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TMI Blog2014 (4) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... ived trade advances from the company for supply of particular type of guwar gum powder – thus, the transactions between the company and firm are business transactions and amounts advanced by this company to the firm is only advance for business purpose and not as loan. Assessee rightly contended that the nature of the transactions has to be decided on the basis of true nature of transactions and not as per nomenclature given in the books – Relying upon Prakash Cotton Mills P. Ltd. Vs. CIT [1993 (4) TMI 3 - SUPREME Court] - the transactions were for the benefit of the shareholders who were also partners in the firm - it cannot be said that the amounts constitute a dividend even under the deeming provisions – the provisions of section 2(22 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share of M/s Shree India Sino Gum (P). Ltd. As per the audit report, there have been transactions within the company and the firm. He is also having substantial interest in the firm. During the year, as per the assessment order, M/s Shree Ram Gum Chemicals took loan of Rs. 1,31,20,000/- from M/s Shree India Sino Gum (P). Ltd [company]. According to the A.O., this amount taken by the firm as loan from the company attracts the provisions of section 2 (22)(e) of the Act as the assessee has ultimate beneficiary having substantial interest in both these concerns. After seeking explanation from the assessee, the A.O. has restricted the deemed dividend to Rs. 1,25,09,050/- being accumulated profit and after treating 50% share holding in the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . At any point of time, no investment of the assessee in the firm has been negatived and there was debit balance. The assessee did not receive any loan or advance from the firm. Thus, no amount can be stated to have been, directly or indirectly, diverted to him. As per the ld. CIT(A) s order, the assessee had submitted copy of bank book on 1.4.2002 and 31.32007 before the A.O. and from this bank book, it is clearly established that no amount was advanced by the firm to the partners and there was credit balance in the accounts of the partner and at no point of time there was debit balance in the account of the partners from this bank book. It was also established that there were transactions between the firm and company in the ordinary cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enclature given in the books. In this case, the decision of the Hon'ble Apex Court in the case of Prakash Cotton Mills P. Ltd. Vs. CIT 201 ITR 684 [SC] and Padmaraje R. Kadambande Vs. CIT 195 ITR 877 are relevant. 5. In A.Y. 2005-06, similar transactions have been accepted by the A.O. himself while passing the order u/s 143(3) of the Act on 20.12.2007. We have found that similar transactions between the company and the firm were carried out in the earlier years and on the same facts, no adverse inference was ever drawn by the A.O. In the subsequent years also, similar transactions have been carried on by the assessee. Therefore, the rule of consistency demands that no such adverse inference should be drawn in this year also. After ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der, the ld. CIT(A) has observed that a perusal of the copies of account of the assessee-company showed that they were normal business transactions. From the account statement, it was not established that they were for the benefit of the shareholders who were also partners in the firm. Therefore, it cannot be said that these amounts constitute a dividend even under the deeming provisions. The above order of the ld. CIT(A), Bikaner was challenged before the ITAT, who, vide their order dated 31.7.2013 have categorically mentioned in order that provisions of section 2(22)(e) of the Act are not attracted in this case. Thus, we find that the payments in question were normal business transactions. It is not a case where one concern is dealing in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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