It is unsustainable to add more considered dividends to those held by non-shareholders
Fact and issue of the case
The present appeal has been filed by the Revenue against order passed by the Ld.Commissioner of Income-Tax(Appeals)-1, Ahmedabad (hereinafter referred to as “ld.CIT(A)”) dated 10.04.2015under section 250(6) of the Income Tax Act, 1961 (“the Act” for short) pertaining to Assessment Year 2010-11. Thereafter the assessee has also filed cross objection bearing CO No.174/Ahd/2015. Both of them are being disposed of by this common order.
The Revenue in its appeal has raised the following grounds:
The ld.CIT(A) has erred in law and on facts in deleting the addition made u/s.68 of the Act at Rs.1,31,50,000/-
The ld.CIT(A) has erred in law and on facts in deleting the addition made u/s.2(22)(e) under section 68 of the Act.
The ld.CIT(A) has erred in law and on facts in deleting the addition made at Rs.1,52,10,011/- being 25% of labour and transportation charges.
The ld.CIT(A) has erred in law and on facts in partly deleting the addition made at Rs.10,00,000/- on account of short term capital gains.
While the assessee in the CO has raised the following grounds:
The learned Commissioner of Income Tax (Appeals) has erred in holding that the addition made u/s.2(22)(e) of the I. T. Act, 1961 should have been of Rs.37,78,000/- while deleting the addition made by the Assessing Officer of Rs.130264245/- and allowing the appeal for statistical purpose.
The learned Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of 10,00,000/- out of disallowance made by the Assessing Officer of Rs.1,52,10,011/- for labour charges and transportation charges.
As transpires from the orders of the authority below, during the assessment proceedings, the AO made addition to the income of the assessee on account of the following:
| Short term capital gain | 10,00,000 |
| Unexplained unsecured loan | 1,31,50,000 |
| Deemed dividend u/s 2(22)(e) | 13,02,64,245 |
| Labour and transport charges | 1,52,10,011 |
Observation of the court
We have discussed and dealt with in detail the ground raised by the Revenue on the issue of deemed dividend taxed in the hands of the assessee to the tune of Rs.13.02 crores in the appeal of the Revenue in ITA No.2105/Ahd/2015. Undisputedly, the ld.CIT(A) had deleted the entire addition noting judicial proposition that the amount could not be taxed in the hands of the non-shareholders and we have upheld the order of the ld.CIT(A) on this aspect. Therefore, the entire addition stands deleted in the hands of the assessee, and there remains no grievance of the assessee. At the same time noting that the assessee is aggrieved by the finding of the ld.CIT(A) that the addition in any case if tenable, is to be restricted to the extent of Rs.37,80,000/-, this is without prejudice to the finding of the ld.CIT(A) that the entire addition needs to be deleted. The finding of the ld.CIT(A) restricting the addition to the aforesaid extent was based on his finding of fact that the available accumulated reserves with the companies making loans & advances, which was treated as deemed dividend, were to this extent only i.e. Rs.37.78 lakhs only. The ld.counsel for the assessee has been unable to controvert this factual finding of the ld.CIT(A). Therefore, considering the provision of law contained in section 2(22)(e) of the Act treating the deemed divided on account of loans & advances made to the extent of accumulated reserves only, and considering the factual position in the present case, which has remained uncontroverted before us, we see no infirmity in the finding of the ld.CIT(A) that the addition in any case under section 2(22)(e) of the Act could not have been exceeded Rs.37,78,000/-. Therefore, ground no.1 raised by the assessee in its CO is rejected.
By Ground no.2, the assessee is aggrieved by restriction of disallowance of labour and transportation charges to the extent of Rs.10 lakhs. We have reproduced the entire order of the ld.CIT(A) on this issue at para-28-33 of our order above. We have also noted that the ld.CIT(A) had appreciated all the evidences filed by the assessee, and gave a finding, that to the tuneof Rs.1 crores of this expenditure, the assessee had failed to file any evidences, and accordingly, he had restricted the disallowance to the extent of 10% on such expenses. The ld.counsel for the assessee has been unable to controvert the finding of the ld.CIT(A) and we therefore, we hold that the ld.CIT(A) has been fair enough to restrict the disallowance to 10% of unsubstantiated labour and transportation charges, and there is no merit in the ground no.2 raised by the assessee before us. Thus, ground no.2 stands dismissed.
In the result, the appeal of the Revenue and the CO of the assessee, both are dismissed.
Order pronounced in the Court on 5th June, 2023 at Ahmedabad.
Conclusion
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
Read the full order from here
DCIT-Vs-Aaryavart-Infrastructure-P.-Ltd.-ITAT-Ahmedabad-2
