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TMI Blog2022 (8) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... e impugned advance to the assessee, it is not a fit case to invoke the provisions of section 2(22)(e) of the Act. The words loans or advances occurring in the provision can be applied to loans or advances simplicitor and not to those transactions carried out in the course of trade/business. By giving advance, if the business purpose of the company is served, such advance cannot be brought within the provision of deemed dividend under section 2(22)(e) of the Act. Trade advance given as a consideration for purchase of a capital asset (i.e. property) as in the case before us which indirectly would benefit the company giving advance, such advance would not fall within the ambit of provisions of section 2(22)(e) of the Act. CBDT circular No. 19/2017 dated 12.06.2017 squarely applies to the case of the assessee. We do not find any substance in the appeal of the Revenue and uphold the order of the Ld. CIT(A). - Decided in favour of assessee. - ITA No. 705/Del/2019 - - - Dated:- 29-8-2022 - Shri N.K. Billaiya, Accountant Member And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Ashwani Kumar, CA, Shri Rahul Chourasia, CA For the Department : Ms. Aashna Paul, CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for purchase of property . Therefore, it falls under the business/commercial transactions between M/s. AMP and the assessee. It was also submitted that the assessee had taken the advance from M/s. AMP in the regular course of business and therefore the transaction does not constitute deemed dividend within the meaning of section 2(22)(e) of the Act. In support, the assesee relied on decision of Hon ble Delhi High Court in CIT vs. M/s. Creative Dyeing Printing Pvt. Ltd. 2009 (9) TMI 43 (Del) and decision of Hon ble P H High Court; Alld. High Court and CBDT Circular No. 19/2017 dated 12.06.2017. 4. The explanation of the assessee was not acceptable to the Ld. AO. He held that the receipt of advance of Rs. 1.50 crore by the assessee from M/s. AMP is deemed dividend under section 2(22)(e) of the Act and added the same to the income of the assessee by observing, inter alia that the contention of the assessee that the purpose of advancing money to the assessee as per records of M/s. AMP is for purchase of property is not tenable; that M/s. AMP had given the advance during the normal course of its business does not deserve merit; that advance given by M/s. AMP to the assessee is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Tribunal. 8. The Ld. CIT-DR submitted that as per the assessment order the pre-requisites of section 2(22)(e) have been met in the case of the assessee. It is pointed out from page 4 of the order of the Ld. AO that the ledger account of the assessee in the books of M/s. AMP is incomplete whereas complete ledger account for the period from 1.4.2014 to 31.03.2015 has been submitted before the Ld. CIT(A) which appears at page 19 of the appellate order. The Ld. CIT-DR further submitted that there is no evidence on record to prove that provisions of deemed dividend are not attracted in the case. All the documents brought on record by the assessee are self serving and internal documents. Therefore cannot be relied upon. The Ld. CIT-DR further submitted that no bifurcation of the amount paid back was brought before Ld. AO/CIT(A). Reference was made to the decision of the Delhi Tribunal in Ashwani Kapoor vs. ITO in ITA No. 808/Del/2013 dated 9.11.17. The Ld. CIT-DR also submitted that as per CBDT circular commercial transactions will not come within the purview of deemed dividend but in assessee s case it is not a commercial transaction as the assessee is not in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the entire financial year 2014-15. In our considered opinion, neither the MOU nor the ledger entries in the books of the company M/s. AMP can be said to be self serving instrument/documents when the Ld. AO himself accepted the transaction as per MOU and the nature of transaction in the case of M/s. AMP for AY 2015-16 assessed by the same Ld. AO. 10.1 The assessee brought on record evidence to prove that the deal of purchase and sale of the property between the parties did not materialize. The Cancellation Agreement executed on 02.03.2015 on stamp paper purchased on 20.02.2015 clearly states that the parties have mutually agreed to cancel the MOU and the assessee seller who had received a sum of Rs. 1.5 crore from the purchaser M/s. AMP undertook to refund the said entire amount on or before 31.03.2015. The Ld. CIT(A) has recorded a finding of fact that the advances received by the assessee on 07.10.2014 and 28.10.2014 totalling to Rs. 1.50 crore were returned on 30.03.2015 by payment of Rs. 3,56,66,965/- and that the assessee had made excess payment to the company M/s. AMP thereby resulting in a credit balance as on 31.03.2015 amounting to Rs. 2,96,18,362/-. This is corroborate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Delhi High Court has hold in CIT vs. Raj Kumar (2009) 318 ITR 462 (Del) that trade advances cannot be treated as deemed dividend. 10.4 In such a fact scenario as set out above, we are of the view that even though the assessee is substantial shareholder in the company M/s. AMP which had made the impugned advance to the assessee, it is not a fit case to invoke the provisions of section 2(22)(e) of the Act. The words loans or advances occurring in the provision can be applied to loans or advances simplicitor and not to those transactions carried out in the course of trade/business. By giving advance, if the business purpose of the company is served, such advance cannot be brought within the provision of deemed dividend under section 2(22)(e) of the Act. Trade advance given as a consideration for purchase of a capital asset (i.e. property) as in the case before us which indirectly would benefit the company giving advance, such advance would not fall within the ambit of provisions of section 2(22)(e) of the Act. The CBDT circular No. 19/2017 dated 12.06.2017 squarely applies to the case of the assessee. We do not find any substance in the appeal of the Revenue and uphold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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