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TMI Blog2017 (11) TMI 1840X X X X Extracts X X X X X X X X Extracts X X X X ..... en because assessee has submitted the copy of the memorandum of understanding dated 1/9/2008 between the assessee and the competent Holdings Ltd wherein in the last paragraph of page No. 1 it has been mentioned that the competent Holdings Ltd has entered into an agreement to sell dated 09/01/2008 with the 1st party to purchase entire basement floor, for a sum of ₹ 1.25 crores and advanced the sum of ₹ 98 lakhs to the 1st party. However, in absence of the Ledger account it cannot be verified that on that particular date i.e. on 1/9/2008 the competent holding Ltd has paid a sum of ₹ 98 lakhs to the assessee or not. We set aside the issue for verification of the amount received by the assessee in pursuance of this agreement as trade advance to the file of the Ld. assessing officer with a direction that if the assessee has received the above sum after 09/01/2008 up to 31/03/2008 in pursuance of this agreement then such amount cannot be treated as deemed dividend under section 2 (22) (e) of the act. In view of this ground No. 1 and 2 of the appeal of the revenue are set aside to the file of the Ld. Assessing officer with above direction. In the result ground No. 1 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. On the facts and in the circumstances of the case and in law, the ld CIT(A) was not justified in reversing the AO s rejection as claimed by the regarding advance of ₹ 9800000/- received from M/s. Competent Holdings Ltd. 2. The brief facts of the case are that the assessee is an individual who filed his return of income of ₹ 5363400/- on 11.09.2008. During the appellate proceedings for Assessment Year 2009-10 the ld CIT (A) directed the Assessing Officer to verify the impugned assessment year where the assessee has taken an advance of ₹ 98 laks from M/s. Competent Holding ltd wherein the assessee is a Director and holding beneficial ownership of more than 10%. The Competent Holding Ltd has also held the accumulated profit of ₹ 10.27 crores. Hence, the provisions of section 2(22) (e) of the Act were invoked in reassessment proceedings. The assessee submitted that the above sum was received by assessee for advance against sale of property at basement of A-44, Kailash Colony, New Delhi and therefore, it is a business transaction hence, provisions of section 2(22)(e) of the Act do not apply. The ld Assessing Officer rejected the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of CIT Vs. Sunil Chopra 242 CTR 498 (Delhi). 6. We have carefully considered the rival contentions and perused the orders of the lower authorities. The brief facts in the present case are that assessee is a director with 36.30 % shareholding in the company M/s competent Holdings private limited. Both the assessee as well as that company is having one of the main business activities of real estate business. The assessee entered into an Agreement to Sale on 09/01/2008 with the company for sale of the basement of property at a 44, Kailash colony, New Delhi which was used by the company as a rented premises since 2003. According to the agreement, the property was to be sold at ₹ 1.25 crores and up to 31.03.2008, the company gave assessee an advance of ₹ 98 lakhs. Later on, this property was not transacted for the reason that the company got a better property hence it cancelled the Agreement To Sale entered with the assessee through a Memorandum of Understanding . According to the agreement to sell, the assessee was paid ₹ 5 Lacs by cheque No. 301849 on 09/01/2008. A further sum of ₹ 70 lakhs was to be paid to the assessee on or before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. 2. The Board has observed that some Courts in the recent past have held that trade advances in the nature of commercial transactions would not fall within the ambit of the provisions of section 2(22) (e) of the Act. Such views have attained finality. 2.1 Some illustrations/examples of trade advances/commercial transactions held to be not covered under section 2(22) (e) of the Act are as follows: i. Advances were made by a company to a sister concern and adjusted against the dues for job work done by the sister concern. It was held that amounts advanced for business transactions do not to fall within the definition of deemed dividend under section 2(22) (e) of the Act. (CIT v. Creative Dyeing Printing P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not furnished the Ledger account of the above company in books of the assessee or the Ledger account of the assessee from the books of the company, hence, we are unable to determine the exact amount of trade advances on account of these transaction. Even otherwise if it is accepted that balance of ₹ 70 lakhs paid by the company to the assessee is also part of these transaction, even then a sum of ₹ 23 lakhs is required to be explained by the assessee that they are forming part of the consideration of these sale agreement between the assessee and the competent Holdings private limited. Furthermore, the confusion has also arisen because assessee has submitted the copy of the memorandum of understanding dated 1/9/2008 between the assessee and the competent Holdings Ltd wherein in the last paragraph of page No. 1 it has been mentioned that the competent Holdings Ltd has entered into an agreement to sell dated 09/01/2008 with the 1st party to purchase entire basement floor, for a sum of ₹ 1.25 crores and advanced the sum of ₹ 98 lakhs to the 1st party. However, in absence of the Ledger account it cannot be verified that on that particular date i.e. on 1/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at assessee has credit of loan of ₹ 1.35 crores during the year, comprising of ₹ 98 lakhs as opening balance and ₹ 37 lakhs during the year. The assessee has also repaid ₹ 75 Lacs to the company. The Ld. assessing officer treated the sum of ₹ 37 lakhs as deemed dividend under section 2 (22) (e). The assessee aggrieved with the order of the Ld. assessing officer preferred an appeal before the Ld. CIT (A) who confirmed the above sum. Therefore, now assessee is in appeal before us. 11. The contention of the Ld. authorized representative remained the same that above transactions are commercial transactions in nature and therefore they are not covered as deemed dividend in the hands of the assessee. The Ld. departmental representative vehemently submitted that the order of the lower authorities have correctly interpreted the provisions of section 2 (22) (e). Further, the Ld. departmental representative relied upon the order of the Hon ble Supreme Court in 105 ITR 642 in case of Sh. PK Badiani VS CIT and decision of the Hon ble Delhi High Court in CIT versus Sunil Chopra 12 Taxmann.com 496. 12. The contention of the assessee is the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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