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TMI Blog2021 (1) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... e CBDT circular No. 19/2017 (supra) and the ratio of case law discussed therein. - Decided against revenue. - I.T.A. No. 266/Kol/2020 - - - Dated:- 5-1-2021 - J. Sudhakar Reddy, Member (A) And A.T. Varkey, Member (J) For the Appellant : Imokaba Jamir, CIT, DR For the Respondents : S.S. Gupta, AR ORDER A.T. Varkey, Member (J) This appeal preferred by the revenue is against the order of Ld. CIT(A)-13, Kolkata dated 19.12.2019 for A Y 2015-16. 2. The main grievance of the revenue is against the action of the Ld. CIT(A) in allowing the grounds of appeal raised by the assessee against the addition of ₹ 10.10 cr. made by the AO u/s. 2(22)(e) of the Income-tax Act, 1961 (hereinafter referred to as the Act ). The main plea which has been taken into consideration by the Ld. CIT(A) is that the advance of ₹ 10.10 cr. which was received (by M/s. Suman Jeweller) from the sister concern (M/s. Rohit Jeweller Pvt. Ltd.) was for business purpose in which assessee had substantial interest was in the nature of normal trade advance which has been later adjusted against the actual sale of gold ornaments partly and balance repaid subsequently, which facts goes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntial 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) (c) 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 vs. Creative Dyeing Printing Pvt. Ltd., Delhi High Court). ii. Advance was made by a company to its shareholder to install plant and machinery at the shareholder's premises to enable him to do job work for the company so that the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, M/s. Suman jeweler shifted to a different place in Burrabazar whereas M/s. Rohit Jeweller Pvt. Ltd. continued to operate from Camac Street. Therefore, the stock of the two concerns which earlier were maintained at the same place was split between the two premises. The Ld. AR referred to the ledger copies placed in the paper book from where he drew our attention to the fact that M/s. Suman Jeweller not only received money from M/s. Rohit Jeweller Pvt. Ltd. but also paid or repaid funds to M/s. Rohit Jeweller Pvt. Ltd. throughout the year under consideration as normal business transactions. According to Ld. AR, the money received from the sister concern M/s. Rohit Jeweller Pvt. Ltd. was paid by M/s. Suman Jeweller to sundry creditors for goods purchased from M/s. Emareld Jewel Industry India Ltd. (hereinafter referred to as M/s. EJIIL), M/s. Mallick Jewellers etc. against purchases made from them. It was pointed out by the Ld. AR that out of the realization from the sundry debtors, M/s. Suman Jeweller made repayment to M/s. Rohit Jewellers Pvt. Ltd. It was brought to our notice that M/s. Suman Jeweller specializes in selling of casting light weight gold ornaments and was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sell the said stock in the domestic market later on low profit margin so as to use the said realization for repayment of trade advances from M/s. Rohit Jeweller Pvt. Ltd. The Ld. AR drew our attention to the details of purchases made by M/s. Rohit Jeweller Pvt. Ltd. from M/s. Suman Jeweller and corresponding sales by M/s. Rohit Jeweller Pvt. Ltd. which have been depicted in two tables which were placed before us. Thus, according to Ld. AR, the purchases of casting light weight gold ornaments in excess by from M/s. Suman Jeweller from M/s. EJIIL were against the anticipated export orders from M/s. Rohit Jeweller Pvt. Ltd. and that on failure of M/s. Rohit Jeweller Pvt. Ltd. to place export orders, the advances taken from M/s. Rohit Jeweller Pvt. Ltd. were refunded by M/s. Suman Jeweller to M/s. Rohit Jeweller Pvt. Ltd. through sales in domestic markets. According to the Ld. AR, within 01-02 years both M/s. Rohit Jeweller pvt. Ltd. and M/s. Suman Jeweller disposed off the huge stock and the trade advance from M/s. Rohit Jeweller Pvt. Ltd. to M/s. Suman Jeweller was brought down to nil. Thus, according to Ld. AR, the transaction between the sister concerns were purely in the nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om M/s. Rohit Jeweller Pvt. Ltd. is not in the nature of normal business transaction and the exemption given in CBDT Circular No. 19/2017 dated 12.06.2017 is not applicable to the assessee's case and the AO rightly added ₹ 10.10 cr. u/s. 2(22)(e) of the Act which according to Ld. CIT DR is correct and therefore, the order of the Ld. CIT(A) in deleting the addition is erroneous and needs to be reversed. 8. We have heard rival submissions on facts and law on the issue and gone through the records. We note that the main plea of the assessee is that advance taken by M/s. Suman Jeweller from M/s. Rohit Jeweller Pvt. Ltd. does not fall in the mischief stated in deeming provision u/s. 2(2)(e) of the Act because it falls in the exemption given in the CBDT Circular No. 19/2017 dated 12.06.2017 (supra). The assessee's claim was that the advance received by the M/s. Suman Jeweller was purely a trade advance in the nature of commercial transaction between the two sister concerns which was due to business expediency and, therefore, would not fall within the ambit of the provision of section 2(22)(e) of the Act. This claim of the assessee was upheld by the Ld. CIT(A) taking note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ornaments worth ₹ 1.06 cr. on 22.12.2015 to M/s. Rohit Jeweller Pvt. Ltd. which is evident from page 63 of the paper book and thus, we note that the goods worth ₹ 7.06 cr. was sold AY 2016-17 by M/s. Suman Jeweller to M/s. Rohit Jeweller Pvt. Ltd. which goes on to show that transaction between the sister concern were commercial in nature and advance was trade advance. The Ld. AR drew our attention to fact that there was subsequent sale of gold ornaments in the AY 2017-18 and they have squared up the trade advance received from M/s. Rohit Jeweller Pvt. Ltd. The Ld. AR has taken the pain to demonstrate before us that these are regular sale and purchase of goods between both the sister concerns and this amount of ₹ 10.10 cr. given by M/s. Rohit Jeweller Pvt. Ltd. to M/s. Suman Jeweller Pvt. Ltd. was in the nature of trade advance and cannot be termed as advance as envisaged u/s. 2(22)(e) of the Act and, therefore, relying on the ratio-decidendi decision of the Hon'ble Delhi High Court in CIT Vs. Creative Dyeing Printing 318 ITR 476 (Del.) [the revenue appeal before the Hon'ble Supreme Court was dismissed] and the ratio of the decision of Hon'ble Punjab ..... X X X X Extracts X X X X X X X X Extracts X X X X
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