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TMI Blog2011 (9) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts, the said amount was repaid by the assessee to the said company and the same does not partake the character of loan as contemplated u/s 2(22)(e) of the Act. - Decided in favor of assessee. - IT APPEAL NO. 738 (CHD.) OF 2011 - - - Dated:- 19-9-2011 - MS. SUSHMA CHOWLA, MEHAR SINGH, JJ. Smt. Jaishree Sharma for the Appellant. Ashwani Kumar for the Respondent. ORDER Ms. Sushma Chowla, Judicial Member. The appeal filed by the Revenue is against the order of the Commissioner of Income-tax(Appeals), dated 18.05.2011 relating to assessment year 2008-09 against the order passed under section 143(3) of the I.T. Act, 1961. 2. The Revenue has raised the following grounds : "1. On the facts and in the circumstances of the case, the Ld. CIT(A)-II, Ludhiana has erred in deleting the addition of Rs. 228,28,016/- made by the Assessing Officer on account of deemed dividend by invoking the provisions of section 2(22)(e) of the Income-tax Act 1961. 2. That the order of Ld. CIT(A), Ludhiana be set aside and that of the Assessing Officer be restored." 3. In the appeal filed by the Revenue, the only issue raised is in connection with the applicability of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty i.e. M/s. Pee Jay Fabrics Ltd. against the purchases made by the other party i.e. M/s. Payare Lal Bansal Company and vice-versa and also how when the assessee had made purchases worth Rs. 20 lakhs, it was not aware that it had not made the payment corresponding to this purchase and nor the amount was debited to its account. On the other side AO also wondered how M/s. Pee Jay Fabrics Pvt. Ltd. was not aware that its account was debited by M/s. Raymonds Ltd. for purchases which were not made by it. The AO, thus held as under: "Hence, it is quite clear that M/s. Raymonds Limited has taken payment of Rs. 28,28,016/- from M/s Pee Jay Fabrics (P) Ltd. on account of purchases made to assessee out of which Rs. 26,44,795/- were subsequently repaid by the assessee to M/s Pee Jay Fabrics (P) Ltd. on 31.3.2008 as evident from its copy of account and the balance amounts of Rs. 11,892/- 1,71,329/- were transferred by M/s Raymonds Ltd. from the account of the assessee to M/s Pee Jay Fabrics (P) Ltd. as mentioned above. Hence, as per the provisions of Section 2(22)(e), the whole amount of Rs. 28,28,016/- is to be treated as loan and advance to the assessee by M/s Pee Jay Fabrics (P) Ltd." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(e) are not attracted and the addition made at Rs. 28,28,016/- is directed to be deleted." 7. The Revenue is in appeal against the order of the CIT(A). Ld. DR for the revenue placing reliance on the order of the AO, also placed reliance on the decision of the Gujarat High Court in Ravindra D.Amin v. CIT [1994] 208 ITR 815. Ld. AR for the assessee placing reliance on the order of the CIT(A) pointed out that the provisions of Section 2(22)(e) of the Act are attracted in case of any payment by a company to its shareholder and in the facts of the present case, there was no payment by the company to its shareholder i.e. the assessee before us. It was further pointed out that because of the entries passed between the company and M/s Raymonds Ltd., there was adjustment carried out by way of book end, which does not attract the provisions of Section 2(22)(e) of the Act. Reliance was placed on the decision of Madras High Court in G.R. Govindarajulu Naidu v. CIT [1973] 90 ITR 13. It was also pointed out that the advances were made during the ordinary course of carrying on the business and the same did not constitute loan for the purpose of Section 2(22)(e) of the Act. Reliance was placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ho is beneficial owner of shares in the said company holding not less than 10% of the voting power. 11. Admittedly in the facts of the present case, the assessee is the beneficial owner of 30% of share holding in the company M/s Pee Jay Fabrics Pvt.Ltd., which is a company in which public are not substantially interested. Admittedly the provisions of Section 2(22)(e) of the Act are attracted in the present case as the preliminary conditions laid down in the said clause are fulfilled. 12. Now coming to the facts of the present case, M/s Pee Jay Fabrics Pvt.Ltd. had made payment to M/s Raymonds Ltd. on behalf of sole proprietorship business of the assessee. The claim of the assessee is that on a particular date, M/s Raymonds Ltd. passed an entry at their end debiting M/s Pee Jay Fabrics Pvt.Ltd. of Rs. 28,28,016/- and crediting M/s Payare Lal Bansal Company with the same amount. Later on, M/s Raymonds Ltd. debited M/s Payare Lal Bansal Company with Rs. 1,82,221/- and credited M/s Pee Jay Fabrics Pvt. Ltd. by an identical amount. The first limb to be hit by provisions of Section 2(22)(e) of the Act is that there has to be a payment by the company to its shareholder, subject to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing different from sale and every sale of goods on credit does not mean to be transaction of loan. In the facts of the case before the Chandigarh Tribunal, there was a debit balance on account of advance paid by AEPL which was held to be purely advance during the course of business and it was held that such payment do not constitute loan for the purpose of Section 2(22)(e) of the Act. We are of the view that in the facts of the present case, the transaction in question is relatable to the carrying on of business by the assessee. The aforesaid payment was made by M/s Pee Jay Fabrics Ltd. as the demand was raised by the consignor M/s Raymonds Ltd. after debiting the account of the said company, though the said transaction related to the assessee. Thereafter, on reconciliation of statement of accounts, the said amount was repaid by the assessee to the said company and the same does not partake the character of loan as contemplated u/s 2(22)(e) of the Act. 15. Upholding the order of the CIT(A), we hold that there is no merit in the addition made by the AO on account of deemed dividend in the hands of the assessee. Ground of Appeal raised by the Revenue is, thus, dismissed. 16. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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