The ITO, Ward-4(1), V. Sarat Chand Bhavaraju, Visakhapatnam

ITA 704/VIZ/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8927 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 3 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 09-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI GVN HARI
• Assessee Lawyers: MURTHY NAIK
• Keywords: Deemed dividend; Commercial expediency
• Section: 15

Judgement Text

ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.689/VIZAG/2013 ( / ASSESSMENT YEAR: 2010-11) SARAT CHAND BHAVARAJU VISAKHAPATNAM ITO, WARD - 4(1), VISAKHAPATNAM [PAN NO. AJYPS1055M ] ( % / APPELLANT) ( &'% / RESPONDENT) ./I.T.A.NOS.704/VIZAG/2013 ( / ASSESSMENT YEAR: 2010-11) ITO, WARD - 4(1), VISAKHAPATNAM SARAT CHAND BHAVARAJU VISAKHAPATNAM ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI SHRI G.V.N. HARI, AR / RESPONDENT BY : SHRI MURTHY NAIK, DR / DATE OF HEARING : 18.04.2017 / DATE OF PRONOUNCEMENT : 28.04.2 017 ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 2 / O R D E R PER SHRI G. MANJUNATHA, ACCOUNTANT MEMBER: THESE CROSS APPEALS FILED BY THE ASSESSEE, AS WELL AS THE REVENUE ARE DIRECTED AGAINST ORDER OF THE CIT(A), VISAKHAPA TNAM DATED 25.9.2013 AND IT PERTAINS TO THE ASSESSMENT YEAR 20 10-11. SINCE, THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE CLUBBED, HEARD TOGETHER AND DISPOSED-OFF BY WAY OF THIS COMMON ORD ER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL DERIVING INCOME FROM HOUSE PROPERTY AND REMUNERATIO N FROM COMPANY, FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 4.2.2011 DECLARING A TOTAL INCOME OF ` 7,63,910/-. THE CASE HAS BEEN SELECTED FOR SCRUTINY UNDER CASS AND NOTICE U/S 143(2) OF THE AC T DATED 10.9.2011 WAS SERVED ON THE ASSESSEE. IN RESPONSE TO NOTICE, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME T O TIME AND FURNISHED THE DETAILS AS CALLED FOR. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTICED THAT THE ASSESSEE IS A DIRECTOR AND SUBSTANTIAL SHAREHOLDER IN THE COMPANY M/S. ALFA EL ECTRONICS SERVICES PRIVATE LIMITED. THE COMPANY IS HAVING ACCUMULATED PROFIT OF ` 51,14,597/- AS ON 31.3.2009. THE A.O. FURTHER NOTI CED THAT THE ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 3 COMPANY HAS ADVANCED AN AMOUNT OF ` 88,57,000/- TO THE ASSESSEE. THEREFORE, CALLED UPON THE ASSESSEE TO EXPLAIN AS T O WHY THE LOAN RECEIVED FROM THE COMPANY SHOULD NOT BE ASSESSED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 3. IN RESPONSE TO SHOW CAUSE NOTICE, THE ASSESSEE H AS SUBMITTED THAT THE AMOUNT RECEIVED FROM THE COMPANY WAS NOT GRATUI TOUS PAYMENTS THAT WERE EXTENDED JUST ON THE BASIS OF THE SHAREHO LDING OF THE ASSESSEE. THE AMOUNTS WERE ADVANCED IN ORDER TO GA IN A LONG TERM ADVANTAGE FOR THE COMPANY IN THE FORM OF AN UNRESTR ICTED OVER DRAFT FACILITY FROM AXIS BANK AS AGAINST THE EXISTING CAS H CREDIT AVAILED FROM STATE BANK OF INDIA THAT WAS SUBJECT TO SO MANY RES TRICTIONS. THE ASSESSEE HAS PLANNED TO SHIFT THE OVER DRAFT LOAN A VAILED FROM STATE BANK OF INDIA TO AXIS BANK FOR A HIGHER CREDIT WHIC H WAS NOT POSSIBLE UNLESS THE LOANS DUE AGAINST THE PROPERTIES OF THE ASSESSEE WERE CLEARED. THE ASSESSEE FURTHER SUBMITTED THAT THE C OMPANY HAS AVAILED OVER DRAFT LOAN FROM THE BANKS ON THE COLLATERAL SE CURITY OF THE PROPERTIES BELONGING TO THE ASSESSEE ON WHICH THE A SSESSEE IS HAVING HOUSING LOAN AS WELL AS MORTGAGE LOAN FROM STATE BA NK OF INDIA AND MONEY LINE CREDIT LIMITED. THE COMPANY HAD ADVANCE D MONEY TO CLEAR THE LOAN OUTSTANDING IN THE NAME OF THE ASSESSEE IN STATE BANK OF INDIA AND MONEY CREDIT LIMITED, SO AS TO PLEDGE THE PROPE RTIES FOR LOANS ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 4 AVAILED AT AXIS BANK LIMITED, THEREFORE, THE SAID P AYMENTS CANNOT BE CONSIDERED AS LOANS AND ADVANCES, WHICH ATTRACTS TH E DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ASS ESSEE HAS MADE AN ALTERNATIVE PLEA TO THE EFFECT THAT, IF AT ALL, TH E PAYMENTS TO THE ASSESSEE WAS CONSIDERED AS GRATUITOUS PAYMENTS, WHICH ATTRAC TS DEEMING PROVISIONS OF SECTION 2(22)(E) OF THE ACT, THEN THE ACCUMULATED PROFIT OF THE COMPANY AS AT THE END OF THE PREVIOUS FINANCIAL YEAR I.E. AS ON 31.3.2009 ONLY SHOULD BE CONSIDERED, BUT NOT THE CU RRENT YEAR PROFIT EARNED BY THE COMPANY. 4. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OF T HE ASSESSEE, OBSERVED THAT THE AMOUNT RECEIVED FROM THE COMPANY IS IN THE NATURE OF LOANS AND ADVANCES WHICH FALLS WITHIN THE MEANING O F DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE A.O. FURTHER OBSERVED THAT THOUGH THE ASSESSEE EXPLAINS THAT THE AMOUNT IS PAID TO CLEAR THE EXISTING LOAN AVAILED ON THE PROPERTIES MORTGAGED FOR THE PURPOSE OF OBTAINING OVER DRAFT LOAN FOR THE BUSINESS OF THE COMPANY, THE SEC TION DOES NOT PROVIDE FOR RELIEF IN THE CIRCUMSTANCES NARRATED BY THE ASS ESSEE. THE ASSESSEE COULD NOT PROVIDE ANY INFORMATION TO PROVE THAT THE COMPANY WAS DOING MONEY LENDING BUSINESS. THEREFORE, OPINED THAT THE AMOUNT ADVANCED BY THE COMPANY TO THE ASSESSEE IS DEEMED DIVIDEND W ITHIN THE MEANING ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 5 OF SECTION 2(22)(E) OF THE ACT AND ACCORDINGLY, MAD E ADDITIONS OF ` 51,44,597/-. 5. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O. THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNT RECEIVED FROM THE COMPANY IS NOT A GRATUITOUS PAYMENTS, BUT ONLY AN INTERIM ARRANGEMENT MADE FOR CLEARING THE HOUSING LOAN AS WELL AS MORTGAGE LOAN AVAILED ON TH E PROPERTIES HELD BY THE ASSESSEE IN HIS INDIVIDUAL CAPACITY, WHICH WERE GIVEN AS COLLATERAL SECURITY FOR THE PURPOSE OF OBTAINING OVER DRAFT LO AN FROM THE BANKS. THE ASSESSEE FURTHER SUBMITTED THAT THE COMPANY HAS AVAILED OVER DRAFT LOAN FROM STATE BANK OF INDIA ON THE BASIS OF COLLA TERAL SECURITY OF PROPERTIES HELD BY THE ASSESSEE AND PLANNED TO SHIF T OVER DRAFT LOAN TO AXIS BANK WHICH IS IMPOSSIBLE UNLESS THE LOAN OUTST ANDING IN THE NAME OF THE ASSESSEE IS CLEARED. THE COMPANY HAS ADVANC ED AMOUNT TO THE ASSESSEE FOR THE PURPOSE OF CLEARING LOAN OUTSTANDI NG IN THE NAME OF THE ASSESSEE, OUT OF WHICH THE COMPANY HAS BENEFITTED B Y MORTGAGING THE PROPERTY TO THE AXIS BANK FOR OBTAINING HIGHER CRED IT LIMIT, THEREFORE, THE PAYMENTS CANNOT BE CONSIDERED AS GRATUITOUS PAYMENT S, COMING WITHIN THE MEANING OF DEEMED DIVIDEND AS DEFINED U/S 2(22) (E) OF THE ACT. IN THIS REGARD, FURNISHED NECESSARY DETAILS OF LOAN SA NCTION LETTERS FROM ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 6 BANKS AND ALSO DETAILS OF PROPERTY MORTGAGED TO THE BANKS TO PROVE THAT THE PROPERTIES OF THE ASSESSEE HAVE BEEN MORTGAGED TO THE BANKS FOR OBTAINING OVER DRAFT LOANS. THE ASSESSEE ALSO RELI ED UPON THE DECISION OF HONBLE KOLKATA HIGH COURT, IN THE CASE OF PRADIP K UMAR MALHOTRA VS. CIT (2011) 338 ITR 538 AND ALSO THE ITAT, CHENNAI B ENCH DECISION IN THE CASE OF ACIT VS. G. SRIVIDYA (2012) 138 ITD 429 . 6. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS OF THE ASSESSEE, HELD THAT AT THE OUTSET, THE ASSESSEE HAS NOT PRODU CED ANY MINUTES OF THE BOARD TO EXPLAIN THE CIRCUMSTANCES AND CONDITIO NS UNDER WHICH THE COMPANY HAD ADVANCED LOANS TO THE ASSESSEE DIRECTOR . THE CLAIM THAT THE LOAN WAS GIVEN BY THE COMPANY TO CLEAR THE HOUS ING LOAN AVAILED BY THE ASSESSEE IN RESPECT OF TWO PROPERTIES TO BE GIV EN AS SECURITY FOR THE FUTURE LOAN TO BE AVAILED BY THE ASSESSEE COMPANY I S NOT SUPPORTED BY ANY CONTEMPOROUS DOCUMENTATION. THOUGH, THE ASSESS EE MADE A PLEA THAT THE COMPANY HAS SHIFTED ITS CASH CREDIT FACILI TIES OF SBI TO OD FACILITY OF AXIS BANK FOR CERTAIN BUSINESS ADVANTAGE SUCH AS HIGHER CREDIT LIMIT AND LESSER RATE OF INTEREST, THE COMPANY ADVANCED A MOUNTS TO THE ASSESSEE TO CLEAR HIS HOME LOAN LIABILITIES WITH SB I AND MONEY LINE CREDIT LIMITED, SO AS TO OFFER THESE PROPERTIES AS SECURITY TO AXIS BANK. HOWEVER, ON PERUSAL OF THE DETAILS FILED BY THE ASS ESSEE, IT IS NOTICED THAT THE ASSESSEE HAS AVAILED OVER DRAFT FACILITY O F ` 175 LAKHS WITH AXIS ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 7 BANK AS AGAINST THE EXISTING CASH CREDIT LIMIT OF ` 115 LAKHS WITH SBI, FOR WHICH THE ASSESSEE HAS EXTENDED A LOAN OF ` 88.5 LAKHS TO THE ASSESSEE, WHICH ON THE FACE OF IT WOULD NOT STAND THE TEST OF ANY SORT OF BUSINESS EXPEDIENCY. THE CIT(A) FURTHER OBSERVED THAT THE A SSESSEE HAS AVAILED LOAN FROM THE COMPANY TO SETTLE HIS HOUSING LOAN LI ABILITIES WITHOUT ANY COST. THE ADVANCES PAID BY THE COMPANY WAS NOT FOR THE BENEFIT OF BUSINESS PURPOSE OF THE COMPANY AS CONTENDED BY THE ASSESSEE. THEREFORE, THE DECISION OF HONBLE HIGH COURT OF KO LKATA, IN THE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT 338 ITR 538 WAS REND ERED WITH TOTALLY DIFFERENT SET OF FACTS IS NOT APPLICABLE TO THE FAC TS OF THE ASSESSEES CASE. WITH THESE OBSERVATIONS, REJECTED THE PLEA OF THE AS SESSEE THAT THE AMOUNT RECEIVED FROM THE COMPANY IS NOT A GRATUITOU S PAYMENT, BUT ONLY AN ARRANGEMENT FOR MUTUAL BENEFIT OF THE COMPA NY AS WELL AS THE ASSESSEE FOR BUSINESS ADVANTAGE. 7. IN SO FAR AS ALTERNATIVE PLEA OF THE ASSESSEE, T HE CIT(A), BY FOLLOWING THE DECISION OF ITAT, VISAKHAPATNAM IN TH E CASE OF P. SATYA PRASAD IN ITA NO.293/VIZAG/2012 DATED 16.11.2012, O BSERVED THAT FOR THE PURPOSE OF COMPUTATION OF DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT, THE ACCUMULATED PROFIT OF THE COMPANY SHOULD BE WOR KED OUT UP TO THE DATE OF EACH PAYMENT/ADVANCE OF LOAN AND WOULD NOT INCLUDE CURRENT YEARS PROFIT. THEREFORE, DIRECTED THE A.O. TO REC OMPUTE THE DEEMED ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 8 DIVIDEND TO THE EXTENT OF ACCUMULATED PROFIT UP TO THE DATE OF EACH ADVANCEMENT OF LOAN WITHOUT INCLUDING CURRENT YEAR S BUSINESS PROFIT. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE, AS WEL L AS THE REVENUE ARE IN APPEAL BEFORE US. 8. THE LD. A.R. FOR THE ASSESSEE SUBMITTED THAT THE LD. CIT(A) IS NOT JUSTIFIED IN HOLDING THAT THE ADVANCE OF ` 51,44,597/- RECEIVED BY THE ASSESSEE FROM M/S. ALFA ELECTRONICS SERVICES PVT. L TD. FALLS WITHIN THE SCOPE OF DEEMED DIVIDEND AS DEFINED U/S 2(22)(E) OF THE ACT. THE LD. CIT(A) IS NOT JUSTIFIED IN NOT APPRECIATING THE FAC T THAT THE ADVANCE RECEIVED BY THE ASSESSEE FROM THE COMPANY WAS FOR A CONSIDERATION OUT OF COMMERCIAL EXPEDIENCY AND WAS NOT GRATUITOUS PAY MENT. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE HAS RECEIVED TH E AMOUNT FROM THE COMPANY FOR THE INTERIM ARRANGEMENT OF CLEARING LOA N OUTSTANDING IN THE NAME OF THE ASSESSEE ON THE PROPERTIES MORTGAGED FO R OBTAINING AN OVER DRAFT FACILITY FROM THE BANKS FOR THE PURPOSE OF BU SINESS OF THE COMPANY, THEREFORE, THE COMPANY HAS GOT BUSINESS ADVANTAGES OUT OF THE ARRANGEMENT AND HENCE, IT CANNOT BE CONSIDERED AS G RATUITOUS PAYMENTS, WHICH FALLS WITHIN THE DEFINITION OF DEEM ED DIVIDEND U/S 2(22)(E) OF THE ACT. THE A.R. FURTHER SUBMITTED TH AT THE ASSESSEE COMPANY HAS SHIFTED ITS EXISTING CASH CREDIT FACILI TY FROM STATE BANK OF INDIA TO OVER DRAFT FACILITY FROM AXIS BANK, WHICH IS NOT POSSIBLE UNLESS ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 9 THE LOANS DUE AGAINST THE PROPERTIES OF THE ASSESSE E WERE CLEARED. THE COMPANY HAS MADE ADVANCE TO THE ASSESSEE TO CLEAR T HE EXISTING LOAN, SO THAT THE SAID PROPERTIES CAN BE MORTGAGED TO THE OVER DRAFT FACILITY AVAILED FROM AXIS BANK. THE RELEVANT DOCUMENTS IN SUPPORT OF THE ENTIRE TRANSACTION IN THE FORM OF SANCTION LETTERS, LOAN A CCOUNT STATEMENTS, BANK ACCOUNT STATEMENTS, EXTRACT FROM CASH BOOK AND COPIES OF RELEVANT LEDGER ACCOUNTS ARE PRODUCED BEFORE THE A.O. TO JUS TIFY THE PAYMENT OF ADVANCE TO THE ASSESSEE. THE A.O. WITHOUT APPRECIA TING THE FACT, SIMPLY MADE ADDITION ON THE REASON THAT AS PER THE PLAIN P ROVISIONS OF SECTION 2(22)(E) OF THE ACT, ANY LOAN OR ADVANCE IS COVERED UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IN SUPPORT OF HIS ARGUMENTS, RELIED UPON THE DECISION OF HONBLE HIGH COURT OF KOLKATA, IN T HE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT (SUPRA) AND ALSO THE ITAT, V ISAKHAPATNAM BENCH DECISION IN THE CASE OF DCIT VS. HARI PRASAD BHARARIA IN ITA NOS.435 TO 441/VIZAG/2014 DATED 9.9.2016. 9. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT T HE ASSESSEE HAS FAILED TO PROVE THE NEXUS BETWEEN BUSINESS ADVANTAG E DERIVED BY THE COMPANY OUT OF ADVANCE GIVEN TO THE ASSESSEE. THER EFORE, THE A.O. HAS RIGHTLY INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, TO TREAT THE ADVANCE AS DEEMED DIVIDEND TO THE EXTENT OF ACCUMUL ATED PROFIT OF THE COMPANY. THE D.R. FURTHER SUBMITTED THAT IN SO FAR AS ALTERNATIVE PLEA ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 10 OF THE ASSESSEE, THE CIT(A) WAS ERRED IN DIRECTING THE A.O. TO RESTRICT THE ADDITION TO THE EXTENT OF ACCUMULATED PROFIT OF THE COMPANY AS AT THE BEGINNING OF THE FINANCIAL YEAR, EXCLUDING THE PROF IT OF THE CURRENT YEAR. THE FACT IS THAT AS PER THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT, THE ACCUMULATED PROFIT UP TO THE DATE OF ADVANCEMENT OF EACH LOAN SHOULD BE CONSIDERED, THEREFORE, THE CIT(A) WAS ERRED IN N OT APPRECIATING THE FACTS IN THE RIGHT PERSPECTIVE. THE LD. D.R. REFER RING TO THE DECISION OF HONBLE SUPREME COURT, IN THE CASE OF CIT VS. DAMOD ARAN REPORTED IN 121 ITR 572 SUBMITTED THAT THE CIT(A) OUGHT TO HAVE APPRECIATED THAT ACCUMULATED PROFITS FOR THE PURPOSE OF DEEMED DIVID END U/S 2(22)(E) OF THE ACT WOULD ALSO INCLUDE CURRENT YEARS PROFIT. 10. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. MADE ADDITION TOWARDS DEEMED DIVIDEND U/S 2(22 )(E) OF THE ACT, TOWARDS LOANS RECEIVED BY THE ASSESSEE FROM THE COM PANY. ACCORDING TO THE A.O., AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, ANY LOAN OR ADVANCE FALLS WITHIN THE MEANING OF DEEMED DIVIDEND AS DEFINED U/S 2(22)(E) OF THE ACT, TO THE EXTENT OF ACCUMULATED P ROFITS OF THE COMPANY. THE A.O. FURTHER OBSERVED THAT UNLESS THE ASSESSEE PROVES THAT THE ADVANCE OR LOAN WAS MADE IN THE ORDINARY C OURSE OF ITS BUSINESS, WHERE LENDING OF MONEY IS SUBSTANTIAL PAR T OF THE COMPANY, ALL ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 11 LOANS AND ADVANCES WOULD FALL UNDER THE DEFINITION OF DEEMED DIVIDEND. THE SECTION DOES NOT PROVIDE FOR ANY EXCEPTIONS IN THE CASES NARRATED BY THE ASSESSEE. IT IS THE CONTENTION OF THE ASSESSEE THAT ADVANCES RECEIVED BY THE COMPANY IS NOT A GRATUITOUS PAYMENT , BUT ONLY AN INTERIM ARRANGEMENT FOR THE MUTUAL BENEFIT OF THE C OMPANY TO AVAIL HIGHER LOAN FACILITY FROM THE BANK. THE ASSESSEE F URTHER CONTENDED THAT THE COMPANY HAS MORTGAGED PROPERTIES STANDING IN TH E NAME OF THE ASSESSEE FOR OBTAINING OVER DRAFT FACILITY FROM STA TE BANK OF INDIA. THE COMPANY SHIFTS ITS OVER DRAFT FACILITY FROM SBI TO AXIS BANK BECAUSE OF BUSINESS ADVANTAGE TO GET HIGHER CREDIT FACILITY. UNLESS THE LOANS IN THE NAME OF THE ASSESSEE ON THE PROPERTIES MORTGAGED TO THE BANK ARE CLEARED, THE EXISTING LOAN BORROWED FROM STATE BANK OF INDIA CANNOT BE SHIFTED TO AXIS BANK. THEREFORE, THE COMPANY HAS A DVANCED MONEY TO THE DIRECTOR TO CLEAR THE EXISTING LOANS IN HIS PER SONAL NAME, SO AS TO GET THE PROPERTIES MORTGAGED TO THE LOANS AVAILED FOR T HE PURPOSE OF THE COMPANY. 11. THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, PROVIDES FOR ADDITION TOWARDS ANY LOAN OR ADVANCES BORROWED BY ANY SHAREH OLDER HAVING SUBSTANTIAL INTEREST IN THE COMPANY. IN ORDER TO A TTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, THE IMPORTANT CONSIDER ATION IS THAT THERE SHOULD BE LOAN/ADVANCE BY THE COMPANY TO ITS SHAREH OLDERS, WHICH IS THE ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 12 GRATUITOUS PAYMENT. THEREFORE, ANY PAYMENTS MADE T O THE SHAREHOLDERS OF THE COMPANY, WHICH IS NOT IN THE NATURE OF GRATU ITOUS PAYMENTS ARE KEPT OUTSIDE THE PURVIEW OF THE DEEMING PROVISIONS PROVIDED U/S 2(22)(E) OF THE ACT. IN THIS CASE, THE ASSESSEE CL AIMS THAT THE COMPANY HAS ADVANCED LOAN IN ORDER TO GAIN A LONG TERM ADVA NTAGE FOR THE COMPANY IN THE FORM OF AN UNRESTRICTED OVER DRAFT F ACILITY FROM AXIS BANK AS AGAINST THE EXISTING CASH CREDIT FACILITY AVAILE D FROM SBI. THE ASSESSEE FURTHER CLAIMS THAT THE COMPANY HAS MORTGA GED HIS PERSONAL PROPERTIES FOR THE PURPOSE OF AVAILING OVER DRAFT F ACILITY. THE ASSESSEE ALSO CLAIMS THAT HE HAD HOUSING LOAN AS WELL AS MOR TGAGE LOAN ON THE PROPERTIES MORTGAGED TO THE OVER DRAFT LOAN AVAILED BY THE COMPANY AND UNLESS THE SAID HOUSING LOAN AS WELL AS MORTGAGE LO AN IS CLEARED, THE COMPANY CANNOT SHIFT ITS EXISTING CASH CREDIT LOAN FROM SBI TO OVER DRAFT LOAN OF AXIS BANK. IN ORDER TO CLEAR THE EXISTING LOAN SO AS TO GET THE PROPERTIES MORTGAGED FOR THE LOANS AVAILED BY THE C OMPANY, THE COMPANY HAS ADVANCED FOR A SHORT PERIOD, OUT OF WHI CH THE COMPANY HAS GOT A LONG TERM BUSINESS ADVANTAGE, WHICH CANNO T BE CONSIDERED AS GRATUITOUS PAYMENT, WHICH FALLS WITHIN THE DEFINITI ON OF 2(22)(E) OF THE ACT. 12. HAVING HEARD BOTH SIDES, WE FIND FORCE IN THE A RGUMENTS OF THE ASSESSEE FOR THE REASON THAT THE ASSESSEE HAS GIVEN HIS PERSONAL ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 13 PROPERTIES AS COLLATERAL SECURITY TO THE OVER DRAFT LOAN AVAILED BY THE COMPANY. IT IS ALSO AN ADMITTED FACT THAT THE ASSE SSEE IS HAVING A HOUSING LOAN AS WELL AS MORTGAGE LOAN ON THE SAID P ROPERTIES. UNLESS THE HOUSING LOAN AS WELL AS MORTGAGE LOAN IS CLEARE D, THE ASSESSEE CANNOT PLEDGE HIS PROPERTIES TO OVER DRAFT LOAN AVA ILED BY THE COMPANY FROM AXIS BANK LIMITED. THE ASSESSEE ALSO PROVED W ITH NECESSARY EVIDENCES THAT THE COMPANY HAS GOT A LONG TERM ADVA NTAGE IN THE FORM OF ENHANCED CREDIT LIMIT FROM AXIS BANK. THEREFORE , WE ARE OF THE VIEW THAT THE A.O. AS WELL AS THE CIT(A) WERE ERRED IN C ONSIDERING THE ADVANCE RECEIVED BY THE COMPANY AS GRATUITOUS PAYME NT, WHICH FALLS UNDER THE DEFINITION OF DEEMED DIVIDEND AS DEFINE D U/S 2(22)(E) OF THE ACT. 13. IT IS PERTINENT TO DISCUSS THE CASE LAW RELIED UPON BY THE ASSESSEE. THE ASSESSEE HAS RELIED UPON THE DECISION OF HONBL E HIGH COURT OF KOLKATA, IN THE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT (2011) 338 ITR 588, WHEREIN THE HONBLE HIGH COURT HELD THAT THE T RANSACTION BETWEEN THE ASSESSEE AND HIS COMPANY ARE NOT GRATUITOUS PAY MENT, WHICH IS COMING WITHIN THE MEANING OF LOANS AND ADVANCES AS DEFINED U/S 2(22)(E) OF THE ACT. THE RELEVANT PORTION OF THE O RDER IS EXTRACTED BELOW: ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 14 THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING I N SUB-CL. (E) OF CI. (2) OF S, 2 MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHARE HOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERS ON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER; BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF AN Y FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RE CEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CAN NOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS , GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAR EHOLDERS WOULD COME WITHIN THE PURVIEW OF S. 2 (22) BUT NOT THE CASES W HERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRE D UPON THE COMPANY BY SUCH SHAREHOLDER. IN THE PRESENT CASE THE ASSESSE E PERMITTED HIS PROPERTY TO BE MORTGAGED TO THE BANK FOR ENABLING T HE COMPANY TO TAKE THE BENEFIT OF LOAN AND IN SPITE OF REQUEST OF THE ASSESSEE, THE COMPANY IS UNABLE TO RELEASE THE PROPERTY FROM THE MORTGAGE. I N SUCH A SITUATION, FOR RETAINING THE BENEFIT OF LOAN AVAILED FROM THE BANK IF DECISION IS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION IS NOT T O GIVE GRATUITOUS ADVANCE TO ITS SHAREHOLDER BUT TO PROTECT THE BUSIN ESS INTEREST OF THE COMPANY. AUTHORITIES BELOW ERRED IN LAW IN TREATING THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE BY WAY OF COMPENSATION TO THE ASSESSEE FOR KEEPING HIS PROPERTY AS MORTGAGE ON BEHALF OF THE C OMPANY TO REAP THE BENEFIT OF LOAN AS DEEMED DIVIDEND WITHIN THE MEANI NG OF S.2(22)(E)CIT VS. CREATIVE DYEING & PRINTING (P) LTD. (2010) 229 CTR (DEL) 250:(2009) 30 DTR (DEL) 143 : (2009) 318 ITR 476 (DEL) AND CIT VS. NAGINDAS M. KAPADIA (1989) 75 CTR (BOM) 161 : (1989) 177 ITR 39 3 (BOM) RELIED ON. 14. THE ASSESSEE ALSO RELIED UPON THE DECISION OF I TAT, VISAKHAPATNAM IN THE CASE OF DCIT VS. HARI PRASAD B HARARIA IN ITA NOS.435 TO 441/VIZAG/2014 DATED 9.9.2016. THE COOR DINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CIRCUMSTANCES, BY FOLL OWING THE DECISION OF HONBLE HIGH COURT OF KOLKATA, IN THE CASE OF PRADE EP KUMAR MALHOTRA VS. CIT (SUPRA) HAS HELD THAT ANY ADVANCE RECEIVED BY THE ASSESSEE FROM THE COMPANY FOR MUTUAL BENEFIT OF THE COMPANY TO GET BUSINESS ADVANTAGE ARE NOT FALLS WITHIN THE MEANING OF DEEM ED DIVIDEND AS ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 15 DEFINED U/S 2(22)(E) OF THE ACT. THE RELEVANT PORT ION OF THE ORDER IS EXTRACTED BELOW: 17. HAVING HEARD BOTH THE PARTIES AND HAVING CONSI DERED THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE A.O. HAS MADE ADDITIONS TOWARDS LOANS AND ADVANCES UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT , ON THE GROUND THAT TRANSACTION BETWEEN THE ASSESSEE AND HIS COMPANY IS COMING WITH IN THE DEFINITION OF LOANS AND ADVANCES. THE ASSESSEE CLAIMS THAT TRANSACTION BETW EEN HIMSELF AND HIS COMPANY IS NOT A GRACIOUS PAYMENT WHICH IS COMING WITHIN THE M EANING OF LOANS AND ADVANCES AS DEFINED U/S 2(22)(E) OF THE ACT. THE CIT(A) AFTE R CONSIDERING THE EXPLANATION FURNISHED BY THE ASSESSEE AND ALSO FOLLOWING THE DE CISION OF KOLKATA HIGH COURT, IN THE CASE OF PRADIP KUMAR MALHOTRA VS. CIT, HELD THA T THE TRANSACTION BETWEEN THE ASSESSEE AND HIS COMPANY ARE NOT GRACIOUS PAYMENT W HICH IS COMING WITHIN THE MEANING OF LOANS AND ADVANCES AS DEFINED U/S 2(22)( E) OF THE ACT. THE RELEVANT PORTION OF THE CIT(A) ORDER IS REPRODUCED HEREUNDER : 7.2 HOWEVER, EVEN ON MERITS ALSO, ALTERNATE CONTENTION OF THE APPELLANT IS CONSIDERED. IT IS NOTED THAT THE APPELLANT HAS MOR TGAGED HIS PERSONAL PROPERTY TO VARIOUS BANKS AND OBTAINED LOANS FOR THE BUSINESS O F THE COMPANY. THE DOCUMENTS FILED BY THE APPELLANT OF THE SANCTION LETTERS FROM VARIOUS BANKS SUPPORTS THIS CONTENTION AND THE DETAILS OF THE MORTGAGE LOANS TA KEN FROM VARIOUS BANKS ALONG WITH SANCTION LETTERS AND THE PROPERTIES PROVIDED B Y THE APPELLANT AS COLLATERAL SECURITY TO OBTAIN LOANS FROM THE SAID BANKS IS TAB ULATED BELOW. DATE OF SANCTION NAME OF THE BANK NAME OF THE BORROWER CREDIT FACILITY (RS.) PROPERTY MORTGAGED 23.3.2004 STATE BANK OF HYDERABAD, SIRIPURAM JUNCTION, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 30 LAKHS AGRICULTURAL LAND 10.2.2006 STATE BANK OF HYDERABAD, SIRIPURAM JUNCTION, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 100 LAKHS 4 STORYED BUILDING ON 555 SQ.YDS SITUATED AT RAJENDRANAGAR, VIZAG IN THE NAME OF (A) HARI PRASAD BHARARIA (B) SHIVLAL BHARARIA (BROTHERS) RENEWAL STATE BANK OF HYDERABAD, SIRIPURAM JUNCTION, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 100 LAKHS 4 STORYED BUILDING ON 555 SQ.YDS SITUATED AT RAJENDRANAGAR, VIZAG IN THE NAME OF (A) HARI PRASAD BHARARIA (B) SHIVLAL BHARARIA (BROTHERS) 7.11.2007 THE DHANALAKSHMI BANK, VIP ROAD, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 150 LAKHS ( 1) 4 STORYED BUILDING ON 555 SQ.YDS. SITUATED AT RAJENDRANAGAR, VIZAG IN THE NAME OF (A) HARI PRASAD BHARARIA (B) SHIVLAL BHARARIA (BROTHERS) (2) VUDA APARTMENT ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 16 ADMEASURING 1485 SQ.FT. SITUATED AT MMTC COLONY, SEETHAMMADHARA, VIZAG IN THE NAME OF HARI PRASAD BHARARIA. RENEWAL THE DHANALAKSHMI BANK, VIP ROAD, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 150 LAKHS (1) 4 STOREYED BUILDING ON 555 SQ.YDS. SITUATED AT RAJENDRANAGAR, VIZAG IN THE NAME OF (A) HARI PRASAD BHARARIA (B) SHIVLAL BHARARIA (BROTHERS) (2) VUDA APARTMENT ADMEASURING 1485 SQ.FT. SITUATED AT MMTC COLONY, SEETHAMMADHARA, VIZAG IN THE NAME OF HARI PRASAD BHARARIA. 13.11.2009 AXIS BANK LTD., RAMNAGAR, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 300 LAKHS (1) 4 STORYED BUILDING ON 555 SQ.YDS SITUATED AT RAJENDRANAGAR, VIZAG IN THE NAME OF (A) HARI PRASAD BHARARIA (B) SHIVLAL BHARARIA (BROTHERS) (2) VUDA APARTMENT ADMEASURING 1485 SQ.FT. SITUATED AT MMTC COLONY, SEETHAMMADHARA, VIZAG IN THE NAME OF HARI PRASAD BHARARIA. 12.11.2010 AXIS BANK LTD. RAMNAGAR, VIZAG M/S. SAMPATH VINAYAK STEELS PVT. LTD. 400 LAKHS (1) 4 STORYED BUILDING ON 555 SQ.YDS. SITUATED AT RAJENDRANAGAR, VIZAG IN THE NAME OF (A) HARI PRASAD BHARARIA (B) SHIVLAL BHARARIA (BROTHERS) (2) VUDA APARTMENT ADMEASURING 1485 SQ.FT. SITUATED AT MMTC COLONY, SEETHAMMADHARA, VIZAG IN THE NAME OF HARI PRASAD BHARARIA. EVEN TILL DATE, THE AXIS BANK HAS GRANTED CASH CRE DIT FACILITY TO THE SAID COMPANY ON THE BASIS OF THE COLLATERAL SECURITY PRO VIDED BY THE PROPERTIES AND ALSO THE PERSONAL GUARANTEE OF THE APPELLANT AND HIS FAM ILY MEMBERS (LATEST SANCTION LETTER BEING 6.3.2013). 7.3 IT IS NOTED THAT THE FACTS IN THE CASE OF PRADIP KUMAR MALHOTRA VS CIT (SUPRA) ARE AKIN TO THE FACTS UNDER REFERENCE WHICH IS GIVEN BELOW. 'THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING S UB-CLAUSE(E) OF SECTION 2(22) OF THE INCOME TAX ACT, 1961 MUST BE CONSTRUED TO MEAN T HOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS SIMPLY ON ACCOUNT OF BEING A P ERSON WHO IS THE 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) HO/DI NG NOT LESS THAN TEN PER CENT OF THE VOTING POWER; BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 17 CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH IS B ENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUC H ADVANCE OR LOAN CANNOT BE SAID TO BE DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT . THUS, GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAR EHOLDERS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22) BUT NOT CASES WHERE THE LO AN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER. THE ASSESSEE HAD SUBSTANTIAL SHAREHOLDING IN A PRIV ATE COMPANY. THE ASSESSEE PERMITTED HIS IMMOVABLE PROPERTY TO BE MORTGAGED TO THE BANK FOR ENABLING THE COMPANY TO TAKE THE BENEFIT OF LOAN AND IN SPITE OF REQUEST OF THE ASSESSEE, THE COMPANY WAS UNABLE TO RELEASE THE PROPERTY FROM MOR TGAGE. CONSEQUENTLY, THE BOARD OF DIRECTORS OF THE COMPANY PASSED A RESOLUTI ON AUTHORIZING THE ASSESSEE TO OBTAIN FROM THE COMPANY INTEREST FREE DEPOSIT UP TO RS.50 LAKHS AS AND WHEN REQUIRED. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1999-2000, THE ASSESSEE OBTAINED FROM THE COMPANY A SUM OF RS.20,7 5,000 BY WAY OF SECURITY DEPOSIT. OUT OF THE AMOUNT, A SUM OF RS.20 LAKHS WA S SUBSEQUENTLY RETURNED BY THE ASSESSEE TO THE COMPANY. IN THE ASSESSMENT MADE FOR 1999-2000 THE ASSESSING OFFICER ADDED THE SUM OF RS. 20,75, 000 AS DEEMED D IVIDEND. THIS WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE H IGH COURT HELD, ALLOWING THE APPEAL, THAT FOR RETAINING THE B ENEFIT OF LOAN AVAILED OF FROM THE BANK, IF DECISION WAS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION WAS NOT TO GIVE GRATUITOUS ADVANCE TO ITS SHAREHOLDER BUT TO P ROTECT THE BUSINESS INTEREST OF THE COMPANY. THE SUM OF RS.20,75,000 COULD NOT BE TREAT ED AS DEEMED DIVIDEND,' 07.4 SINCE IN THE PRESENT CASE ALSO, THE APPELLANT HAS MORTGAGED HIS PROPERTY TO VARIOUS BANKS AND OBTAINED LOANS FOR THE BUSINESS O F THE COMPANY. EVEN THOUGH THERE IS A PERSONAL ELEMENT OF INDIVIDUAL BENEFIT T O THE APPELLANT, THE COMPANY FROM WHICH THE ADVANCES WERE TAKEN ALSO BENEFITED BY USI NG THE PROPERTY AS COLLATERAL SECURITY TO THE BANK. THUS, AS OBSERVED BY THE HON' BLE CALCUTTA HIGH COURT THAT THE LOAN OR ADVANCE GIVEN IN RETURN TO AN ADVANTAGE CON FERRED UPON THE COMPANY BY A SHAREHOLDER IS NOT A GRATUITOUS LOAN OR ADVANCE GIV EN BY THE COMPANY AND DOES NOT COME UNDER THE PURVIEW OF SECTION 2(22)(E). IN VIEW OF THE ABOVE, THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND BY THE ASSESSING OFFICER IS ORDERED TO BE DELETED FOR AYS 2005-06 TO 2011-12. SINCE TH E ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT, THE MATTER RELATING TO THE APPELLANTS REMUNERATION DOES NOT ARISE. 18. THE CIT(A) HAS CONSIDERED THE ISSUE IN DETAIL A ND HELD THAT THE TRANSACTION BETWEEN THE ASSESSEE AND HIS COMPANY ARE NOT COMING WITHIN THE MEANING OF LOANS AND ADVANCES AS DEFINED U/S 2(22)(E) OF THE ACT. T HE FACTS REMAIN UNCHANGED. THE REVENUE HAS FAILED TO BROUGHT ON RECORD ANY EVIDENC ES TO PROVE THAT THE FINDINGS OF THE FACT RECORDED BY THE CIT(A) IS INCORRECT. THER EFORE, WE ARE OF THE VIEW THAT THE CIT(A) HAS RIGHTLY DELETED ADDITIONS MADE TOWARDS D EEMED DIVIDEND UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. WE DO N OT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). HENCE, WE INCLINED TO UPH OLD THE CIT(A) ORDER AND DISMISS THE APPEAL FILED BY THE REVENUE. ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 18 15. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS CASE AND ALSO RESPECTFULLY FOLLOWING THE DECISION OF HONBLE KOLK ATA HIGH COURT IN THE CASE OF PRADEEP KUMAR MALHOTRA VS. CIT (SUPRA), WE ARE OF THE VIEW THAT ANY LOAN OR ADVANCE RECEIVED FROM THE COMPANY FOR THE MUTUAL BENEFIT OF THE COMPANY AS WELL AS THE ASSESSEE TO G ET BUSINESS ADVANTAGE ARE NOT FALLS WITHIN THE DEFINITION OF D EEMED DIVIDEND AS DEFINED U/S 2(22)(E) OF THE ACT. THEREFORE, WE ARE OF THE VIEW THAT THE ADVANCE RECEIVED BY THE ASSESSEE FROM THE COMPANY I S NOT A GRATUITOUS PAYMENT WHICH ATTRACTS DEEMING PROVISION OF SECTION 2(22)(E) OF THE ACT. HENCE, WE DELETE ADDITIONS MADE BY THE A.O. TOWARDS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 16. IN SO FAR AS APPEAL FILED BY THE REVENUE IS CON CERNED, SINCE WE HOLD THAT THE ADVANCE RECEIVED BY THE ASSESSEE FROM HIS COMPANY ARE NOT COMING WITHIN THE MEANING OF DEEMED DIVIDEND AS DEFINED U/S 2(22)(E) OF THE ACT. THE FINDINGS GIVEN BY THE CIT( A) ON THE ALTERNATIVE PLEA OF THE ASSESSEE THAT FOR THE PURPOSE OF COMPUT ATION OF DEEMED DIVIDEND, THE ACCUMULATED PROFIT OF THE COMPANY UP TO THE DATE OF ADVANCEMENT OF EACH LOAN HAS TO BE CONSIDERED, BUT NOT CURRENT YEAR PROFIT BECOMES ACADEMIC IN NATURE. THEREFORE, THE GROUND RAISED BY THE REVENUE IN ITS APPEAL IS DISMISSED AS INFRUCTUOUS. ITA NOS.689 & 704/VIZAG/2013 SARAT CHAND BHAVARAJU, VISAKHAPATNAM 19 17. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.689/VIZAG/2013 IS ALLOWED AND APPEAL FILED BY TH E REVENUE IN ITA NO.704/VIZAG/2013 IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 28 TH APR17. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 28.04.2017 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT SRI SARAT CHAND BHAVARAJU, D.NO. 49-22-5, SRI SAI MANSION, LALITHANAGAR, VISAKHAPATNAM 2. / THE RESPONDENT THE ITO, WARD-4(1), VISAKHAPATN AM 3. + / THE CIT, VISAKHAPATNAM 4. + ( ) / THE CIT (A), VISAKHAPATNAM 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY //