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TMI Blog2023 (6) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be termed as deemed dividend within the meaning of s. 2(22)(e) of the Act and therefore its addition cannot be made. Thus no addition u/s 2(22)(e) of the Act of the Act could be made in the present case. Decided in favour of assessee. - ITA No.2204/Del/2018 - - - Dated:- 16-6-2023 - Sh. Anil Chaturvedi, Accountant Member And Sh. Chandra Mohan Garg, Judicial Member For the Assessee : Srhi M. P. Rastogi, Adv. For the Revenue : Shri Kirti Sankratyayan, Sr. D.R. ORDER PER ANIL CHATURVEDI, AM : This appeal filed by the assessee is directed against the order dated 16.01.2018 passed by the Commissioner of Income Tax (Appeals) 27, New Delhi for Assessment Year 2013-14. 2. Brief facts of the case as culled o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying on of business. 5. Before us, at the outset, Learned AR submitted that though the assessee has raised various grounds but the sole controversy is with respect to the addition of Rs.8,65,000/- u/s 2(22)(e) of the Act. 6. During the course of assessment proceedings and on perusing the details of loans and advances received during the year, AO noticed that assessee had received advances from various parties including Rs.8,65,000/- from Saga Developers Pvt. Ltd. AO noted that Mr. Dinesh Panday had common and substantial shareholding of 35% in assessee company as well as 35% in Saga Developers Pvt. Ltd. He also noted that the accumulated profits of Saga Developers Pvt. Ltd. was Rs.70,13,581/-. AO, therefore, asked the assessee to ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he advances had not advanced the amount out of its accumulated profits because it was not physically available with them for advancing and the amounts that was advanced by Saga Developers P. Ltd to the assessee was out of the funds raised from 3rd parties. He further submitted that the transactions between the assessee and Saga Developers P. Ltd. was during the course of business and for the purpose of business and therefore, it could not be added u/s 2(22)(e) of the Act. In support of his aforesaid contention, he placed reliance on the decisions in the case of CIT vs. Creative Dye Printing Works reported in 318 ITR 476 (Del), Bombay Oil Industry vs. DCIT reported in 28 SOT 383 (Mumbai), Ravindra R. Fotedar vs. ACIT reported in 167 ITD 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing transactions in the nature of current account, no addition could be made u/s 2(22)(e) of the Act. He therefore submitted that addition made by AO and upheld by CIT(A) be deleted. 9. Learned DR on the other hand supported the order of lower authorities. 10. We have heard the rival submissions and perused the material on record. The issue in the present grounds is with respect to the addition made u/s 2(22)(e) of the Act. Sub-clause (e) of Section 2(22) of the Act, seeks to bring within the tax net accumulated profits which are distributed by closely held companies to its shareholders in the form of loans. The purpose being that persons who manage such closely held companies should not arrange their affairs in a manner that they ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er by way of an advance or loan or it may be any payment which the Company may make on behalf of or for the individual benefit of any shareholder or also to any concern in which such shareholder is a member or a partner and in which he is substantially interested. (iv) And lastly, the limiting factor being that these payments must be, to the extent of accumulated profits, possessed by such a Company. It was held by the H ble High Court that the word 'advance' which appears in the Company of the word 'loan' could only mean such advance which carries with it an obligation of repayment and that the trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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