IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. No: 2105/AHD/2012& 2125/AHD/2012 (Assessment Year: 2003-04 & 2004-05) DCIT, (OSD), Range-1, V/S Dishman Pharmaceuticals Ahmedabad & Chemicals Ltd.2, Bhadr- Raj Chambers, Nr. Swastik Cross Road, Navrangpura, Ahmedabad-380009 (Appellant) (Respondent) PAN: AAACD4164D Appellant by : Shri Prasoon Kabra, Sr. D.R. Respondent by : Shri Tushar Hemani, A.R. ORDER Date of hearing : 04-10-2016 Date of Pronouncement : 06 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA Nos. 2105/Ahd/2012 & 2125/Ahd/2012 are two appeals by Revenue preferred against two separate orders of Ld. CIT(A)-6, Ahmedabad 2 ITA Nos. 2105 & 2125/Ahd/2012 . A.Ys. 2003-04 & 2004-05 dated 10.07.2012 & 09.07.2012 pertaining to A.Ys. 2003-04 & 2004-05 respectively. 2. Since both these appeals involved common grievance with different quantum, they were heard together and are being disposed of by this common order for sake of convenience. 3. common grievance of revenue in both these appeals relates to deletion of addition made u/s. 2(22)(e) of Act despite fact that assessee company had 22.3% share capital of SDBPL and had also availed loan along with several financial transaction with said company during year. 4. During course of assessment proceedings, A.O. noticed that assessee is holding substantial interest in Schutz Dishman Biotech Ltd. (SDBPL). A.O. further found that assessee company holds 22.3% share in SDBPL. While scrutinizing statement of accounts, A.O. found that assessee has taken loan from SDBPL and said company has also accumulated profit. 5. A.O. was of firm belief that provisions of Section 2(22)(e) of Act squarely apply on facts of case and accordingly made addition of Rs. 4,59,63,532/- in A.Y. 2003-04 and Rs. 2,17,05,000/- in A.Y. 2004-05. 3 ITA Nos. 2105 & 2125/Ahd/2012 . A.Ys. 2003-04 & 2004-05 6. Assessee carried matter before ld. CIT(A) and claimed that transaction with SDBPL is business transaction done in ordinary course of business. It was brought to notice of First Appellate Authority that entire issue is covered in favour of assessee and against revenue by decision of ld. CIT(A) in assessment year 2006-07. 7. ld. CIT(A) was convinced after verification that issue is covered by decision of First Appellate Authority. relevant findings of ld. CIT(A) for A.Y. 2003-04 reads as under:- "It is not in dispute that appellant had lot of business transactions with M/s Schutz Dishman Biotech Ltd. There were transactions of purchase of raw material as well as temporary accommodation deposits. Assessing officer of M/s Schutz Dishman Biotech Ltd initiated action under section 201 (1) by treating transaction with appellant company as deemed dividend and said company was treated as assessee in default for not deducting TDS in assessment year 2004- 05 and 2005-06. In both years, CIT(A)-XXI, Ahmedabad by order dated 28- 09-2010 held that transactions entered into by appellant which its associate concern would not attract provisions of section 2(22)(e) of act. And accordingly there would not be any obligation to deduct tax under section 194 and therefore assessee cannot be treated as assessee in default within meaning of section 201(1) of IT act. relevant extract of said appeal order in para-six is quoted below- "There is 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 on account whereby loans and advances have been given to associate concern. It is on account payments in nature of current adjustment accommodation account wherein there is movement of funds both ways, on basis. Unlike transactions of loan and advances, movement funds is both ways and same is more in nature of current account rather than 4 ITA Nos. 2105 & 2125/Ahd/2012 . A.Ys. 2003-04 & 2004-05 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 as 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 dividend are not attracted and therefore question of deduction of tax at source also would not arise." Since these transactions between appellant and its associate concern M/s Schutz Dishman Biotech Ltd was there since assessment year 2004-05 onwards and during year debit balance in appellant's account was substantially reduced. Since CIT (A) did not find transactions between appellant and its associate concern as loans and advances given, logically same cannot be loans and advances received by appellant. It is not in dispute that in books of associate concern, there are five accounts relating to various transactions in name of appellant and six accounts in name of associate concern in books of appellant. In these many accounts where large number of debit and credit entries involving different business transactions. Apart from this, there are certain financial transactions also in these accounts. movement of funds was not for any period but was frequent and in both ways. Respectfully following decision of Id CIJ (appeal) in case of associate concern holding that transactions are not in nature of loan and also decisions of jurisdictional ITAJ relied upon by appellant, addition on account of deemed dividend cannot survive in this year." Facts relating to financial transactions with SDBPL are identical to aforesaid assessment year in which issue is decided in favour of appellant. In view of this, by following appeal order in assessment year 2006-07, addition on account of deemed dividend in respect of financial transactions with SDBPL made by assessing officer is not confirmed. 5 ITA Nos. 2105 & 2125/Ahd/2012 . A.Ys. 2003-04 & 2004-05 8. perusal of aforementioned findings of ld. CIT(A) shows that he has followed findings given in A.Y. 2006-07 wherein First Appellate Authority has followed decision taken in case of SDBPL. We find that appeal of SDBPL travelled up to Hon ble Jurisdictional High Court of Gujarat wherein Hon ble High Court was seized with following question of law for 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?" 9. And relevant findings of Hon ble High Court reads as under:- 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 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. 6 ITA Nos. 2105 & 2125/Ahd/2012 . A.Ys. 2003-04 & 2004-05 10. Considering findings of First Appellate Authority in light of decision of Hon ble Jurisdictional High Court of Gujarat (supra), we do not find any reason to interfere with findings of ld. CIT(A). Both these appeals of Revenue are accordingly dismissed. Order pronounced in Open Court on 06 - 10- 2016. Sd- Sd/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: True Copy Rajesh Copy of Order forwarded to:- 1. Appellant. 2. Respondent. 3. CIT (Appeals) 4. CIT concerned. 5. DR., ITAT, Ahmedabad. 6. Guard File. By ORDER Deputy/Asstt.Registrar ITAT,Ahmedabad DCIT, (OSD), Range-1, Ahmedabad v. Dishman Pharmaceuticals & Chemical