SHRI DAMODAR SARDA, Nagpur v. A,C.I.T CIR. -5, Nagpur

ITA 305/NAG/2016 | 2007-2008
Pronouncement Date: 10-10-2016 | Result: Allowed

Appeal Details

RSA Number 30523914 RSA 2016
Assessee PAN AFFPS6338M
Bench Nagpur
Appeal Number ITA 305/NAG/2016
Duration Of Justice 5 month(s) 5 day(s)
Appellant SHRI DAMODAR SARDA, Nagpur
Respondent A,C.I.T CIR. -5, Nagpur
Appeal Type Income Tax Appeal
Pronouncement Date 10-10-2016
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 10-10-2016
Assessment Year 2007-2008
Appeal Filed On 05-05-2016
Judgment Text
1 ITA NO. 305/NAG/2016. IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH NAGPUR BEFORE SHRI SHAMIM YAHYA ACCOUNTANT MEMBER. (S.M.C.) I.T.A. NO. 3 05 /NAG/201 6 ASSESSMENT YEAR : 2007 - 08. SHRI DAMODAR SARDA ASSTT. COMMISSIONER OF INCOME - TAX NAGPUR. VS. CIRCLE - 5 NAGPUR. PAN AFFPS6338M. APPELLANT. RESPONDENT. APPELLANT BY : SHRI RAJESH LOYA. RESPONDENT BY : SMT. AGNES P. THOMAS. DATE OF HEARING : 10 - 10 - 2016 DATE OF PRONOUNCEMENT : 10 TH OCT. 2016 O R D E R. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - 4 NAGPUR DATED 15 - 02 - 2016 AND PERTAINS TO ASSESSMENT YEAR 2007 - 08. THE GROUNDS OF APPEAL READ AS UNDER : 1. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN UPHOLDING THE ORDER OF THE AO MADE U/S 147 R.W.S. 143(3). ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ORDER OF THE AO AND THE REOPENING PROCEEDINGS ARE BAD IN LAW. 2. THAT THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.13 65 991/ - MADE U/S 2(22)(E) BY THE AO. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE ACTION OF THE AO IN TREATING THE AMOUNT OF RS.13 65 991/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE IS IMPROPER AND UNJUSTIFIED. 2. AT THE OUTSET IN THIS CASE LEARNED COUNSEL OF THE ASSESSEE SUB MITTED THAT HE SHALL NOT BE PRESSING FOR GROUND AGAINST REOPENING. HENCE GROUND NO. 1 STANDS DISMISSED AS NOT PRESSED. 3. BRIEF FACTS OF THE CASE ARE AS UNDER : 2 ITA NO. 305/NAG/2016. THE AO IN THIS CASE RECEIVED INFORMATION FROM ACIT CIRCLE - 7 NAGPUR THAT M/S SHREE GAJANAND PLASTICS PVT. LTD. HAD RECEIVED UNSECURED LOANS OF RS.24 91 690/ - FROM M/S GAURAV MUTILAYERS PVT. LTD. THE APPELLANT SHRI DAMODAR SARDA IS A SHAREHOLDER IN THE LOANEE COMPANY HOLDING 26.31% OF SHAR E S IN ADDITION TO 25.72% SHARES TO THE LOANER COMPANY M/S G AURAV MUTILAYERS PVT. LTD. HENCE THE AO HELD THAT AS PER PROVISION OF SECTION 2(22)(3) THE AMOUNT LOANED TO THE LOANEE COMPANY AS REDUCED BY THE RESERVES AND SURPLUS (RS.13 65 999/ - ) WAS TO BE ADDED TO THE TAXABLE INCOME OF THE APPELLANT. 4. BEFORE THE LEARNED CIT(APPEALS) THE ASSESSEE SUBMITTED AS UNDER : 1. THAT THE AO ADDED RS.13 65 999/ - MERELY ON THE BASIS OF REMARKS PASSED BY CIT(A) - II VIDE ORDER NO. CIT(A)II/302/09 - 10 DATED 31.07.2012. 2. THAT THE AO WITHOUT VERIFYING THE FACTS THAT WHETHER TH E ASSESSEE HAS USED THE AMOUNT OUT OF LOAN TAKEN BY M/S SHRI GAJANAND PLASTICS (P) LTD. FROM M/S GAURAV MUTILAYERS PVT. LTD. ADDED RS.13 65 999/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AS THE ASSESSEE IS COMMON SHAREHOLDER IN BOTH THE COMPANIES H AVING 26.31% SHARES IN SHRI GAJANAND PLASTICS (P) LTD. & 25.77% SHARES IN M/S GAURAV MUTILAYERS PVT. LTD. 3. THAT THE ASSESSEE HAS NOT TAKEN LOAN FROM ANY COMPANY IN WHICH HE HAS SUBSTANTIAL INTEREST. ON THE CONTRARY HE HAS GIVEN LOAN TO COMPANIES. COPY O F LEDGER A/C IS ENCLOSED. 4. THAT MR. DAMODAR SARDA HAS NOT USED MONEY FOR HIS INDIVIDUAL BENEFIT OR FOR PURCHASE OF SHARES IN THE COMPANY. 5. THAT THE ASSESSEE RELIED ON THE DECISION OF BOMBAY HIGH COURT IN CASE OF CIT VS. IMPACT CONTAINERS (P) LTD. 6. THAT IN VIEW OF WHAT HAS BEEN STATED ABOVE THE ADDITION OF RS.13 65 999/ - REQUIRED TO BE DELETED. 5. THE LEARNED CIT(APPEALS) OBSERVED AS UNDER : I HAVE GONE THROUGH THE ASSESSMENT ORDER GROUNDS OF APPEAL THE ORDER PASSED BY CIT(A) - II NAGPUR IN CASE OF SHRI GAJANAND PLASTICS PVT. LTD. 3 ITA NO. 305/NAG/2016. VIDE APPEAL NO. CIT(A) - II/302/09 - 10 DATED 31.07.2012. I HAVE ALSO GONE THROUGH THE ORDER OF HONBLE ITAT NAGPUR IN THE CASE OF SHRI GAJANAND PLASTICS PVT. LTD. VIDE ITA NO. 378/NAG/2012 DATED 10.04.2015. LEARNED CIT( APPEALS) REFERRED TO THE AOS ORDER IN THE CASE OF SHRI GAJANAND PLASTICS (P) LTD. AND FURTHER HELD AS UNDER : 7. ACCORDINGLY CIT(A) HAS CLEARLY STATED THAT THE AO IS FREE TO BRING THIS DEEMED EVIDENCE TO TAX AND IF THE A.O. IS NOT THE AO OF SHRI DAMODAR SARDA THAN THE CONCERNED AO MAY BE INFORMED. THE CIT(A) - II HAS DECIDED THIS ISSUE BASED ON THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANKITECH PVT. LTD. 340 ITR 14 (DEL). 8. IN RESPONSE TO ORDER OF CIT(A) THE AO HAS SUBSEQUENTLY RE OPENED THE ASSESSMENT. IT IS SEEN THA SHRI DAMODAR SARDA IS HOLDING 26.31% SHARES IN M/S SHREE GAJANAN PLASTICS PVT. LTD. AND 25.72% SHARES IN M/S GAURAV MULTILAYERS PVT. LTD. ACCORDINGLY THE PROVISION OF SEC. 2(22)(E) ARE APPLICABLE ON SHRI DAMODAR SARDA AND THE AO HAS CORRECTLY PASSED THE ORDER ADDING A SUM OF RS.13 65 991/ - AS DEEMED DIVIDEND IN THE CASE OF THE APPELLANT. 9. I HAVE ALSO PERUSED THE ORDER OF HONBLE ITAT NAGPUR BENCH NAGPUR IN THE CASE OF GAJANAN PLASTIC PVT. LTD. WHEREIN ITAT HAS DECI DED THE ISSUE BY MAKING FOLLOWING OBSERVATION: WITH THIS BRIEF FACTUAL BACKGROUND WE HAVE HEARD BOTH THE SIDES. IN A SITUATION WHERE THE ASSESSEE COMPANY IS NOT HAVING A DIRECT SHARE HOLDING OF THE LENDER COMPANY THEN THERE ARE SEVERAL DECISIONS ACCORDING TO WHICH THE FICTION CANNOT BE EXTENDED TO ASSESS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY. THE HONBLE BOMBAY HIGH COURT IN CIT V/S IMPACT CONTAINERS PVT. LTD. (2014) 367 ITR 346 (BOM) HAS DISCUSSED DECISION OF THE HONBLE DELHI HIG H COURT IN CIT V/S ANKITECH PVT. LTD. (2012) 340 ITR 14 (DEL) AND ALSO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN CIT V/S UNIVERSAL MEDICARE PVT. LTD. (2010) 324 ITR 263 (BOM) AND CONCLUDED THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN CASE OF A PERSON WHO IS A SHAREHOLDER OF LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN SHAREHOLDER. RESPECTFULLY FOLLOWING THE ABOVE PRECEDENCE WE HEREBY CONFIRM THE FINDINGS O F THE LEARNED COMMISSIONER (APPEALS) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 10. A PERUSAL OF ITATS ORDER IN THE ABOVE MENTIONED CASE CLEARLY SHOWS THAT THE HONBLE ITAT HAS CONFIRMED THE FINDING OF CIT(A). 4 ITA NO. 305/NAG/2016. ACCORDINGLY I FIND NO INFIRMI TY IN THE ORDER PASSED BY THE AO IN THE CASE OF THE APPELLANT. THE ADDITION MADE BY THE AO AMOUNTING TO RS.13 65 999/ - U/S 2(22)(E) IN CASE OF THE APPELLANT IS SUSTAINED AND GROUND OF APPEAL RAISED BY THE APPELLANT ARE DISMISSED. THE GROUND FILED BY THE AP PELLANT IS ACCORDINGLY DISMISSED. 6. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 7. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IN THIS CASE HAS NOT DERIVED ANY BENEFIT WHATSOEVER FROM THE LOAN GRANTED BY M/S GAURAV MULTILAYERS PVT. LTD. TO M/S GAJANAND PLASTIC PVT. LTD. LEARNED COUNSEL SUBMITTED THAT AS A MATTER OF FACT THE ASSESSEE HAS HIMSELF GRANTED LOAN TO BOTH THE COMPANIES. FOR THIS PROPOSITION HE REFE RRED TO COPY OF ACCOUNT S IN PAPER BOOK PAGE NO.2 & 3 LEARNED COUNSEL FURTHER SUBMITTED THAT THE ORDER OF THE LEARNED CIT(APPEALS) AND THE ITAT IN THE CASE OF GAJANAND PLASTICS HAS BEEN WRONGLY RELIED UPON BY THE AUTHORITIES BELOW. LEARNED C OUNSEL SUBMITTE D THAT WHILE DEALING WITH THE ADDITION U/S 22(2)(E) IN THE HANDS OF GAJANAND PLASTICS PVT. LTD. THE ITAT HAS OBSERVED THAT SECTION 2(22)(E) CAN BE INVOKED ONLY IN THE HANDS OF THE PERSON WHO IS ACTUALLY A REGISTERED SHAREHOLDER. LEARNED COUNSEL SUBMITTED THAT THIS DOES NOT MEAN THAT THE ADDITION SHOULD BE MADE IN THE HANDS OF A REGISTERED SHAREHOLDER WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE. LEARNED COUNSEL SUBMITTED THAT THE ITAT HAS NOT CONSIDERED THE MERI T S OF THE ISSUE OF LOAN RECEIV ED BUT HAS ONLY CONFINED ITSELF TO THE PRELIMINARY ISSUE THAT SECTION 2(22)(E) CAN BE INVOKED ONLY IN THE HANDS OF A REGISTERED SHAREHOLDER. LEARNED COUNSEL PLEADED THAT IN THE PRESENT CASE SHREE GAJANAND PLASTICS HAS RECEIVED UNSECURED LOAN OF M/S GAUR AV MULTILAYERS PVT. LTD. FOR THIS LOAN SHREE GAJANAND PLASTICS HAS GIVEN 12% INTEREST. FOR THIS LEARNED COUNSEL REFERRED TO PAPER BOOK PAGE NO. 1. REFERRING TO THIS ASPECT LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE UPON HONBLE CALCUTTA HIGH COURT DE CISION IN THE CASE OF PRADEEP KUMAR MALHOTRA 338 ITR 538 AND THE ITAT KOLKATA BENCH DECISION IN THE CASE OF SMT. SANGEETA JAIN IN ITA NO. 1817/KOL/2009 DATED 5 ITA NO. 305/NAG/2016. 11 TH MARCH 2016. LEARNED COUNSEL FURTHER PLACED RELIANCE UPON THE DECISION OF ITAT CHENNAI BENCH IN THE CASE OF ACIT VS. SMT. C. RAJINI IN ITA NO. 1666/MAD/2007 140 TTJ 218 VIDE ORDER DATED 10 - 12 - 2010. HENCE LEARNED COUNSEL SUBMITTED THAT THE RATIO OF THE AB OVE SAID DECISION IS THAT GENUINE BUSINESS TRANSACTION BETWEEN TWO ENTITIES CANNOT BE TREATED AS DEEMED DIVIDEND. IN THE PRESENT CASE SHREE GAJANAND PLASTICS HAS PAID 12% INTEREST TO M/S GAURAV MULTILAYERS PVT. LTD.. SO LEARNED COUNSEL SUBMITTED THAT THERE IS NO CASE THAT SHREE GAJANAND PLASTICS HAS RECEIVED ANY UNDUE BENEFIT FROM M/S GAURAV MULTILAYERS PVT. LTD. FURTHER LEARNED COUNSEL HAS EMPHASIZED THAT THE ASSESSEE INDIVIDUALLY HAS NOT TAKEN ANY LOAN FROM BOTH THE COMPANIES RATHER HE HAS ADVANCED MONEY TO BOTH THE COMPANIES. 8. PER CONTRA LEARNED D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. SHE FURTHER SUBMITTED AS UNDER : IN TEREST IS AN INHERENT PART OF LOAN AND JUST BECAUSE INTEREST HAS BEEN RECEIVED OR P AI D THE LOAN WILL NOT GO OUT OF THE PU RVIEW OF 2(22)(E) IF ALL THE OTHER LIMBS OF THE S ECTION ARE SATISFIED UNLESS SPECIFICALLY EXCLUDED BY PROVISO (II) OF 2(22)(E). (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER (OR THE SAID CONCERN) BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE ASSESSEE IN THE CASE RELIED ON BY THE ASSESSEE IN SMT SANGEETA JAIN V IS ITO (PAPER BOOK PGS 4 - 7) IT HAS BEEN ESTABLISHED THAT THE ASSESSEE THAT LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE ASSESSEE WHICH IS NOT THE CASE IN \ THIS CASE IN THE MATTER OF CIT VS. RAJ KUMAR (2009) 181 T AXMANN 155 (DELHI) (ENCLOSED) THE COURT HAS HELD THAT: THE USUAL ATTRIBUTES OF A L O AN ARE THAT 1. IT INVOLVES POSITIVE ACT OF LENDING COUPLED WITH THE ACCEPTANCE BY THE O THER SIDE OF THE MONEY AS LOAN - 2. IT GENERALLY CARRIES INTEREST AND 3. THERE IS AN OBLIGATION OF REPAYMENT. T HE TERM 'ADVANCE' IS OF WIDE IMPORT & HAS UNDOUBTEDLY MORE THAN ONE MEAN ING D E PE N D ING ON THE CONTEXT IN WHICH IT IS USED. IN ITS WIDEST MEANING THE TERM ' AD V AN CE' MAYOR MAY NOT INCLUDE LENDING OR THE 6 ITA NO. 305/NAG/2016. OBLIGATION OF REPAYMENT. THE DE LHI HIGH COURT APPLIED THE RULE OF CONSTRUCTION OF NOSCITUR A SOCIIS - 'THE MEAN IN G O F THE WORD CAN BE GATHERED FROM THE CONTEXT' OR 'BY THE COMPANY WHICH IT KE E PS .' T H E W O R D 'A D VANCE' WHICH APPEARS IN THE COMPANY OF THE WORD 'LOAN' COULD ONLY MEAN SU CH 'ADVANCE' WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT . TRADE A D VANCE WHICH ARE IN THE NATURE OF MONEY TRANSACTED IT GIVE EFFECT TO A COMM E R C I AL TRANSACTI O NS WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISIONS OF SECTION 2 (22 )(E ) O F THE A CT. FURTHER THE COURTS HAVE ALSO HELD TARULATA SHYAM & ORS. VS CIT(SC) 108 ITR 345: 'LOAN ADVANCED TO A SHAREHOLDER WAS RE - PAID WITHIN 23 DAYS STILL DEEMED DIVIDEND UNDER SECTION 2(22)(E) - IF THE ASSESSEE COMES UNDER THE LETTER OF LAW HE HAS TO BE TAXED HOWEVER GREAT THE HARDSHIP MAY APPEAR TO THE JUDICIAL M IND TO BE.' P. SARADA VS CIT(SC) 229 ITR 444: 'THE FACT THAT LOAN OR ADVANCE WAS ULTIMATELY ADJUSTED AT THE END OF THE YEAR AGAINST THE CREDIT BALANCE OF ANOTHER SHAREHOLDER WILL NOT ALTER THE POSITION. ACCOUNT OF ANOTHER SHAREHOLDER WAS NOT DEBITED ON V ARIOUS DATES OF WITHDRAWALS AND HENCE IT CANNOT BE SAID THAT THE ASSESSEE WAS PAID MONEY OUT OF THE THE FUNDS LYING TO THE CREDIT OF THE OTHER SHAREHOLDE R. 9. IN REJOINDER LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SUBMISSION OF LEARNED D.R. THAT IN THE CASE OF SMT. SANGEETA JAIN (SUPRA) IT HAS BEEN ESTABLISHED THAT THE ASSESSEES BUSINESS WAS LENDING OF MONEY IN SUBSTANTIAL PART IS TOTALLY INCORRECT. LEARNED COUNSEL SUBMITTED THAT LEARNED CIT(APPEALS) IN THAT CASE HAS GIVEN A CLEAR FINDING T HAT LENDING OF MONEY WAS NOT A SUBSTANTIAL PART OF ASSESSEES BUSINESS. THE ITAT HAD GRANTED RELIEF NOT ON THE BASIS THAT LENDING WAS SUBSTANTIAL PART OF ASSESSEES BUSINESS. THE ITAT HAD CONSIDERED THAT THE ASSESSEES TRANSACTION WAS A BUSINESS TRANSACTIO N AND THE LENDER WAS SUITABLY COMPENSATED BY WAY OF INTEREST. HENCE THERE WAS NO QUESTION OF ANY UNDUE BENEFIT OR DEEMED DIVIDEND. IN THIS REGARD LEARNED COUNSEL OF THE ASSESSEE HAS FURTHER REFERRED TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING & PRINTING (P) LTD. 229 CTR 250 FOR THE FOLLOWING PROPOSITION : (HEAD NOTES ONLY) THE FINDING OF FACTS ARRIVED AT BY THE TRIBUNAL IS THAT THE TRANSACTION IN QUESTION WAS A BUSINESS TRANSACTION AND WHICH TRANSACTION WOULD HAV E BENEFITED BOTH THE ASSESSEE COMPANY AND PE LTD. IN FACT THE COUNSEL FOR THE APPELLANT HAS CONCEDED THAT THE AMOUNT I S IN FACT NOT A LOAN BUT ONLY AN ADVANCE BECAUSE THE AMOUNT PAID TO THE ASSESSEE COMPANY WOULD BE ADJUSTED AGAINST THE ENTITLEMENT OF MONEYS OF THE ASSESSEE COMPANY PAYABLE BY PE LTD. IN THE SUBSEQUENT YEARS. THE CONTENTION THAT SINCE PE LTD. IS NOT INTO THE BUSINESS OF LENDING OF MONEY THE PAYMENTS MADE BY IT TO THE ASSESSEE COMPANY WOULD BE COVERE D BY S. 2(22)(E) 7 ITA NO. 305/NAG/2016. (II) AND CONSEQUENTLY PAYMENTS EVEN FOR BUSINESS TRANSACTIONS WOULD BE A DEEMED DIVIDEND IS NOT ACCEPTABLE . THE PROVISION OF S. 2(22)(E)(II) IS BASICALLY IN THE NATURE OF AN EXPLANATION. THAT CANNOT HOWEVER HAVE BEARING ON INTERPRETATI ON OF THE MAIN PROVISION OF S. 2(22)(E) AND ONCE IT IS HELD THAT THE BUSINESS TRANSACTIONS DO NOT FALL WITHIN S. 2(22)(E) ONE NEED NOT TO GO FURTHER TO S . 2(22)(E)( I I). THE PROVISION OF S . 2(22)(E)(II) G I VES AN E X AMPLE ONLY OF ONE OF THE SITUATIONS WHE RE THE LOAN/ADVANCE WILL NOT BE TREATED AS A DEEMED D I VIDEND BUT THAT ' S ALL. THE SAME CANNOT BE EXPANDED FURTHER TO TAKE AWAY THE BASIC MEANING INTENT AND PURPORT OF THE MAIN PART OF S. 2(22)(E). THIS INTERPRETATION IS IN ACCORDANCE WITH THE LEGISLATIVE INTENTION OF INTRODUCING S . 2 (22)(E). THEREFORE THE TRIBUNAL WAS CORRECT IN HOLD I NG THAT THE AMOUNTS ADVANCED FOR BUSINESS TRANSACTION BETWEEN THE PARTIES NAMELY THE ASSESSEE COMPANY AND PE LTD . WAS NOT SUCH TO FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND UNDER S . 2(22)(E) . 10 . I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. FIRST OF ALL I DEAL WITH THE DECISION OF ITAT AND CIT(APPEALS) IN THE CASE OF GAJANAND PLASTICS WHICH HAS BEEN MADE BASIS OF ADDITION U/S 2(22)(E) IN THE HANDS OF THE PRESENT ASSESSEE. I FIND THAT WHILE ADJUDICATING THE CASE OF GAJANAND PLASTICS THE ITAT HAS REFERRED TO HONBLE BOMBAY HIGH COURT DECISION IN THE CASE OF CIT VS. IMPACT CONTAINERS P. LTD. 367 ITR 346 FOR THE PROPOSITION THAT D EEMED DIVIDEND CAN BE ASSESSED ONLY IN THE CASE OF THE PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE PERSON OTHER T HAN THE SHAREHOLDER. BY NO STRETCH OF IMAGINATION THE ABOVE DECISION OF THE ITAT CAN BE SAID TO BE HOLDING T HAT THE AMOUNT BEING CONSIDERED U/S 2(22)(E) IN THE HANDS OF GAJANAND PLASICS PVT. LTD. SHOULD BE ADDED IN THE HANDS OF THE ASSESSEE SHRI DAMODAR SARDA WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE TRANSACTION. 11. NOW I COME TO THE FACTS AND CIR CUMSTANCES OF THE TRANSACTION AS REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE. THE CLAIM OF THE LEARNED COUNSEL OF THE ASSESSEE IS THAT THE ASSESSEE HAS NOT DERIVED ANY BENEFIT FROM THE LOAN TRANSACTION BETWEEN GAJANAND PLASTICS AND M/S GAURAV MULTILAYE RS PVT. LTD AND BOTH THE COMPANIES ACTUALLY HAVE RECEIVED LOANS FROM THE ASSESSEE. THAT IN FACT GAJANAND PLASTICS HAVE GIVEN 12% INTEREST TO M/S GAURAV MULTILAYERS PVT. LTD. HENCE IT IS A BUSINESS TRANSACTION. 1 2 . IN THIS REGARD HONBLE CALCUTTA HIGH COU RT DECISION IN THE CASE OF PRADIP 8 ITA NO. 305/NAG/2016. KUMAR MALHOTA (SUPRA) HAS EXPOUNDED AS UNDER : 9. IN ORDER TO APPRECIATE THE SAID QUESTION IT WILL BE PROFITABLE TO REFER TO THE PROVISIONS CONTAINED IN S. 2(22)( OF THE ACT WHICH IS QUOTED BELOW : (A) ANY D I STRIBUTION BY A COMPANY OF ACCUMULATED PROFITS WHETHER CAPITALISED OR NOT I F SUCH DISTRIBUTION ENTAILS THE RELEASE BY THE COMPANY TO ITS SHAREHOLDERS OF ALL OR ANY PART OF TH E ASSETS OF THE COMPANY; (B) ANY D I STRIBUTION TO ITS SHAREHOLDERS BY A COMPAN Y 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 WHET HER CAPITALISED OR NOT; (C) ANY DISTRIBUTION MADE TO THE SHAREHOLDERS OF A COMPANY ON ITS L I QUIDATION TO THE EXT EN T TO WHICH THE DISTRIBUTION I S ATTRIBUTABLE TO THE ACCUMULATED PROFITS OF THE COMPANY IMMEDIATELY BEFORE I TS LIQU I DATION WHETHER CAPITALISED OR NOT; (D) ANY DISTR I BUTION TO ITS SHAREHOLDERS BY A COMPANY ON THE REDUCTION OF ITS CAPITA L TO TH E EXTENT TO WHICH THE COMPANY POSSESSES ACCUMULATED PROF I TS WHICH AROSE AFTER THE END OF T H E PREV I OUS YEAR ENDING NEXT BEFORE THE 1ST DAY OF APRIL 1993 WHETHER SUCH ACCUMULAT E D PROFITS HAVE BEEN CAPITALISED OR NOT; (E) ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM (WHETHER AS REPRESENT I NG A PART OF THE ASSETS OF TH E COMPANY O R OTHERWISE) MADE AFTER THE 31ST DAY OF MAY 1987 BY WAY OF ADVANCE OR L OAN TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITL E D TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PART ICIPATE IN PROFITS) HO L DING NOT LESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY CONCERN IN WHICH SUCH SHAREHOLD E R IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUS E REFERRED TO AS THE SA I D CONCERN) OR AN Y PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR TH E INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY I N E I TH E R CASE POSSESSES ACCUMULATED PROFITS; BUT 'DIVIDEND' DOES NOT INCLUDE - (I) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CL . (C) OR SUB - CL. (D) IN RESPECT OF ANY SHAR E ISSUED FOR FULL CASH CONS I DERATION WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED I N THE EVENT OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS; (I - A) A DISTRIBUT I ON MADE IN ACCORDANCE WITH SUB - CL. (C) OR SUB - CL . (D) INSOFAR AS SUCH DISTRIBUTION IS ATTRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENT I NG BONUS SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH 1964 AND BEFORE TH E 1ST DAY OF APRIL 1965 ; (II) ANY A DVANCE OR LOAN MADE TO A SHAREHOLDER OR THE SAID CONCERN BY A COMPANY IN TH E ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF TH E BUSINESS OF THE COMPANY; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE C OMPANY AGAINST THE WHOL E OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB - CL. (E) TO THE EXTENT TO WHICH IT IS SO SET OFF ; [(IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF ITS OWN SHARES FROM A SHAREHOL DER IN ACCORDANCE WITH THE PROVISIONS OF S. 77A OF THE COMPANIES ACT 1956; (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER BY THE RESULT I NG COMPANY TO TH E SHAREHOLDERS OF THE DEMERGED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAP I TAL IN TH E DEMERGED COMPANY). 9 ITA NO. 305/NAG/2016. EXPLANATION 1 : THE EXPRESSION 'ACCUMUL A TED PROFITS' WHEREVER IT OCCURS IN THIS CLAUSE SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL 1946 OR AFTER THE 31ST MARCH 1948 AND BEFORE THE 1ST DAY OF APRIL 1956. EXPLANATION 2 : THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB - CLS. (A) (B) (D) AND (E) SHALL INCLUDE ALL PROFITS OF THE COMPANY UPTO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB - CLAUSES AND IN SUB - CL. (C) SHALL INCLUDE ALL PROFITS OF THE COMPANY UPTO 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 C ONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE. EXPLANATION 3 : FOR THE PUR POSES OF THIS CLAUSE - (A) 'CONCERN' MEANS AN HUF OR A FIRM OR AN AOP OR A BOL 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 ENT ITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN.' (EMPHASIS ITALICIZED IN PRINT SUPPLIED BY US) 10 . 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 - CL . (E) MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL O WNER 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 SHAREHOLDER AS A CONSEQ UENCE OF ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH A SHAREHOLDER 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 SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF S. 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 SHAREHOLDER. 11 . IN THE CASE BEFORE US THE ASSESSEE PERMITTED HIS 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 IS UNABLE TO RELEASE THE PROPERTY FROM THE MORTGAGE. IN SUCH A SITUATION FOR RETAINING THE BEN EFIT OF LOAN AVAILED FROM VIJAYA BANK IF DECISION IS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION IS NOT TO GIVE GRATUITOUS ADVANCE TO ITS SHAREHOLDER BUT TO PROTECT THE BUSINESS INTEREST OF THE COMPANY. 12 . THE VIEW WE PROPOSE TO TAKE FINDS SUPP ORT FROM THE TWO DECISIONS ONE OF THE BOMBAY HIGH COURT AND THE OTHER OF THE DELHI HIGH COURT RELIED UPON BY MR. KHAITAN AS INDICATED EARLIER . 13 . WE THEREFORE FIND THAT THE 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 COMPANY TO REAP THE BENEFIT OF LOAN AS DEEMED DIVIDEND WITHIN THE MEANING OF S. 2(22)(E) OF THE ACT. 14 . WE CONSEQUENTLY SET AS IDE THE ORDER OF THE TRIBUNAL BELOW BY DIRECTING THE AO NOT TO TREAT THE ADVANCE OF RS. 20 75 000 AS A DEEMED DIVIDEND. 15. THE APPEAL ~ THUS ALLOWED BY ANSWERING THE POINT NO. (II) IN THE AFFIRMATIVE AND AGAINST THE REVENUE. / 10 ITA NO. 305/NAG/2016. 16. IN T H E FACTS AN D CIRCUMST A NCES THERE WILL BE HOWEVER NO ORDER AS TO COSTS. 1 3 . FOLLOWING THE ABOVE DECISION THE ITAT KOLKATA BENCH IN THE CASE OF SMT. SANGITA JAIN (SUPRA) HAS HELD AS UNDER : 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ONE OF THE MAIN CONTENTIONS RAISED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US IS THAT THE LOAN IN QUESTION TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) BY THE AUTHORITIE S BELOW WAS TAKEN BY THE ASSESSEE FROM M/S SURYA BUSINESS PVT. LIMITED ON INTEREST AND SINCE THE SAID COMPANY WAS COMPENSATED BY WAY OF INTEREST PAID BY THE ASSESSEE ON LOAN THE ASSESSEE IN REAL SENSE DID NOT DERIVE ANY BENEFIT FROM THE FUNDS OF THE COMPA NY SO AS TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E). ALTHOU GH TH E ID. D.R. HAS VEHEMENTLY OPPOSED THIS CONTENTION OF THE ID. COUNSEL FOR T HE ASSESSEE BY SUBMITTING THAT THE PAYMENT OF INTEREST ALONE CANNOT BE CONSIDERED FROM THE BENEFIT ANGLE AS ENVI SAGED UNDER SECTION 2(22)(E) IT IS OBSERV E D TH A T THE JUDICIAL PRONOUNCEMENTS CITED BY THE ID. COUNSEL FOR THE ASS E SS EE CLEARLY SUPPORT THE CASE OF THE ASSESSEE. 6 . IN THE CASE OF PRADIP KUMAR MALHOTRA REPORTED IN 338 ITR 538 CITED BY THE ID. COUNSEL F OR THE ASSESESE IT WAS HELD BY THE HO NB L E CALCUTTA HIGH COURT THAT THE PHRASE 'BY WAY OF ADVANCE OR LOAN ' APPEARING IN SE CTION 2(22)(E) MUST BE CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PA RTNER WHO I S THE BENEF I CIAL OWNER OF SHARES BUT IF SUCH LOAN OR ADVANCE IS GI V EN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH I S B E NEFICIAL TO THE COMPANY RECEIVED FROM SUCH SHAREHOLDER IN SUCH CASE S UCH ADVANCE OR LOAN CANNOT BE SAID TO BE DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. IT WAS HELD THAT GRATUITOUS LOAN OR ADVANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHAREHOLDERS THUS WOULD COME WITHIN THE PURVIEW OF SECTION 2(22)(E) BUT NOT THE CA SES WHERE THE LOAN OR A DVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER . IN THE CASE OF ACIT - VS. - M/S. ZENON (INDI A ) PVT . LIMITED A L OA N TAKEN BY THE ASSESSEE WAS TREATED BY THE ASS E SSING OFF I CER A S DEEMED DIVI DEND UNDER SECTION 2(22)(E) BUT THE ID. CIT(APPEALS) DID NOT A PPROV E THE ACTION OF THE ASSESSING OFFICER AFTER HAV I NG NOTICED THAT INT E REST AT THE RATE OF 9 % PER ANNUM WAS PAID BY THE A SS E SS E E ON SUCH LOAN WHICH ACCORDING TO HIM WAS A CONSIDERATION RECEIVED FROM HER 11 ITA NO. 305/NAG/2016. SHAREHOLDERS WHICH WAS BENEFICIAL TO THE COMPANY AND THE ORDER OF THE ID. CIT(APPEALS) GIVING RELIEF TO THE ASSESSEE WAS UPHELD BY TH E TRIBUNAL VIDE ITS ORDER DATED 29.06.2015 PASSED IN ITA NO . 1124/KOL/2012 BY RELYING ON THE DECISIO N OF THE HO NB L E CALCUTTA HIGH COURT IN THE CASE OF PR A DIP KUMAR MALHOTRA (SUPRA). KEEPING IN VIEW THE SAID DECISION OF THE HON'BLE CALCUTTA HIGH COURT WHICH HAS BEEN FOLLOWED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. ZENON (INDIA) PVT . LIMITED (SUPRA) WE HOLD THAT THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE ID. CIT(APPEALS) UNDER SECTION 2(22)(E) ON ACCOUNT OF LOAN RECEIVED BY THE ASSESSEE FROM M/S. SURYA BUSINESS PVT. LIMITED ON WHICH CONSIDERATION IN THE FORM OF INTEREST WAS PAID BY THE ASSESSEE TO THE BENEFIT OF THE COMPANY IS NOT SUSTAINABLE. WE THEREFORE DELETE TH E SAME AND ALLOW GROUNDS NO. 1 & 2 OF THE ASSESSEE'S APPEAL . 1 4 . AGAIN THE ITAT CHENNAI BENCH IN THE CASE OF ACIT VS. SMT. C. RAJINI (SUPRA) EXPOUNDED AS UNDER : (HEAD NOTE ONLY). DIVIDEND - DEEMED DIVIDEND UNDER S. 2(22)(E) - TRANSACTIONS IN THE NORMAL COURSE OF BUSINESS - ASSESSEE IS A DIRECTOR IN CPDPL AND ALSO IN CHPL HAVING 80 PER CENT AND 41.67 PER CENT SHAREHOLDING RESPECTIVELY - CPDPL MADE A PAYMENT OF RS. 20 00 000 TO CHPL WHICH WAS HELD TO BE DEEMED DIVIDEND AND ADDED UNDER S . 2 (22)(E) IN THE HANDS OF THE ASSESSEE - NOT JUSTIFIED - THIS SECTION CAN BE INVOKED TO CURTAIL THE MISUSE OF THE FUNDS BE LONGING TO A PRIVATE LIMITED COMPANY BY I TS SHAREHOLDER BUT NOT WHEN THERE IS A BUSINESS TRANSACTION BETWEEN THE TWO ENTITIES - ASSESSEE IS HOLDING SUBSTANTIAL AMOUNT WITH COMPANY WITHOUT INTEREST AND TO BRUSH ASIDE THIS FACT IS AGAINST THE SPIRIT OF THE SECT I ON+ADV A NCE OF RS. 20 00 000 WAS MADE BY CPDPL TO CHPL ON 26TH DEC . 2000 AND BALANCE OF THE ASSESSEE WITH COMPANY WAS RS. 4 35 67 200 - CONTRACT REFERRED TO BY THE AD WAS COMPLETED AFTER TWO YEARS IN A TOTAL AMOUNT OF RS. 8 CRORES - ASSESSEE WAS ADVANCING ALL HER FUNDS IN THE TWO COMPANIES IN WHICH SHE IS A DIRECTOR FOR THE PURPOSE OF BUSINESS - THERE WAS NO QUESTION OF DEEMED DIVIDEND . 15. FURTHER THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CREATIVE DYEING & PRINTING (P) LTD. (SUPRA) H AS ALSO REITERATED THAT THE PROV ISIONS OF SECTION 2(22)(E)(II) IS BASICALLY IN THE NATURE OF E XPLANATION . T HAT CANNOT HOWEVER HAVE BEARING ON INTERPRETATION OF THE MAIN PROVISION OF SECTION 2(22)(E). ONCE IT IS HELD THAT THE BUSINESS TRANSACTION DID NOT FAL L WITHIN SECTION 2(22)(E) O NE NEED NOT TO GO FURTHER TO SECTION 2(22)(E)(II). THAT THE PROVISION OF 12 ITA NO. 305/NAG/2016. SECTION 2(22)(E) (II) GIVES AN EXAMPLE ONLY OF ONE OF THE SITUATION WHERE THE LOAN/ADVANCE WILL NOT BE TREATED AS DEEMED DIVIDEND BUT THAT S ALL. THE SA ME CANNOT BE EXPANDED FURTHER TO TAKE AWAY THE BASIC MEANING INTENT AND PURPORT OF THE MAIN PART OF SECTION 2(22)(E). 16. NOW EXAMINING THE PRESENT TRANSACTION IN THE PRESENT APPEAL ON THE ANVIL OF AFORESAID CASE LAWS HERE I FIND THAT THE ASSESSEE SHR I DAMODAR SARDA HAD GIVEN LOAN TO M/S GAURAV MULTILAYERS PVT. LTD. THE OPENING BALANCE WAS RS. 68.26 LAKHS AND THE CLOSING BALANCE WAS RS.45.08 LAKHS NOW M/S GAURAV MULTILAYERS PVT. LTD. IN WHICH SHRI DAMODAR SARDA HAS SPECIFIED SHARE HOLDING HAD GRANTED LOAN TO SHREE GAJANAND PLASTICS IN WHICH ALSO SHRI SARDA HAS SPECIFIED SHARE HOLDINGS FOR WHICH DEEMED DIVIDEND TO THE EXTENT OF RS.13 65 999/ - IS BEING ADDED IN THE HANDS OF SHRI DAMODAR SARDA. FIRSTLY I FIND THAT THE LOAN FROM M/S GAURAV MULTILAYERS PVT . LTD. TO SHREE GAJANAND PLASTICS CARRIED AN INTEREST RATE OF 12% AND THE AMOUNT ADVANCED BY M/S GAURAV MULTILAYERS PVT. LTD. TO GAJANAND PLASTICS WAS MUCH LESS THAN THE AMOUNT ADVANCED BY SHRI DAMODAR SARDA TO M/S GAURAV MULTILAYERS PVT. LTD. IN SUCH SCE NARIO THE ASSESSEE CANNOT BE HELD TO HAVE ANY BENEFIT OR DEEMED DIVIDEND AGAINST MONEY RECEIVED BY GAJANAND PLASTICS OUT OF LOAN GRANTED BY THE ASSESSEE HIMSELF. 17. MOREOVER THE TRANSACTION BETWEEN THE TWO COMPANIES WAS A BUSINESS TRANSACTION. BOTH THE COMPANIES HAD OBTAINED RESPECTIVE LOANS WHICH CARRIED 12% INTEREST. IN THESE CIRCUMSTANCES THE PLEA OF THE LEARNED COUNSEL OF THE ASSESSEE IS VERY COGENT THAT THE SAME WAS A BUSINESS TRANSACTION . M/S GAURAV MULTILAYERS PVT. LTD. HAD GRANTED LOAN TO GAJANAND PLASTICS. FOR THIS GAJANAND PLASTICS WAS PAYING 12% INTEREST TO M/S GAURAV MULTILAYERS PVT. LTD.. THUS M/S GAURAV MULTILAYERS PVT. LTD. IS RECEIVING CONSIDERATION WHICH IS BENEFICIAL TO 13 ITA NO. 305/NAG/2016. THE CO MPANY. IN SUCH A SITUATION THE LOAN BY M/S GAURAV MULTILAYERS PVT. LTD. TO GAJANAND PLASTICS CANNOT BE SAID TO BE DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. ACCORDINGLY RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS I HOLD THAT THE SUM RECEIVED BY GAJANAN D PLASTICS FROM M/S GAURAV MULTILAYERS PVT. LTD. CANNOT BE SAID TO BE COMING INTO AMBIT OF DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE SHRI DAMODAR SARDA. ACCORDINGLY I SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAV OUR OF THE ASSESSEE. 1 8 . IN THE RESULT THIS APPEAL BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF OCT. 2016. SD/ - ( SHAMIM YAHYA) ACCOUNTANT MEMBER. NAGPUR DATED: 10 TH OCT. 2016. COPY FORWARDED TO : 1. SHRI DAMODAR SARDA C/O M/S LOYA BAGRI & CO. CHARTERED ACCOUNTANTS GANDHIBAGH NAGPUR 440 002. 2. A.C.I.T. CIRCLE - 5 NAGPUR. 3. C.I.T. - NAGPUR. 4. CIT(APPEALS) - 4 NAGPUR. 5. D.R. ITAT NAGPUR. 6. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL NAGPUR BENCH NAGPUR. WAKODE.