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TMI Blog2014 (4) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... repayment - in its widest meaning the term 'advance' may or may not include lending - The word 'advance' if not found in the company of or in conjunction with a word 'loan' may or may not include the obligation of repayment - If it does, then it would be a loan - the word 'advance' which appears in the company of the word 'loan' could only mean such advance which carries with it an obligation of repayment - Trade advance which are in the nature of money transacted to give effect to commercial transactions would not fall within the ambit of the provisions of section 2(22)(e) of the Act – Decided against Revenue. - - - - - Dated:- 3-9-2013 - SANJIV KHANNA AND SANJEEV SACHDEVA, JJ. JUDGMENT This appeal by the Revenue, which pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 399 (Jharkhand). He observed that the share application money had remained with the respondent-assessee for more than three months during the relevant assessment year and the shares were issued in the subsequent assessment year. Therefore, deposit in the nature of advance was available for use to the assessee during this period. Further, there was a delay of four months in informing the Registrar of Companies about the allotment of shares as per the board resolution dated July 22, 2010. He has recorded that preponderance of probability was that the shares were allotted only after the Assessing Officer had sought explanation why section 2(22)(e) should not be invoked. The Commissioner of Income-tax (Appeals), on the other hand, accepted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 2(22)(e) of the Act. The said issue whether the share application money is loan or deposit is covered by the decision of this court in CIT v. I. P. India Pvt. Ltd. [2012] 343 ITR 353 (Delhi). In the said case, the decision of the Jharkhand High Court in Bhalotia Engineering Works Pvt. Ltd. (supra) has been distinguished. The Tribunal in the impugned order has referred to the decision in I. P. India Pvt. Ltd. (supra) wherein it has been held (page 357) : On a careful consideration of the matter, we find that the Assessing Officer has relied on the judgment of the Jharkhand High Court (supra) and referred the issue of levying penalty to the Additional Commissioner of Income-tax. He did not examine whether the share applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posit is that there must be a liability to return it to the party by whom or on whose behalf it has been made, on fulfilment of certain conditions. If these tests are applied to the facts of the case before us, it may be seen that the receipt of share application monies from the three private limited companies for allotment of shares in the assessee-company cannot be treated as receipt of loan or deposit. In any case, the Tribunal has rightly noticed the cleavage of judicial opinion on the point and held that in that situation there was reasonable cause under section 273B, applying the judgment of the Supreme Court in CIT v. Vegetable Products Ltd. [1973] 88 ITR 192 (SC). In I. P. India Pvt. Ltd. (supra), the question raised was whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers in the form of loans. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they assist the shareholders in avoiding the payment of taxes by having these companies pay or distribute, what would legitimately be dividend in the hands of the shareholders, money in the form of an advance or loan. If this purpose is kept in mind then, in our view, the word 'advance' has to be read in conjunction with the word 'loan'. Usually attributes of a loan are that it involves positive act of lending coupled with acceptance by the other side of the money as loan : it generally carries an interest and there is an obligation of repayment. On the other hand, in its widest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of construction of noscitur a sociis. Importantly, the broad principles which emerge from the judgment of the Supreme Court with regard to the applicability of the said rule of construction are briefly as follows : (i) does the term in issue have more than one meaning attributed to it, i.e., based on the setting or the context one could apply the narrower or wider meaning ; (ii) are words or terms used found in a group totally 'dissimilar' or is there a 'common thread' running through them ; (iii) the purpose behind the insertion of the term. Let us examine as to whether based on the aforesaid tests the said rule of construction noscitur a sociis ought to be applied in the instant ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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