The case number ITA 705/DEL/2019 involves the appellant, DCIT, Central Circle-14, New Delhi, and the respondent, Gurmeet Singh Anand, Delhi. This case pertains to the assessment year 2015-16 and was filed on January 31, 2019. The order type is a Final Tribunal Order, with the date of the order and the date it was pronounced being August 29, 2022.
The appeal by the Revenue is directed against the order dated November 15, 2018, of the Commissioner of Income Tax (Appeals)–XXVI, New Delhi, pertaining to the assessment year 2015-16. The primary issue in this appeal revolves around the treatment of a transaction under Section 2(22)(e) of the Income Tax Act, 1961, concerning deemed dividends.
The Revenue raised the following grounds of appeal:
During the course of the assessment proceedings, the Assessing Officer (AO) required the assessee to show cause why an amount of Rs. 1,51,76,217/- should not be disallowed on account of deemed dividend under Section 2(22)(e) of the Income Tax Act. The assessee submitted that the amount in question was taken as an advance towards the sale of property to M/s AMP Motors Pvt. Ltd., supported by a Memorandum of Understanding (MOU) dated October 5, 2014. The advance was subsequently returned as the sale did not materialize.
The AO, however, held that the receipt of the advance constituted deemed dividend under Section 2(22)(e) and added the same to the income of the assessee. The assessee appealed to the CIT(A), who ruled in favor of the assessee, stating that the transaction was a business transaction and not a loan or advance simpliciter.
The Tribunal noted that the advance was given for a property deal which was supported by an MOU. The AO did not dispute the authenticity of the MOU. The Tribunal observed that the transactions were duly recorded in the books of M/s AMP Motors Pvt. Ltd., and the advance was returned when the deal was canceled.
The Tribunal relied on various judicial precedents and the CBDT circular, which clarifies that trade advances in the nature of commercial transactions do not fall under the purview of deemed dividends. The Tribunal also noted that the AO had accepted the same transaction as a business transaction in the case of M/s AMP Motors Pvt. Ltd.
The Tribunal upheld the order of the CIT(A) and dismissed the appeal of the Revenue. The Tribunal concluded that the transaction between the assessee and M/s AMP Motors Pvt. Ltd. was a commercial transaction and did not constitute deemed dividend under Section 2(22)(e) of the Income Tax Act.
In summary, the Tribunal’s decision in DCIT vs Gurmeet Singh Anand underscores the importance of distinguishing between commercial transactions and loans or advances when applying the provisions of Section 2(22)(e) of the Income Tax Act. The appeal was dismissed, reinforcing the position that advances given for business purposes do not attract the deemed dividend provisions.
This case serves as a significant reference for taxpayers and tax professionals dealing with similar issues, highlighting the necessity of maintaining clear documentation and understanding the nuances of tax provisions related to deemed dividends.
DCIT vs Gurmeet Singh Anand: Appeal Dismissed on Deemed Dividend Issue for AY 2015-16
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