AS LOANS AND ADVANCES AS PER SECTION 2( 22)(E) OF THE I.T.ACT. WE, THEREFORE DELETE THE ADDITION OF ` 3,000/-. 16. SINCE WE HAVE DELETED THE ADDITION MADE U/S. 2( 22)(E), IN OUR OPINION, THE ALTERNATE GROUND TAKEN BY THE ASSESSEE BEING GR OUND NO.1.4 DOES NOT REQUIRE ANY ADJUDICATION AS THE MAIN GROUND NO.S1.1 TO 1.3 STANDS ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (AMARJIT SINGH) (P K BANSAL) JUDICIAL MEMBER VICE-PRESIDENT MUMBAI; DATED: 11 TH SEPTEMBER, 2017 SA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, D BENCH, ITAT, MUMBAI BY ORDER, #TRUE COPY # ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI