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TMI Blog2016 (4) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... he earlier and subsequent years the sale of machineries were made to the said concern by the assessee from whom the money towards the supply of machinery were taken could not fall within the meaning of section 2(22)(e) of the Act. In the catena of decisions relied on by the assessee the ratio laid down is that the advances taken against the supply are not covered by the provisions of section 2(22)(e) of the Act. We, therefore, hold that order of CIT(A) confirming the order of AO is wrong and cannot be sustained and accordingly delete the addition - Decided in favour of assessee. - I.T.A. No 3129/Mum/2013 - - - Dated:- 8-3-2016 - SHRI C.N. PRASAD, JM AND SHRI RAJESH KUMAR, AM For The Appellant : Shri J P Bairagra For The Respondent : Shri R A Dhyani PER RAJESH KUMAR, A. M: This appeal by the assessee is directed against the order dated 4.2.2013 of Commissioner of Income Tax (Appeals)-8, Mumbai Hereinafter called as the CIT(A)) for assessment year 2009-10. 2. The only issue raised in the grounds of appeal by the assessee is against the upholding of the provisions of section 2(22)(e) of the Income Tax Act, 1961 and against the confirmation of addition of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.01.2009 Rs.6.75 lakhs; and ₹ 54.50 lakhs were also credited as interest on the outstanding loan in the said account and the remaining entries on the credit side were ₹ 1,77,279/- for travelling expenses, ₹ 40,000/- for staff welfare expenses and ₹ 7,550/- were also for travelling expenses. The ld. AO made the addition of ₹ 1,09,75,000/- on account of deemed dividend under the provisions of section 2(22)(e) of the Act by rejecting the contention of the assessee that the advances by TISCPL to the assessee were on account of trade advances for the supply of machinery given in the ordinary course of business. The AO also disbelieved the contention of the assessee that the similar machinery was purchased in the financial years 2006-07 and 2007-08 and also in subsequent years. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) who also confirmed the action of the AO by upholding the observations of the AO that the explanation given by the assessee was after thought as both the companies i.e assessee as well as TISCPL were interrelated companies and the whole exercise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant from the said associate concern as loan without any backing of supply order from the said company. In the facts and circumstances, the provisions of section 2(22)(e) of the Act were clearly applicable on this amount of Rs.l,09,75;000/- received by the appellant. 2.7. Without prejudice to the above facts and findings, if the appellant's argument appears to be genuine that the above said amount was received as advance for supply of machineries, there are number of decisions of Courts and Tribunals that the provisions of section 2(22)(e) of the Act are not applicable on business transaction carried out in in normal course of business. In the facts and circumstances, it has to be examined as to whether the amount shown as advance i.e. Rs.l,09,75,000/ - was received by the appellant in the normal course of business as advance for supply of machineries to the associate concern. The facts as stated earlier show that upto 11/8/2008, the appellant had already received huge amount of ₹ 10.26 crores from the above said associate. In view of the facts that the appellant had already received a huge amount from the associate concern, such associate concern could have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TISPCL were ₹ 5,06,184/- and in subsequent financial year the total sales to the said company were ₹ 3,49,99,934/- and freight charges of ₹ 4,75,000/- . The ld counsel drew out attention to the copies of ledgers accounts in respect of M/s TISCPL, bills and vouchers, supply orders filed in the paper book. The ld counsel submitted that the orders placed in financial year 2008-09 could not mature and ultimately replaced with fresh orders fulfilled in the next financial year. The ld vehemently submitted that trading advances wrongly treated as deemed dividend. In support of his arguments the ld. AR placed reliance on the following decisions : a) CIT V/s Nagindas M Kapadia (1989) 177 ITR 393 (Bom); b) Bombay Oil Industries Ltd V/s DCIT (2009) 28 SOT 383(Mum); c) CIT V/s Ambassador Travells (P) Ltd ((2009) 318 ITR 376) (Del); d) NH Securities Ltd V/s DCIT (2007) 11 SOT 302 (Mumba); e) CIT V/s Raj Kumar (2009) 318 ITR 462(Del); f) CIT V/s P K Badiani (1970) 76 ITR 369) (Bom); g) Anilkumar Agarwal V/s ITO (2011)138 TTJ 175) Mum); and h) Kedarnath Jute Mfg. Co.Ltd V/s CIT (1971) 82 ITR 363(SC) 5. Per contra the ld DR relied heavily on the orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase orders were changed and replaced with fresh proposal of 200 TPH feeding Mobile Crushing and Screening machineries. The fact is also corroborated that during the year under consideration as the sale and supplies came down drastically as stated elsewhere in this para. The assessee had duly provided interest on money borrowed and also treated the trade advance against the sale of machinery accordingly however the AO as well as the CIT(A) held the trading advances to be covered under the deeming provisions of section 2(22)(e) of the Act. In view of the foregoing facts, we are of the considered opinion that money received by the assessee which was engaged in the manufacturing and sale of machinery and more particularly when in the earlier and subsequent years the sale of machineries were made to the said concern by the assessee from whom the money towards the supply of machinery were taken could not fall within the meaning of section 2(22)(e) of the Act. In the catena of decisions relied on by the assessee the ratio laid down is that the advances taken against the supply are not covered by the provisions of section 2(22)(e) of the Act. We, therefore, hold that order of CIT(A) conf ..... X X X X Extracts X X X X X X X X Extracts X X X X
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