Subhash Chandra Agarwal, Hyderabad V. Addl.CIT, Nizamabad Range, Nizamabad

ITA 890/HYD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6201 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 18-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 29-05-2013
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: A V RAGHURAM
• Keywords: Deemed dividend
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 890/HYD/2013 ASSESSMENT YEAR: 2006-07 SRI SUBHASH CHANDRA AGARWAL, BHAINSA ADILABAD DISTRICT., [PAN: ABLPA2165N] VS ADDL. CIT, NIZAMABAD RANGE, NIZAMABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR FOR REVENUE : SMT U. MINICHANDRAN, DR DATE OF HEARING : 18-08-2016 DATE OF PRONOUNCEMENT : 14-09-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-18, MUMBAI WIT H CAMP OFFICE AT HYDERABAD HAVING CONCURRENT JURISDICTION OV ER ASSESSEES CASE, DATED 04-03-2013. THE ISSUE IN APPEAL IS WHE THER AN AMOUNT OF RS. 50 LAKHS CONFIRMED BY THE CIT(A) WILL C OME WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE INCOME TAX ACT [ACT]. ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ORDER OF RE-ASSESSME NT PASSED U/S. 143(3) R.W.S. 147 OF THE I.T. ACT, 1961. I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 2 -: 2. THE INVOCATION OF JURISDICTION U/S. 147 OF THE A CT WAS WRONG AND ERRONEOUS IN AS MUCH AS THE REQUISITE CONDITIONS WE RE NOT FULFILLED. THEREFORE THE ENTIRE RE-ASSESSMENT PROCEEDINGS ARE VITIATED. 3. THE LEARNED CIT(A) ERRED IN NOT ACCEPTING THE PL EA OF THE APPELLANT THAT RS. 50.00 LAKHS WAS PAID BY M/S. AMIT COTTONS PVT. LTD. IT WAS A TRANSFER ENTRY IN THE BOOKS OF M/S. K.G.F. COTTONS PVT. LTD., FOR THE PAYMENT MADE BY M/S. AMIT COTTONS PVT. LTD., HENCE NOT COMING UNDER THE PURVIEW OF SECTION 2(22)(E) OF THE I.T. ACT, 1961. AS THE SAID AMOUNT WAS NOT PAID BY OR THERE WAS NO OUTGOING OR FLOW OF MON EY FROM M/S. K.G.F. COTTONS PVT. LTD., TRANSFER ENTRY BY MAKING BOOK EN TRIES CANNOT BE TREATED AS PAYMENT BY WAY OF LOAN BY THE COMPANY TO THE APP ELLANT FOR THE PURPOSE OF MULCTING THE APPELLANT WITH TAX LIABILIT Y. 4. THE ASSESSING OFFICER OUGHT NOT HAVE TAXED THE A MOUNT OF RS. 50 LAKHS PAID BY M/S. AMIT COTTONS PVT. LTD., TO THE A PPELLANT WHERE HIS SHAREHOLDING IS BELOW THE SPECIFIED PERCENTAGE OF 1 0% WHICH IS A NECESSARY PREREQUISITE FOR BRINGING THE APPELLANT I NTO TAX NET. 2. BRIEFLY STATED, ASSESSEE IS AN INDIVIDUAL AND DIR ECTOR IN M/S. K.G.F. COTTONS PVT. LTD. ASSESSEE FILED RETURN OF INCOME DECLARING INCOME AT RS. 9,17,325/- AND AGRICULTURAL INCOME OF RS. 50,000/-. THE RETURN FILED ON 05-04-2007 WAS PROCES SED U/S. 143(1). IN THE COURSE OF ASSESSMENT PROCEEDINGS IN T HE CASE OF THE COMPANY M/S. K.G.F. COTTONS PVT. LTD., ASSESSING OFFICE R (AO) HAS NOTICED THAT THE COMPANY HAS ADVANCED AN AMOUNT OF RS . 1,24,92,795/- TO ASSESSEE. IT IS ALSO BEEN NOTICED TH AT ASSESSEE HAS A SHARE HOLDING MORE THAN 10% IN THE SAID COMPANY . CONSIDERING THAT THE AMOUNT ADVANCED TO THE DIRECTOR WOULD CONSTITUTE DEEMED DIVIDEND WITHIN THE MEANING OF SECTIO N 2(22)(E) OF THE ACT, A NOTICE U/S. 148 OF 16-12-2008 ISSUED TO B RING TO TAX THIS AMOUNT. IN THE CONSEQUENTIAL PROCEEDINGS COMPLETE D AFTER GIVING DUE OPPORTUNITY TO ASSESSEE, THE AO HAS CONSI DERED THE ENTIRE AMOUNT OF RS. 1,24,92,795/- AS DEEMED DIVIDEND BY DISCUSSING THE PROVISIONS OF THE ACT. IT WAS THE ASSESS EES CONTENTION THAT THE AMOUNT WAS ADVANCED FOR ACQUIRING PR OPERTY I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 3 -: ACCORDINGLY, THE SAME CANNOT BE CONSIDERED AS A DEEME D DIVIDEND IN THE HANDS OF THE DIRECTOR. THIS CONTENTION OF ASSES SEE WAS REJECTED BY THE AO AFTER DUE EXAMINATION. 2.1. BEFORE THE LD. CIT(A), ASSESSEE CONTENDED THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLI CABLE AND MOREOVER, THE ABOVE AMOUNT INVOLVED HAS AN OPENING B ALANCE TO AN EXTENT OF RS. 82,00,063/- AND THE SAID AMOUNT CANNOT B E CONSIDERED AS DEEMED DIVIDEND DURING THE YEAR. WI TH REFERENCE TO THE BALANCE AMOUNT OF RS. 50 LAKHS, IT WAS SUBMITTED THA T ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 50 LAKHS FROM ANOTHER COMPANY M/S. AMIT COTTONS PVT. LTD., AND THERE WERE ONLY TRANSFER ENTRIES IN THE HANDS OF THE M/S. K.G.F. COTTONS PVT. LTD ., AND SO THE ABOVE SUM ALSO CANNOT BE CONSIDERED AS DEEMED DI VIDEND. LD. CIT(A) AFTER REFERRING THE MATTER TO THE AO FOR VERIFIC ATION AND OBTAINING THE REPORT THEREON, ACCEPTED THAT THE OPENING B ALANCE CANNOT BE CONSIDERED AS DEEMED DIVIDEND DURING THE IMPUGNED YEAR. ASSESSEES CONTENTION WAS THAT THE AMOUNT WAS RECE IVED TOWARDS LAND TRANSACTION TO REGULARISE EMAM LANDS IN THE HANDS OF THE PARTNERSHIP FIRM WHOSE ASSETS WERE TAKEN OVER BY THE COMPANY ON LEASE BASIS. LD. CIT(A) HOWEVER, CONFIRMED THE A MOUNT OF RS. 50 LAKHS AS DEEMED DIVIDEND BY STATING AS UNDER: THE SECOND ADDITIONAL GROUND IS RELATING TO RS. 50 LAKHS RECEIVED BY THE COMPANY M/S. KGF FROM ANOTHER COMPA NY M/S. AMIT COTTONS PVT LTD., THE ARGUMENT OF THE APPELLAN T THAT THIS LOAN WAS RECEIVED BY THE COMPANY FROM OTHER COMPANY, THE REFORE, SEC. 2(22)(E) IS NOT APPLICABLE AND NOT ACCEPTABLE BECAU SE THE COMPANY HAS RECEIVED LOAN FROM ANOTHER COMPANY OR FROM BANK , DOES NOT CHANGE THE IMPACT OF SEC. 2(22)(E). AS PER THE PROV ISIONS OF SEC. 2(22)(E), THE LOAN ADVANCED BY THE COMPANY TO THE S HAREHOLDERS HAVING MORE THAN 10% SHARE HOLDING THEN THE PROVISI ONS OF SEC. 2(22)(E) ARE APPLICABLE. IN THE PRESENT CASE, THE A SSESSEE HAS I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 4 -: RECEIVED LOAN FROM M/S.KGF COTTONS PVT. LTD., THUS, THE QUESTION THAT THE COMPANY M/S.KGF HAS RECEIVED LOAN FROM ANO THER COMPANY OR FROM ANY BANK IS IMMATERIAL. THE CONCERN ED QUESTION IS THAT THE COMPANY M/S.KGF COTTONS PVT. LTD. HAS ADVA NCED LOAN TO. THE ASSESSEE, THEREFORE, THIS ARGUMENT OF THE APPEL LANT IS REJECTED. IN TOTALITY OF THE FACTS & CIRCUMSTANCES, THE ADDITION MADE BY THE A.O. IS CONFIRMED TO THE EXTENT OF RS. 1,24,92,795/- 82, 00,631 WHICH COMES TO RS. 42,92,1641/- AND THE BALANCE AMOUNT IS DELETED. THUS, THE GROUND OF APPEAL IS PARTLY ALLOWED. 3. IT WAS THE CONTENTION OF THE LD. COUNSEL THAT THE SAID AMOUNT WAS NOT DIRECTLY PAID BY M/S. K.G.F. COTTONS PVT. LTD., BUT PERTAINS TO A TRANSFER ENTRY MADE TOWARDS PAYMENTS RECEI VED FROM M/S. AMIT COTTONS PVT. LTD. THEREFORE, IN THE ABSENCE OF CASH PAYMENT, THE SAME CANNOT BE CONSIDERED AS DEEMED DIVI DEND. LD. COUNSEL RELIED ON THE DECISION OF CIT VS. SMT. SAVITH IRI SAM [236 ITR 1003] (MAD). REFERRING TO THE LAST PARA OF THE ABO VE JUDGMENT, IT WAS SUBMITTED THAT: 5. THAT APART, THE PROVISIONS OF LAW NAMELY S.2(22 )(E) WHICH WE HAVE ALREADY EXTRACTED ABOVE, SAYS THAT BY A FIC TION DIVIDEND IS MADE TO INCLUDE ANY PAYMENT BY A COMPANY ETC. THERE FORE, IT IS DIFFICULT FOR US TO INTRODUCE ANOTHER FICTION IN RE SPECT OF THE WORDS 'PAYMENT BY THE COMPANY' BY CONSTRUING EVEN A TRANS FER ENTRY AS AMOUNTING TO PAYMENT. IN OTHER WORDS, WHEN S.2(22)( E) ITSELF INTRODUCES A FICTION, IT IS IMPROPER FOR US TO INTR ODUCE ANOTHER FICTION AND CONSTRUE A PAYMENT AS EQUIVALENT TO A CONSTRUCT IVE PAYMENT. IN THIS VIEW OF THE MATTER, WE ARE NOT INCLINED TO ACC EPT THE ARGUMENTS ADVANCED ON BEHALF OF THE REVENUE AND FOLLOWING THE DECISION FN G.R. GOVINDARAJULU NAIDU VS. CIT (SUPRA), WE ANSWER THE REFERENCE IN THE AFFIRMATIVE AND AGAINST THE REVENUE. 4. IT WAS THE CONTENTION THAT SINCE THE ENTRY IS ONLY AS TRANSFER ENTRY IN THE BOOKS OF M/S. K.G.F. COTTONS PVT . LTD., SAME CANNOT BE CONSIDERED AS AMOUNT PAID BY THE COMPANY. ACCORDINGLY, THE SAME CANNOT BE TREATED AS DEEMED DIV IDEND. I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 5 -: 5. LD. DR, HOWEVER, SUBMITTED THAT THE ABOVE JUDGEMENT DOES NOT APPLY WHICH WAS GIVEN IN A DIFFERENT CONTEXT A ND REFERRED TO THE PAYMENTS MADE FROM M/S. AMIT COTTONS PVT. LTD., ON VARIOUS DATES AS LISTED OUT DURING THE SUBMISSIONS TO THE CIT(A) AND THE PROVISIONS OF SECTION 2(22)(E), TO SUBMIT THAT TH E AMOUNT PAID BY/DEBITED BY M/S. K.G.F. COTTONS PVT. LTD., WOUL D BE CONSIDERED AS DEEMED DIVIDEND AS PER THE PROVISION S OF SECTION 2(22)(E). IT WAS FURTHER SUBMITTED THAT THERE IS NO DISP UTE WITH REFERENCE TO POSSESSING ACCUMULATED PROFITS AND ASSESS EE BEING SHARE-HOLDER OF THE ABOVE COMPANY HAVING MORE THAN SU BSTANTIAL INTEREST AS PRESCRIBED. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DOUBT THAT THE COMPANY HAS ADVANCED MONEYS TO ASSESSEE. PART OF IT WHICH WAS OPENING BALANCE WAS DELETED BY THE CIT(A ) AND HE HAS CONFIRMED THE AMOUNT OF RS. 42,92,164/- OUT OF RS. 50 LAKHS ADVANCED BY M/S. AMIT COTTONS PVT. LTD., TRANSFERRED AS A LIABILITY TO M/S. K.G.F. COTTONS PVT. LTD. AS SEEN FROM THE SUBMIS SIONS BEFORE THE CIT(A), PLACED ON RECORD, ASSESSEE HAS DR AWN AN AMOUNT OF RS. 50 LAKHS FROM M/S. AMIT COTTONS PVT. LTD., ON THE FOLLOWING DATES: DATES AMOUNT (RS.) 06.04.05 7,50,000 18.04.05 10,00,000 04.05.05 12,50,000 15.02.06 20,00,000 I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 6 -: 6.1. EVEN THOUGH HE IS HAVING VOTING POWER OF LESS THAN 10% IN THE SAID M/S. AMIT COTTONS PVT. LTD., HOWEVER, THE SAID OUTSTANDING BALANCE IN THE BOOKS OF M/S. AMIT COTTONS P VT. LTD., HAS BEEN TRANSFERRED BY WAY OF JOURNAL ENTRIES IN THE BOOKS OF M/S. K.G.F. COTTONS PVT. LTD. EVEN THOUGH, IT WAS CONTENDED THAT THESE WERE ONLY TRANSFER ENTRIES, WE CAN NOT ACCEPT THAT ARGUME NT AS THERE IS A CONSTRUCTIVE PAYMENT TO ASSESSEE TO AN EXTENT O F RS. 50 LAKHS, WHICH CANNOT BE DISPUTED. INSTEAD OF ASSESSEE DIRECTLY DRAWING FROM THE COMPANY WHERE HE HAS SUBSTANTIAL SHA RE HOLDING, ASSESSEE MUST HAVE TAKEN RECOURSE TO DRAWING FROM M/S. AMIT COTTONS PVT. LTD., AND THAT LIABILITY WAS TRANSFERRED TO OTHER COMPANY BY WAY OF JOURNAL ENTRIES. THE PROVISIONS OF SECTION 2(22)(E) ARE AS UNDER: SEC. 2. (22) 'DIVIDEND' INCLUDES (A) ANY DISTRIBUTION BY A COMPANY OF ACCUMULATED PR OFITS, WHETHER CAPITALISED OR NOT, IF SUCH DISTRIBUTION ENTAILS THE RELEASE BY THE COMPANY TO ITS SHAREHOLDERS OF ALL OR ANY PART OF THE ASSETS OF TH E COMPANY ; (B) ANY DISTRIBUTION TO ITS SHAREHOLDERS BY A COMPA NY OF DEBENTURES, DEBENTURE- STOCK, OR DEPOSIT CERTIFICATES IN ANY FORM, WHETHER WITH OR WITHOUT INTEREST, AND ANY DISTRIBUTION TO ITS PREFERENCE SHAREHOLDERS OF SHARES BY WAY OF BONUS, TO THE EXTENT TO WHICH THE COMPANY POSSESSES ACCUMULATED PROFITS, WHETHER CAPITALISED OR NOT ; (C) ANY DISTRIBUTION MADE TO THE SHAREHOLDERS OF A COMPANY ON ITS LIQUIDATION, TO THE EXTENT TO WHICH THE DISTRIBUTION IS ATTRIBUT ABLE TO THE ACCUMULATED PROFITS OF THE COMPANY IMMEDIATELY BEFORE ITS LIQUI DATION, WHETHER CAPITALISED OR NOT ; (D) ANY DISTRIBUTION TO ITS SHAREHOLDERS BY A COMPA NY ON THE REDUCTION OF ITS CAPITAL, TO THE EXTENT TO WHICH THE COMPANY POSSESS ES ACCUMULATED PROFITS WHICH AROSE AFTER THE END OF THE PREVIOUS YEAR ENDI NG NEXT BEFORE THE 1ST DAY OF APRIL, 1933, WHETHER SUCH ACCUMULATED PROFIT S HAVE BEEN CAPITALISED OR NOT ; (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL ED TO A FIXED RATE OF I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 7 -: DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WH ICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFE RRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHA LF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFIT S ; BUT 'DIVIDEND' DOES NOT INCLUDE (I) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CL AUSE (C) OR SUB-CLAUSE (D) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONSIDERA TION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVENT OF LIQUIDATI ON TO PARTICIPATE IN THE SURPLUS ASSETS ; (IA) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLA USE (C) OR SUB-CLAUSE (D) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING BONUS SHARES ALLOTTED TO ITS E QUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH, 1964, AND BEFORE THE 1 ST DAY OF APRIL, 1965 ; (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR T HE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHE RE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY ; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET O FF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB-CLAUSE (E), TO T HE EXTENT TO WHICH IT IS SO SET OFF; (IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF I TS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISIONS OF SE CTION 77A OF THE COMPANIES ACT, 1956 (1 OF 1956); (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERG ER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERGED COMPANY (WHETHE R OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY). EXPLANATION 1.THE EXPRESSION 'ACCUMULATED PROFITS' , WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARI SING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MARCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2.THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB-CLAUSES (A), (B), (D) AND (E), SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB-CL AUSES, AND IN SUB-CLAUSE (C) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION, BUT SHALL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR T HE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE S UCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SU CH ACQUISITION TOOK PLACE. EXPLANATION 3.FOR THE PURPOSES OF THIS CLAUSE, I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 8 -: (A) 'CONCERN' MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; (B) 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, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER C ENT OF THE INCOME OF SUCH CONCERN ; 6.2. AS CAN BE SEEN FROM THE ABOVE, IT IS ALSO A SOR T OF INDIRECT PAYMENT WHICH IS COVERED BY THE PROVISIONS O F SEC. 2(22)(E) BY THE WORDS ANY PAYMENT BY ANY SUCH COMPANY ON BEH ALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER. IN THIS CASE, EVEN THOUGH THE AMOUNT WAS NOT DIRECTLY PAID BY M/S. K .G.F. COTTONS PVT. LTD., IN THE FIRST INSTANCE, IT IS DEEMED TO H AVE BEEN PAID BY TRANSFER ENTRY MADE FOR THE BENEFIT OF THE INDI VIDUAL IN THE BOOKS OF M/S. K.G.F. COTTONS PVT. LTD. IN OUR VIEW, THE AMOUNT TRANSFERRED TO ASSESSEES ACCOUNT FROM M/S. AMIT COTTONS PVT. LTD., DO COME WITHIN THE PURVIEW OF THE PROVISIONS OF SECTION 2(22)(E) IN VIEW OF THE WIDE DEFINITION GIVEN AS ABOVE. 7. LD. COUNSEL RELIED ON THE DECISION OF THE CIT VS . SMT. SAVITHIRI SAM [236 ITR 1003] (MAD) (SUPRA) TO SUBMIT THAT TRANSFER ENTRIES CANNOT BE CONSIDERED AS PAYMENT BY COMPANY. THE FACTS IN THE ABOVE SAID CASE ARE ENTIRELY DIFFERENT WHEREIN ASSESSEES HUSBAND SHRI G.N. SAM WAS ALSO A SHAREHOLDER IN THE COMPANY AND HER HUSBAND WITHDREW SUMS OF MONEY FROM THE SAID COMPANY. ON THE DEATH OF HER HUSBAND THE DEBIT BALANCE OF RS. 4,73,241/- IN THE ESTATE OF LATE G.N. SAM WAS TRANSFERRED TO THE ACCOUNT OF ASSESSEE IN THE BOOKS OF THE SAID COMPANY, AND BY SUC H TRANSFER, THE SAID AMOUNT IN THE HANDS OF ASSESSEE WERE SHOWN AS DEBIT BALANCE IN ASSESSEES ACCOUNT. ON THOSE FACTS, IT WAS CONSIDERED THAT A FURTHER FICTION CANNOT BE INTRODUCED WHEN THE PROVI SIONS OF I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 9 -: SECTION 2(22)(E) ITSELF IS A FICTION CREATED BY THE STA TUTE. THE FACTS IN THE ABOVE SAID CASE ARE ENTIRELY DIFFERENT FROM THE FACTS IN ASSESSEES CASE. IN THIS CASE, ASSESSEE DIRECTLY WITH DREW THE MONEY FROM ANOTHER COMPANY AND SAID OUTSTANDING AMOUNT TO M /S. AMIT COTTONS PVT. LTD., WAS SETTLED BY WAY OF TRANSFER ENTRIES BETWEEN THE TWO COMPANIES BUT ULTIMATELY, AS PER THE PROVISIONS OF SECTION 2(22)(E), IT IS PAID ON BEHALF OF ASSESSEE BY SUCH C OMPANY. THEREFORE, IT IS WITHIN THE PURVIEW OF THE PROVISIONS OF SECTION 2(22)(E). IN VIEW OF THAT, WE AFFIRM THE ORDER OF CIT (A) TO THE EXTENT OF AMOUNT CONFIRMED U/S. 2(22)(E) IN THE ORDER. AS SESSEES GROUNDS ARE ACCORDINGLY REJECTED. 8. IN THE RESULT, APPEAL OF ASSESSEE IS DISMISSED . ORDER PRONOUNCED IN THE COURT ON 14 TH SEPTEMBER, 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 14 TH SEPTEMBER, 2016 TNMM I.T.A. NO. 890/HYD/2013 SRI SUBHASH CHANDRA AGARWAL :- 10 -: COPY TO : 1. SRI SUBHASH CHANDRA AGARWAL, BHAINSA, ADILABAD DIST ., C/O. CH. PUSHYAM KIRAN, ADVOCATE, FLAT NO. D, 1 ST FLOOR, UMA ENCLAVE, ROAD NO. 9, BANJARA HILLS, HYDERABAD. 2. THE ADDL. CIT, NIZAMABAD RANGE, NIZAMABAD. 3. CIT (APPEALS)-18, MUMBAI. 4. CIT (APPEALS)-VI, HYDERABAD. 5. CIT-5/6, HYDERABAD. 6. D.R. ITAT, HYDERABAD. 7. GUARD FILE.