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TMI Blog2019 (7) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... piece of document which needs to be examined. Given that the said agreement has not been taken into consideration by the lower authorities, we are setting aside the matter to the file of the AO to examine the same afresh. In view of the same, various contentions raised by the Ld. AR are left open and the assessee is free to raise the same before the AO. In the result, the ground is allowed for statistical purposes. - ITA No. 270 & 271/ASR/2019 - - - Dated:- 22-7-2019 - Sh. Vikram Singh Yadav, Accountant Member And Sh. N.K. Choudhry, Judicial Member For the Appellant : Sh. Ashray Sarna (C.A.) For the Respondent : Sh. M. P Singh (CIT DR) ORDER PER: VIKRAM SINGH YADAV, A.M. These are two appeals filed by the assessee for the Assessment Years 2014-15 2015-16 against the consolidated order of ld. CIT(A)-5, Ludhiana dated 11.02.2019. Since the common issue is involved, both these appeals were heard together and are disposed off by this consolidated order. The respective grounds of appeal are as under: ITA No. 270/ASR/2018 (For Assessment Year 2014-15) 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acto Vegetarian Exports Pvt. Ltd. During the year under consideration, M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd. has given an interest free loan of ₹ 2,62,75,000/- on different dates to M/s Hazoor Sahib Milk Processing Pvt. Ltd wherein also, the assessee held a 50% shareholding. As per the Assessing Officer, since the assessee is a substantial shareholder in both the companies and given the fact the said interest free loan was given without any business purpose or business interest, the provisions of section 2(22)(e) are attracted. Given that the amount of accumulated profits as on 31.03.2014 are to the tune of ₹ 3,95,48,653/-, the whole of the amount of interest free loan of ₹ 2,62,75,000/- was brought to tax in the hands of the assessee as deemed dividend u/s 2(22)(e) of the Act. 5. On appeal, Ld. CIT(A) held that given the undisputed fact that the assessee was a substantial shareholder in both M/s Bhagwati Lacto Vegetarian Exports Pvt. Ltd. and M/s Hazoor Sahib Milk Processing Pvt. Ltd., the amount of loan will be deemed to be dividend taxable in the hands of the assessee to the extent of accumulated profits of M/s Bhagwati Lacto Vegetarian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Firozepur. It was submitted that as per the said agreement, M/s Bhagwati Lacto Vegetarian Pvt. Ltd., was appointed as sole selling agents for the sale of the milk and other products manufactured by it and the appointment was for a period of 7 years commencing from the date of the said agreement. As per the said agreement, M/s Bhagwati Lacto Vegetarian Pvt. Ltd., would canvass for and secure orders and push the sale of the milk products and other products manufactured by M/s Hazoor Sahib Milk Processing Pvt. Ltd. and M/s Bhagwati Lacto Vegetarian Pvt. Ltd. and in return, has agreed to finance the project of M/s Hazoor Sahib Milk Processing Pvt. Ltd and accordingly, ₹ 2,62,75,000/- was advanced to M/s Hazoor Sahib Milk Processing Pvt. Ltd. It was accordingly submitted that keeping in view the objects of the company, it has entered into agreement with M/s Hazoor Sahib Milk Processing Pvt. Ltd for diversifying and expanding its business and invested in the project of milk and related products of M/s Hazoor Sahib Milk Processing Pvt. Ltd. It was further submitted that later on, this project could not commence for the reason that there were disputes among the directors of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncern against the use of electricity generators belonging to the sister concern. The company utilized gas available to it from GAJL to generate electricity and supplied it to the sister concern at concessional rates. It was held that the scrutiny deposit made by the company to its sister concern was a business transaction arising in the normal course of business between two concerns and the transaction did not attract section 2(22)(e) of the Act. (CIT, Agra vs. Atul Engineering Udyog, Allahabad High Court, [NJRS] 2014-LL-0926-121, ITA No. 223 of 2011. 3. In view of the above it is , a settled position that trade advances, which are in the nature of commercial transactions would not fall within the ambit o the word advance in section 2(22)(e) of the Act. Accordingly, henceforth, appeals may not be filed on this ground by Officers of the Department and those already tiled, in Courts/ Tribunals may be withdrawn/not pressed upon. 7. The Ld. CIT DR is heard who has vehemently argued the matter and submitted that basis the facts on record, the assessee is a substantial shareholder in both the companies and given that the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing is substantial part of business of the company cannot be treated as deemed dividend. Similarly the CBDT Circular referred supra has also stated that trade advances which are in the nature commercial transactions would not fall within the ambit section 2(22)(e) of the Act. Therefore, we find that the agreement entered into between the two companies which is placed on record by virtue of which the funds have been lend is clearly a relevant piece of document which needs to be examined. Given that the said agreement has not been taken into consideration by the lower authorities, we are setting aside the matter to the file of the AO to examine the same afresh. In view of the same, various contentions raised by the Ld. AR are left open and the assessee is free to raise the same before the AO. In the result, the ground is allowed for statistical purposes. 9. In ITA No. 271/Asr/2019, undisputedly the facts and circumstances are exactly identical. Therefore, our findings and directions contained in ITA No. 270/Asr/2019 shall apply mutatis mutandis to this appeal as well. In the result, the appeal is allowed for statistical purposes. In the result, both th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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