Manoj Jaikumar Tibrewala, Nashik V. Assistant Commissioner of Income tax,

ITSSA 7/PUN/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4398 (ITAT-PUNE)
• Duration Of Justice: 5 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 09-05-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 17-01-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Deemed dividend; Capital Gains
• Section: 2; 143(3); 2(22)(e); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER IT(SS)A Nos. 06 & 07/PUN/2017 (Assessment Years: 2012-13 & 2013-14) ITA No. 609/PUN/2019 (Assessment Years: 2014-15) Shri Manoj Jaikumar Tibrewala Vastu Shilp, Ground Floor Godavari Housing Society Boys Town School Road Nashik 422005 Vs. ACIT, Central Circle-1 Kendriya Rajaswa Bhavan Gadkari Chowk Old Agra Road, Nashik PAN – AAKPT7009G Appellant Respondent Appellant by: Shri Pamod S. Shingte Respondent by: Shri S.P. Walimbe Date of Hearing: 25.04.2022 Date of Pronouncement: 10.05.2022 O R D E R Per S.S. Godara, JM These assessee’s three 3 appeals for AY 2012-13 – 2014-15 arise against the CIT(A)-12, Pune’s common order dated 07.11.2016 in case No. PN/CIT(A)- 12/445, 446, 447/2015-16 involving proceedings under Section 143(3) r.w.s. 153A of the Income Tax Act, 1961 (in short the Act) in the former twin and under Section 143(3) of the Act in the last assessment year; respectively. 2. We note at the outset that there is a delay of 800 days in filing this assessee’s appeal ITA No. 609/Pun/2019. He has filed an affidavit explaining the reasons for the same as attributable to beyond it control. The Revenue is fair enough to not dispute this solemn averment. We find that there is reasonable cause for the delay in filing the appeal. We follow Collector Land Acquisition Vs. Mst. Katijoi & Ors. (1987) 167 ITR 471 (SC) to condone the impugned delay. This main appeal is taken up for adjudication on merits. 3. We now advert to the assessee’s pleadings of all these years to note that its former twin appeals IT(SS)A 06 & 07/Pun/2017 raise an identical issue of IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 2 correctness of Section 2(22)(e) deemed dividend addition(s) of Rs.60,92,388/- and Rs.1,08,07,866/; respectively. The CIT(A)’s common detailed discussion affirming the impugned addition to this effect reads as under: - “5. Vide ground No.2, the appellant has contended that the AO erred in invoking the provisions of section 2(22)(e) ·in relation to extra payment towards sale price of Rs.,1,19,27,086/- on the, ground that the sum paid did not have any attribute ,of loan and only advances having the attributes of loan are hit by the provisions of section 2(22)(e) and not business advances allowed against value. The AO in the impugned assessment order has dealt with issue in para 06.7 of his assessment order as under : 06.7 Without prejudice to this fact, the assessee is having 34% shareholding in the company. Therefore even at any stage if assessee takes the stand that this advances on account of delay in completion of project received is not a business income then it will be taxed in the hands of the assessee u/s. 2(22)(e) of the IT. Act as deemed dividend." 5.1 The appellant made the following submission, in support of this ground of appeal: 4. "Ground No.3: Alternative addition .of Rs, 1,19,27,086/· on the ground of deemed dividend (Para 6.7 of Assessment-Order) : 4.1. After making addition of Rs. 1,19,27,086/-, being the amount of excess receipt over the 15% of customer advances received by JREPL, on the ground of compensation for delay in project execution, A.O. considered such excess paid amount, over & above 15%/17.33, as advance covered by the provisions of sec. 2(22)(e) and held that, if the said sum of Rs. 1,1,9,27;086/- is not assessed as business income, then it be assessed as deemed dividend u/s 2(22)(e). 4.2. While doing so he has- ignored the submission of appellant that the- extra sums paid being again against property i.e. value to be received was not all advance, as envisaged u/s 2(22)(e). Sec. 2(22)(e) envisages advances having the features akin to loan and not all types of advances. 4.3. Please note that, appellant was holding minimum 34% of share capital of JREPL during the entire period of previous year relevant to A. Y. 2012-13 (Page Nos. 51). Further, accumulated profits, as on 331.03.12, include opening balance (credit) of Profit & Loss Account of Rs.46,36,756/- plus profit for the year of Rs.1,17,54,703/-, aggregating to Rs.1,63,91,549/- (Page No. 51 backside). Appellant‟s entitlement to the accumulated profits at 34% was at Rs.15,76,497/- of opening balance & at Rs.39,96,630/- of the profits for the year. Thus, in aggregate, appellant‟s share in accumulated profits, as on 31.03.2012 was at Rs.55,73,127/-. Whereas, deemed dividend u/s 2(22)(e) is adopted at Rs.1,19,27,086/-. 4.4 Admittedly, the advance paid was paid against the entitlement of appellant to the sale price under Development Agreement for development of land belonging to appellant & was received in the normal course of appellant‟s business and in subsequent year it is in fact adjusted against land price receivable by appellant under the IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 3 development agreement. It was neither a gratuitous advance nor with the obligation to return the same. It did not bear any interest. 4.5 In similar situation of advance against sale of land, ITAT, Delhi „C‟ Bench, in the case of Gomti Exim Pvt. Ltd. (Page Nos 59 to 62) has held that such advance is not liable to be considered as deemed dividend u/s 2(22)(e). In this context following observations of the Calcutta High Court in the case of Pradip Kumar Malhotra v/s CIT, at Page Nos. 12 & 13 thereof (Page Nos. 63 to 69) also need to be noted – "After hearing the learned Counsel for the parties and after going through the aforesaid provisions of the Act, we are of the opinion that the. phrase "by way of advance or loan" appearing in sub-section (e) must be construed to mean those advances or loans which a share holder enjoys for simply on account of being a person who is the beneficial owner of shares (not being 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; but if such loan or advance is given to such share holder as a consequence of any further consideration, which is beneficial to the company received from such a share holder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. Thus, for gratuitous loan or advance given by a company to those classes of share holders would come within the purview of Section 2(22) but not to the cases where the loan or advance is given in return to an advantage conferred upon the company by such. share holder." (emphasis supplied) Similarly, in the case of Raj Kumar v/s CIT (Page Nos: 70 to 73), the Delhi High Court has held as under, at Para Nos. 10.9, 11 & 12 thereof- “10.9 Keeping the aforesaid rule in mind we are of the opinion that the word advance which appears in the company of the word loan could only mean such advance which carries with it an obligation of repayment. Trade advance which are in the nature of money transacted to give effect to a commercial transactions would not, in our view, fall within the ambit of the provisions of Section 2(22)(e) of the Act. This interpretation would alloy the rule of purposive construction with noscitur a sociis, as was done by the Supreme Court in the case of LIC Officers Assn. (2008) 3 SCC 321. The observation in para 24 of the report being opposite are extracted here in below: -. “Each word employed in a statute must take colour from the purport and object for which it is used. The principle of purposive interpretation, therefore, should be taken recourse to”. 11. A close examination of the judgment of the Bombay High Court in the case of Nagindas M. Kapadia (supra) would show that the Court excluded from the ambit of dividend, monies which the assessee had received towards purchases. In our view both the CIT(A) and the Tribunal have correctly appreciated this aspect of the matter in the said judgment of the Bombay High Court. The relevant portion of the judgement of the Bombay High Court which sets out this aspect of the matter is already extracted by us in the narrative given by us hereinabove. We are also in agreement with the view of the Tribunal that the judgment of the Supreme Court in the case of Ms. P. Sarada IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 4 (supra) and Smt. Tarulata (supra) has no applicability to the present case. Both the judgments establish the principle that once the payment made to a shareholder is deemed as dividend then the fact that it is repaid would not take it out of the ambit of the tax net. In the instant case, however, a discussion with respect to which has been made hereinabove, the issue is whether the payment received by the shareholder would at all fall within the four corners of provisions of Section 2(22)(e) of the Act. Having held otherwise, the said judgments of the Supreme Court, in our view, will have no applicability to the facts of the instant case. 12. In view of the above, the question of law as framed by us is answered in favour of the assessee and against the Revenue. We hold that trade advance does not fall with in the ambit of the provisions of Section 2(22)(e) of the Act. Resultantly, the appeal is dismissed. There shall be, however, no order as to costs." (emphasis supplied) Thus, the advances received from the company against land under development agreement, by owner of it as owner thereof; cannot be said to be hit by the provisions of sec. 2(22)(e) & the A.O. erred in alternatively holding that, the advances paid to appellant by JREPL, in excess of entitlement, constituted dividend income u/s 2(22,)(e). In this connection, reliance is also placed, on the Bombay High Court, decision in the case of CIT vs Nagindas M. Kapadia (1989) 177 ITR 393 (Page Nos 74). 4,6. Alternatively and without prejudice to above claim, appellant would like to submit that, if at all such deemed dividend income was to be assessed in the hands of appellant, it should have been calculated with reference to the accumulated profits, being opening balance of Profit & Loss Account of Rs. 46,36,756/-, @ 34% thereof i.e. the share to which appellant was entitled to at Rs. 15,76,497/-, in law. The A.O. erred in including current year's business profits of JREPL in calculation of accumulated profits. This is so because it is held by the Supreme Court in the case of CIT vis Ashokbhai Chimanbhai (56 ITR 42). that profits do not accrue from day to day or even from month to month and have to be ascertained by a comparison of assets at two stated points. Unless the right to profits comes into existence there is no accrual of profits and the destination of profits must be determined by the title thereto on the day on which they arise. Relying on the decision of: the Supreme Court in Ashokbhai Chimanbhai, it is held by ITAT, Ahmedabad in M.B. Stock Holding (P) Ltd v/s ACIT (84 ITD 592 – Page Nos 75 to 82) as under at the conclusion of Para 24 thereof – “Keeping in view the above interpretation of law, it cannot be said that the Explanation 2 to section 2(22)(e) is redundant. It is bound to be for a specific purpose. The question for determination is as to what is the purpose for which this Explanation. has been incorporated when the Hon'ble Supreme Court in the case of Ashokbhai Chimanbhai have held that the profits of business do not accrue from day-to-day or even from month to month. In our considered view, the Legislature has taken into account the fact that whereas the profits from business for the current year may not be determinable in the middle of the year, there are certain sources of income, the income from which is capable o] determination which, according to the legislative intent, should also be taken into account while determining the accumulated profits on the IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 5 clay of advancing the loan. The company is a person. It may carry on business and may also derive income from various other sources. For example, the company may sell an asset from which capital gains are derived. If the capital gain is derived before the date of advancement of the loan that profit shall have to be taken into account in determining the accumulated profits notwithstanding the fact that such an event has taken place in the middle of the year. It is so the determination of capital gains is not to wait for the end of the previous year. Similarly, there can be income from other sources also such as receipt of or dividend income or interest which may not have to wait for determination at the end of the year. Similarly, some subsidy may be received from the Government which may be taxable on receipt basis. Such income shall also have to be taken into account in determining the accumulated profits as it has not to wait for determination of income at the dose of the year." From the above decision of the ITAT it is evident that, the A.O. erred in including current year's business profits of JREPL in the accumulated profits for determination of the quantum of deemed dividend taxable in the hands of appellant. Therefore, it is prayed to exclude current year's income from the determination of the amount of accumulated profits, as it consisted of business income. Further, such accumulated profits belonged to all shareholders. Appellant's share in such accumulated profits, in law, was restricted to the extent of his share holding i.e. to 34%. Accordingly, at the most, as already submitted, deemed dividend could have been assessed at Rs.15,76,497/- in the hands of appellant, as against Rs.1,19,27,086/-, assessed by the A.O. Hence, if at all advances received by appellant are considered as deemed dividend, it is prayed to restrict the assessment of deemed dividend in the hands of appellant to Rs.15,76,497/-. 4.7. Before conclusion please note that, the amount assessed as deemed dividend is subsequently assessed as sale proceeds of land and taxed accordingly. Thus, the same receipt is taxed twice, once as deemed dividend & then in the subsequent assessment year as sale proceeds of land. This has resulted into double taxation of the same receipt & it is settled law that there cannot be double taxation of same amount. Hence, if at all any amount is held as taxable as deemed dividend in A.Y. 2012-13, then corresponding credit for the same may please be directed to be allowed in the subsequent years, when such receipt is offered to tax as sale proceeds of land under Development Agreement." Findings: 5.2 I have gone through the submissions filed by the appellant. Brief facts are that appellant was holding 34% of beneficial shares throughout the year in the company M/s. JREPL and also entered into a Development Agreement dated 02.05.2008 with the company M/s. Jaikumar Real Estate Pvt. Ltd. (hereinafter referred as JREPL) for development of project 'Parksyde'. According to clause 3 of the development agreement, appellant was entitled to 15.00% of amounts received from prospective purchaser of residential property and 17.33% of the amount received from the purchasers of commercial premises. It was agreed upon that all the amounts received by the developers on account of construction carried out on the land owned by the appellant, IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 6 would be deposited in an 'Escrow Account' which would be operated jointly by the land owners and the developers. It was specifically agreed that except the aforesaid sharing of amounts, no other amount shall be paid to the land owners. During the year, appellant received excess amount of Rs.1,19,27,086/- over and above his entitlement as per the Development Agreement. Appellant as well as developer company treated the same as advance against the land and the AO treated it as business receipts being compensation received on account of delay in execution of the project. Alternatively, the AO was of the view that if amount was not in nature of business receipts same would constitute deemed dividend u/s 2(22)( e) of the act. While disposing off Ground No. 2 of this appeal, it has been held vide paras 4.2 to 4.5 that amount received were not in nature of business receipts as amount to the extent of .entitlement under the Development Agreement accrued to the appellant under mercantile system of accounting followed by the appellant. Therefore, alternative addition made by the AO u/s 2(22)(e) is required to be adjudicated. Ledger account of the Company M/s. JREPL in the books of appellant for the year under consideration is produced below: MANOJ JAIKUMAR TIBREWALA JAIKUMAR REAL ESTATES PVT. LTD. Ledger Account 1-April-2011 to 31-March-2012 Date Particulars Vch Type Vch No. Debit Credit 8-4-2911 Cr Union Bank CC A/C 75004 CHQ No. 41110367 BANK PAYMENT BANK PAYMENT/9 25,000.00 17-5-2011 Cr Union Bank CC A/C 75004 CHQ No. 41110415 BANK PAYMENT BANK PAYMENT/59 25,00,000.00 7-7-2011 Cr Union Bank CC A/C 75004 CHQ No. 41116169 BANK PAYMENT BANK PAYMENT/131 25,000.00 16-82011 Cr Union Bank CC A/C 75004 CHQ No. 41116277 BANK PAYMENT BANK PAYMENT/189 2,50,000.00 29-8-2011 Cr Union Bank CC A/C 75004 CHQ No. 41116289 BANK PAYMENT BANK PAYMENT/203 3,50,000.00 20-9-2011 Dr Union Bank CC A/C 75004 CHQ No. 070151 BANK RECEIPT BANK RECEIPT/07- 03/70 9,00,000.00 24-9-2011 Cr Union Bank CC A/C 41116237 BANK PAYMENT BANK PAYMENT/285 5,00,000.00 28-9-2011 Dr Union Bank CC A/C 75004 CHQ No. 02070161 BANK RECEIPT BANK RECEIP/07-08/70 12,50,000.00 7-10-2011 Cr Union Bank CC A/C 75004 CHQ No. 295962 BANK RECEIPT BANK RECEIPT/07- 08/265 5,00,000.00 14-11-2011 Dr Union Bank CC A/C 75004 CHQ No. 02079564 BANK RECEIPT BANK RECEIPT/07- 08/84 24,00,000.00 21-11-2011 Dr SBI CURRENT A/C NO. 31936822337 CHQ No. 57770 RECD AS LAND CONTRIBUTION BANK RECEIPT BANK RECEIPT/07- 08/87 7,00,000.00 Dr SBI CURRENT A/C NO. 31936822337 CHQ No. 57771 RECD AS LAND CONTRIBUTION BANK RECEIPT BANK RECEIPT/07- 08/98 8,00,000.00 9-12-2011 Dr SBI CURRENT A/C NO. 31936822337 internal trasfer BANK RECEIPT BANK RECEIPT/07- 08/98 75,00,000.00 22.12.2011 Dr SBI CURRENT A/C NO. 31936822337 CHQ No. 653061 BANK RECEIPT BANK RECEIPT/07- 08/100 40,00,000.00 31-12-2011 Dr Union Bank CC A/C 75004 CH No. 079573 TR FROM BANK RECEIPT BANK RECEIPT/07- 23,20,000.00 IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 7 JREPL 08/104 2-1-2012 Dr Union Bank CC A/C 75004 CH No. 02079577 BANK RECEIPT BANK RECEIPT/07- 08/107 17,40,000.00 4-1-2012 Dr Union Bank CC A/C 75004 CH No. 02079579 BANK RECEIPT BANK RECEIPT/07- 8/109 6,10,000.00 9-1-2012 Dr Union Bank CC A/C 75004 rtgs recd BANK RECEIPT BANK RECEIPT/07- 08/116 24,00,000.00 12-1-2012 Dr Union Bank CC A/C 75004 CH No. 02079581 BANK RECEIPT BANK RECEIPT/07- 08/119 11,80,000.00 31-1-2012 Dr Union Bank CC A/C 75004 CH No. 02081607 TR FROM JREPL PARKSYDE A/C BANK RECEIPT BANK RECEIPT/07- 08/84/129 15,10,000.00 9-2-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/07- 08/84/134 14,50,000.00 22-2-2012 Dr Union Bank CC A/C 75004 rtgs BANK RECEIPT BANK RECEIPT/07- 08/138 17,26,500.00 24-2-2012 Dr Union Bank CC A/C 75004 Chq no. 0209583 BANK RECEIPT BANK RECEIPT/07- 08/139 2,60,385.00 Dr (as per details) Union Bank CC A/C 75004 Bank Charges rtgs BANK RECEIPT BANK RECEIPT/07- 08/140 29,01,454.00 29-2-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/07- 08/144 5,00,000.00 1-3-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/07- 08/146 5,00,000.00 5-3-2012 Dr (as per details) Union Bank CC A/C 75004 Bank Charges online tr. BANK RECEIPT BANK RECEIPT/07- 08/150 30,62,000.00 15-3-2012 Dr Union Bank CC A/C 75004 RTGS BANK RECEIPT BANK RECEIPT/07- 08/151 58,02,708.00 21-3-2012 Dr Union Bank CC A/C 75004 CH NO. 02079568 TR. BANK RECEIPT BANK RECEIPT/07- 08/155 27,00,000.00 28-3-2012 Dr Union Bank CC A/C 75004 Bank Charges RTGS BANK RECEIPT BANK RECEIPT/07- 08/160 17,68,175.00 31-3-2012 Cr PATHARDI LAND (PARKSYDE) BEING Journal 154 3,18,84,136.00 Cr Closing Balance 3,60,34,136.00 4,79,61,222.00 1,19,27,086.00 4,79,61,222.000 4,79,61,222.00 Perusal of the above ledger account clearly shows that apart from money to be received on account of development agreement, the appellant was indulged in giving advances and receiving advances from the company M/s. JREPL. In the month of April, 2011 to August, 2011, the appellant has advanced amount of Rs.31,50,000/- to the company although he had no liability to pay and on the contrary was expected to receive his share out of the booking amount received by the developer company. Thereafter, in September, 2011, the appellant received Rs.9.00,000/- back and after for days advanced further amount of Rs.5,00,000/-. On 7 th October, 2011, the appellant had outstanding receivable from the company of Rs.20,00,000/-. On 14.11.2011, appellant received Rs.24,00,000/ - and in this manner for the first time, he had received advance of Rs.4,00,000/- from company IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 8 without any reference to the contribution to be received on account of land transaction. First credit on account of land contribution was received on 21.11.2011 of Rs.15,00,000/-. Thereafter, further amount of Rs.75,00,000/- was received on account of internal transfer from the company. At the year end, i.e. on 31.03.2012, amount of Rs. 3,18,84,136/ - was debited being the exact amount receivable from the developer company as per clause (3) of the development agreement. By the year end, the appellant had received amount of Rs.1,19,27,086/- in excess of amount receivable on account of land contribution. The appellant had clubbed both the accounts i.e. running account of pure financial transactions with Developer Company as well as on account of transactions undertaken as per development agreement. As per terms of development agreement, the appellant was not entitled to receive any amount in excess of his entitlement, therefore, his business receipts were taxed only to the extent of amount accrued to him as per development agreement. This leads to simple conclusion that excess amount received was not on account of advance to be adjusted against future entitlement but it was money advanced on account of financial transactions. The contention of appellant that excess amount received was in nature of trade advance is not tenable in view of the fact that no such amount could have been paid to the appellant under the development agreement and appellant initially himself advanced money to the company and later on received huge advance from the company. The decisions relied upon by the appellant are on different facts hence would not apply. Payment of Rs.1,19,27,086/- received by the appellant is in nature of advance as envisaged u/s 2(22)(e) of the Act. Advance received was for the benefit of the appellant who held 34% beneficial shares in the lender company, therefore, I uphold the findings of the AO that provisions of Section 2(22)(e) would apply. 5.3 The AO had treated entire amount of Rs:1,19,27,686/- as deemed dividend considering accumulated profit of M/s. JREPL at Rs1,63,91,548/- as on 31.03.2012. The appellant has contended that accumulated profit would not include current business profits earned during the year as held by the Apex Court in the case of Ashokbhai Chimanbhai (56 ITR 42) and followed by ITAT, Ahmedabad in case of M.B. Stock Holding Pvt. Ltd. It was contended that M/s. JREPL had accumulated profit of Rs.46,36,756/- as on 01.04.2011. Therefore, deemed dividend has to be computed with reference to this amount and the profit of the current previous year was not to be considered as accumulated profit. I find merit in the contention raised by the appellant as regards to the definition of accumulated profit. Hon'ble Bombay High Court in the case of P.K.Badiani (76 ITR 0360) has held as under: "16. Question No.2 raised at the instance of the assessee raises the question whether the development rebate reserve provided for the accounting year 1957 alone would constitute "accumulated profits" of the company within the meaning of s.2(6A)(e) to the exclusion of the development rebate reserve provided in earlier years. Now, the word "accumulated" in the phrase "accumulated profits" in s. 2(6A)(e) clearly indicates that "accumulated profits" mean, profits which have been accumulated before the beginning of the accounting year which would be the previous year relevant to the assessment year. The provision of s. 2(6A)(e) may fall for consideration during that previous year and at IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 9 that point of time it would not be even possible to know whether in that previous year there were any profits or to ascertain their amount and even if there were profits of that previous year up to that point of time, whether they would not be wiped out during the subsequent period of that previous year. The profits of that previous year would be current profits as distinguished from "accumulated profits". Therefore, the profits of that previous year cannot be included in "accumulated profits". ITAT Ahmedabad following the judgement of Apex Court in the case of Ashokbhai Chimanbhai and also after considering Explanation to Section 2(22)(e) has held as under: "Keeping in view the above interpretation of law, it cannot be said that the Explanation 2 to section 2(22)( e) is redundant. It is bound to be for a specific purpose. The question for determination is as to what is the purpose for which this Explanation has been incorporated when the Hon'ble Supreme Court in the case of Ashokbhai Chimanbhai have held that the profits of business do not accrue from day-to-day or even from month to month. In our considered view, the Legislature has taken into account the fact that whereas the profits from business for the current year may not be determinable in the middle of the year, there are certain sources of income, the income from which is capable (if determination which, according to the legislative intent, should also be taken into account while determining the accumulated profits on the day of advancing the loan. The company is a person. It may carry on business and may also derive income from various other sources. For example, the company may sell an asset from which capital gains are derived. If the capital gain is derived before the date of advancement of the loan that profit shall have to be taken into account in determining the accumulated profits notwithstanding the fact that such an event has taken place in the middle of the year. It is so the determination of capital gains is not to wait for the end of the previous year. Similarly, there can be income from other sources also such as receipt of or dividend income or interest which may not have to wait for determination at the end of the year. Similarly, some subsidy may be received from the Government which may be taxable on receipt basis. Such income shall also have to be taken into account in determining the accumulated profits as it has not to wait for determination of income at the close of the year." Combined reading of decision of Bombay High Court and ITAT Ahmedabad leads to the conclusion that accumulated profit is to be considered on the day when advance was given and it would include all the profits which are capable of quantification meaning thereby it would include accumulated profit as on 01.04.2011 and profits of the current year excluding the income under the head 'Business or Profession' which is not capable of quantification during the year. In the case of appellant, there was accumulated profit of Rs.46,36,756/- as on 01.04.2012 and out of current year's income, interest on FDRs of Rs.14,55,632/- is capable of quantification. Since entire advance (in' excess of entitlement against land was received in the month of March, 2012) the entire interest income is considered as accumulated profit. Therefore, accumulated profit has to be considered at Rs.60,92,388/- IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 10 (Rs.46,36,756/- + Rs.14,55,632/-) and not at Rs.1,63,91,548/ - which was accumulated profit as on 31.03.2012. 5.4 Another contention of the appellant was that since appellant had 34% beneficial shares, the deemed dividend should be restricted to 34% of accumulated profit. Contention of appellant is without any basis as there is no provision u/s 2(22)(e) to consider dividend proportionate to the share holding. It only. states that advances given to the extent of accumulated profit of the company has to be considered as deemed dividend. Identical issue arose before the Hon'ble Gujarat High Court in case of Mayur Madhukant Mehta (85 ITR 230) wherein Hon'ble Court rejected the contention of the assessee and held as under: "6. If there is one rule of construction clearer than any other, it is that the meaning of a statutory provision must be gathered from a plain natural construction of the words used by the legislature. If the words of the statutory provision are themselves precise and unambiguous, then no more can be necessary than to expound those words in their ordinary and natural sense. The words themselves alone in such a case best declare the intention of the law giver. Now, turning to the language of section 2 (6A) (e), it is clear that it seeks to bring to tax as dividend in the hands of a shareholder, three types of payments made by a company : (1) any payment 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; (ii) any payment on behalf of a shareholder'; and (iii) any payment for the individual benefit of a shareholder. Two conditions must be fulfilled in order that any such payment should be liable to tax under this clause : (1) the company should not be one in which the public are substantially interested within the meaning of section 23A; and (2) the company should possess accumulated profits at the time it makes the payment. If these two conditions are satisfied, any such payment would be liable to be taxed in the hands of the shareholder as dividend to the extent to which the company possess accumulated profits at the time when such payment is made. Section 2(6A)(e) uses the words "any payment" meaning every payment made by a company which falls within one of the three categories specified in the section and provides that such payment shall' be included within the meaning and connotation of the word "dividend" provided, of course, the two conditions which we have just referred to are satisfied. The reference in section 2 (6A) (e) is to "any payment" and not to any proportionate part of it. The only limitation on the quantum liable to be treated as dividend is that it should be to the extent to which the company possesses accumulated profits. If the accumulated profits possessed by the company at the time of payment exceed the amount of payment made by the company, the whole of the payment should be liable to be regarded as dividend. There is nothing in section 2 (6A) (e) to indicate that the legislature intended to tax not the whole of the payment made by the company but only that apart of it which represented proportionate share of the shareholder in the accumulated profits of the company. There is no reference in section 2 (6A) (e) to any holding of shares by the shareholder nor is there any reference to the concept of distribution of the accumulated profits. There could not in fact be any reference to distribution of accumulated profits pro rata amongst the shareholders, since such reference would have been IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 11 wholly incompatible with the subject-matter of the section which deals essentially with an individual shareholder who receives payment from the company. Here the body of shareholders is not on the scene but only an individual shareholders who receives payment from the company and who is therefore sought to be taxed on such payment. The concept of distribution of accumulated profits is wholly absent in section 2 (6A) (e) and it is not possible to project that concept in the section and then to read the section as meaning that so much of the payment as represents the proportionate share of the shareholder in the accumulated profits must be treated as dividend. To construe section 2 (6A) (e) in the manner suggested on behalf of the assessee would involve reading words in the section which are not there. A comparison of the language of section 2 (6A) (e) with that of clauses (a), (b), (c) and (d) of section 2 (6A) also supports this conclusion. Section 2 (6A), clauses (a), (b), (c) and (d) speak of distribution by a company amongst shareholders and the concept of taking the share of accumulated profits represented by the distribution received by each shareholder is inherent in each one of these clauses. But, when we come to section 2 (6A) (e), it is clear that the section is dealing with an individual shareholder who receives payment from the company and this payment is sought to be taxed in his hands as dividend. The language of section 2 (6A) (e) is clear and explicit : it says in words which admit of no doubt or ambiguity and any payment made by a company which falls within one of the three categories specified in the section shall be liable to be treated as dividend subject only to this limitation that it shall be to the extend to which the company possesses accumulated profits at the time of payment." Hon'ble Kolkata High Court also expressed same view in case of Arati Debi (111 ITR 277) (Cal). In view of clear provisions of Section 2(22)(e) (same as Section 2(6A)(e) of earlier Act) and the ratio of the Gujarat and Kolkata High Court, the contention of appellant of treating deemed dividend in proportion to appellant's share holding is rejected. 5.5 To sum up, it is held that advance of Rs.1,19,27,086/- received by the appellant was in nature of payment covered u/s 2(22)(e) of the Act. However, accumulated profit at te time of payment of advance stood to Rs.60,92,388/-, hence deemed dividend can be taxed only upto accumulated profit. Addition of Rs.60,92,388/- u/s 2(22)(e) is upheld and appellant gets relief of Rs.58,34,698/-. Ground raised by the appellant is partly allowed.” 4. Mr. Shingte vehemently argued during the course of hearing that the lower authorities have erred in law and on facts adding the impugned sum(s) as covered under the deeming fiction of dividend under Section 2(22)(e) of the Act. He first of all quoted CBDT circular dated 12.06.2017 that trade advances in the nature of commercial transactions do not fall within the ambit of Section 2(22)(e) of the Act. We find no merit in the assessee’s instant first argument as he could hardly prove the impugned sums forming subject IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 12 matter of addition herein in as commercial transactions. Mr. Shingte invited our attention to the CIT(A)’s detailed discussion; and more particularly in pages 222 and 223 extracted hereinabove, that he had been squaring all the payments received from M/s. Jaikumar Real Estate Ltd. against outstanding advances at the end of the year(s). He also referred to the corresponding adjustments made in light of the assessee’s detailed paper book page 135 containing the corresponding opening balance, payments received, adjustments and net amount in FY 2011-12 to 2015-16. Learned counsel further sought to highlight the fact that the company hereinabove had received advances from its customers which in turn were adjusted against the corresponding liabilities involving the assessee. 5. All these arguments failed to evoke our concurrence in assessee’s favour. We make it clear that the assessee’s detailed paper book running into 219 pages contains his “JDA” with the company as well as page 84, clause 3 therein suggests that the assessee as well as the company along with other owners/shareholders had to open/operate an escrow account with joint signatures in which the corresponding sale proceedings had to be deposited to be disbursed to the developers. Mr. Shingte sought to clarify at this stage that no such Escrow account had been opened which means that the said stipulation stood rendered frustrated. We are unable to accept the assessee’s arguments as it is clear not only from a perusal of case records as well as the CIT(A)’s findings but also from the evidence on record that the impugned sum(s) over and above the balance payable by the company represent the latter’s accumulated profits only. We make it clear that the learned CIT(A) has also discussed a catena of case law regarding assessee’s contention that the impugned addition deserves to be restricted to its 34% stake only (supra). 6. Mr. Shingte lastly invited our attention to the CIT(A)’s findings in paras 3 to 4.5 that the assessing officer’s action treating the advances of Rs.1,19,27,086/- received from the company as business income already stands deleted. We hold that the same has no bearing on the instant issue of deemed dividend whose application stands sufficiently proved qua the loan and advances coming from the company side to his account. We accordingly uphold the impugned identical deemed dividend addition in assessee’s twin appeals IT(SS)A Nos. 06 & 07/Pun/2017. These two cases fail accordingly. IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 13 7. Next come assessee’s third appeal ITA 609/Pun/2019 for AY 2014-15 raising the sole ground that the CIT(A) has erred in not allowing setoff of Rs.16,90,024/- which already has been taxed as deemed dividend (supra). Faced with this situation and keeping in mind the fact that we have upheld Section 2(22)(e) addition in preceding paragraphs, we are of the view that larger interest of justice would be met in case if the Assessing Officer readjudicates the assessee’s instant solitary substantive grievance in this third assessment year 2014-15 afresh as per law. We order accordingly. We make it clear that the assessee shall be at liberty to file all the relevant details in consequential proceedings. This last appeal ITA No. 609/Pun/2019 is allowed for statistical purposes, therefore. 8. The assessee’s former two appeals IT(SS)A 06 & 07/Pun/2017 are dismissed and third appeal ITA No. 609/Pun/2019 is allowed for statistical purposes in above terms. A copy of this common order be placed in the respective case files. Order pronounced in the open court on 10 th May, 2022. Sd/- Sd/- (Dipak P. Ripote) (S.S. Godara) Accountant Member Judicial Member Pune, Dated: 10 th May, 2022 Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -12, Pune 4. The Pr.CIT - Central, Nagpur 5. The DR, “A” Bench, ITAT, Pune By Order //True Copy// Assistant Registrar ITAT, Pune Benches, Pune n.p. IT(SS)A Nos. 06 & 07/Pun/2017 ITA No. 609/Pun/09 Shri Manoj Jaikumar Tibrewala 14 S.No. Details Date Initials Designation 1 Draft dictated on 25.04.2022 Sr. PS/PS 2 Draft placed before author 26.04.2022 Sr. PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member AM/AM 5 Approved Draft comes to the Sr. PS/PS Sr. PS/PS 6 Kept for pronouncement Sr. PS/PS 7 File sent to Bench Clerk Sr. PS/PS 8 Date on which the file goes to Head Clerk 9 Date on which file goes to A.R. 10 Date of Dispatch of order