O/TAXAP/958/2015 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 958 of 2015 TO TAX APPEAL NO. 959 of 2015 ========================================================== COMMISSIONER OF INCOME TAX(TDS)....Appellant(s) Versus SCHUTZ DISHMAN BIO-TECH PVT.LTD.....Opponent(s) ========================================================== Appearance: MRS MAUNA M BHATT, ADVOCATE for Appellant(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE MOHINDER PAL Date : 21/12/2015 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. appeals are filed by Revenue calling in question judgement of Income Tax Appellate Tribunal, raising following question for our consideration : Whether on facts and in law ITAT was right in cancelling order passed u/s 201(1) and 201(A) of Act, without appreciating that amount advanced was in nature of deemed dividend u/s 2(22)(e) of Act? 2. According to Revenue, assessee company had made advances in favour of one M/s. Dishman Pharmaceuticals & Chemicals Ltd. having 22.23% holding in assessee company. According to Revenue, therefore, such Page 1 of 4 HC-NIC Page 1 of 4 Created On Wed Dec 23 17:42:42 IST 2015 O/TAXAP/958/2015 ORDER advances were in nature of deemed dividend under section 2(22)(e) of Income tax Act. Since no deductions were made at time of payment of such dividend, section 201 of Act, was invoked. 3. Commissioner (Appeals) however, deleted order of Assessing Officer making following observations : 6. I have carefully considered impugned orders and submissions of appellant. I am of view that provisions of S.2(22)(e) of Act are not applicable at all and therefore question of deduction of tax at source does not arise and therefore, liability u/s.201(1) and 201(A) of Act also does not arise. For both years under consideration, I have perused copies of ledger accounts placed on record. It can be seen that there are large number of debit and credit transactions. Meaning thereby, appellant has given and received funds as and when required to and from its associate concern. It is not account whereby loans and advances have been given to associate concern. It is account which is in nature of current adjustment accommodation account wherein there is movement of fund both ways, on need basis. Unlike transactions of loans and advances, in this kind of current adjustment accommodation account, movement of hinds is both ways and same is more in nature of current account rather than loan account. Transactions in nature of loans and advances are usually very few and for longer duration. In facts of present case, nature of transaction is in form of current accommodation adjustment account and therefore, same is not transaction in nature of loans and advances. In absence of any loans and advances, provisions of section 2(22)(e) of ACt in respect of deemed divided are not attracted and therefore, question of deduction of tax at source also would not Page 2 of 4 HC-NIC Page 2 of 4 Created On Wed Dec 23 17:42:42 IST 2015 O/TAXAP/958/2015 ORDER arise. This view is supported by following direct decisions : CIT vs. Creative Dyeing & Pringint (P) ltd. 318 ITR 476 (Del) CIT vs. Raj Kumar 318 ITR 462 (Del) NH Securities Ltd v. DCIT (2007) 11 SOT 302 (BOM) ACIT v. Global Agencies(P) ltd. (2005) 87 TTJ 1086(Delhi) CIT v. Nagindas M. Kapadia (1989) 177 ITR 393 (BOM) Even otherwise, if transactions are not in nature of current accommodation adjustment account, same are in nature of deposits as it apparent from nomenclature of ledger account. If transactions are in nature of deposits and same are between two corporate, it is nothing but Inter Corporate Deposits (ICD) which in any case would be outside purview of section 2(22)(e) of Act. This view supported by following direct binding decisions of ITATs. M/s. Utkarsh Fincap(P) Ltd., v ITO 1288 ITR 38 On.(Tri. Ahmedabad) M/s. Bombay Oil Industries Ltd, v. DCIT, Central Circle 35 Mumbai 128 SOT 383 (Mum.) 4. It can thus be seen that Commissioner as matter of fact found that payments were not in nature of current adjustment. There was movement of fund both ways on need basis. transactions in nature of loans and advances are usually very few in number whereas in present case, such transactions are in form of current accommodation adjustment entries. Commissioner therefore, held that transactions were not in nature of loans and advances. Revenue carried matter in appeal. Tribunal concurred with view of CIT (Appeals) and held that amounts Page 3 of 4 HC-NIC Page 3 of 4 Created On Wed Dec 23 17:42:42 IST 2015 O/TAXAP/958/2015 ORDER were not in nature of Inter Corporate Deposits and were therefore, not to be treated as loans or advances as contemplated in section 2(22)(e) of Act. 5. issue is substantially one of appreciation of facts. When CIT(Appeals) as well as Tribunal concurrently held that looking to large number of adjustment entries in accounts between two entities, amounts were not in nature of loan or deposit, but merely adjustments, application of section 2(22)(e) of Act would not arise. Consequently, no question of law arises. Tax appeals are dismissed. (AKIL KURESHI, J.) (MOHINDER PAL, J.) raghu Page 4 of 4 HC-NIC Page 4 of 4 Created On Wed Dec 23 17:42:42 IST 2015 Commissioner of Income Tax(TDS) v. Schutz Dishman Bio-tech Pvt. Ltd