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TMI Blog2024 (8) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement between the directors and the company - the company has not taken the 1st and 2nd floor on lease of the building which was constructed by the directors of the company. Thus, the excess amount received by the directors from the company roughly 30 lakhs of rupees which was shown as rental deposits again represents the commercial transaction between the assessee directors and the company. The directors including the assessee in the present case were acting in dual capacity as director and in personal capacity. As such there was no reason for the directors which prevented them to enter into the formal agreement at the time of giving the advances and therefore the money receipts, proposed agreement, minutes of the Board of Directors c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The necessary facts are that the assessee in the present case is an individual and declared her income under the head salary, house property and other sources . The assessee is a director and shareholder in the company viz., DTDC Ltd. The assessee along with other 5 Directors has received a loan and advance amounting to Rs. 39,60,000/-, which was shown by the company as an advance for the purchase of property. The share of the assessee in the account of such loans and advances stands at Rs. 6,60,000/- only. As such loan and advance was given to the directors dated 28/03/1995, whereas the agreement was entered between the directors and the company dated 21/11/2995, wherein, it was agreed that the company shall purchase ground floor and shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lement in the disputed transaction, the provision of deemed dividend specified under section 2(22)(e) of the Act cannot be attracted. 6. On the other hand, the ld. DR vehemently supported the order of the authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee is a director in a company namely DTDC Ltd. The assessee along with other 5 directors has received money of ₹ 39,60,000 from the company dated 28th of March 1995. The company has shown such advance to the directors in its books as advance for the purchase of lands. As per the assessee, such advances were representing the commercial transaction between the assessee and the direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered dated 21-11-1995. As such during the intervening period from 28-3-1995 and 20-11-1995, the amount in question was a simple advance without any business/ commercial connection. 7.3 Furthermore, the transaction between the assessee along with the directors and the company was not at the arm length because it was not a normal business transaction. It is for the reason that the company has advanced money 31.60% of the total cost of the project which is significant enough. 7.4 The AO also observed that the documents i.e. receipt of money, proposed agreement, actual agreement, minutes of the Board of Directors cannot be the factor to hold that the transaction in question was commercial in nature in the given fact and circumstances. 7.5 The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes of the Board of Directors cannot be ignored while deciding the issue whether there was a commercial element between the transaction discussed above. Thus, we hold that there was a commercial transaction between the directors and the company. 7.7 The Hon ble Karnataka High Court in the case of Smt. Jamuna Vernekar v. Dy. CIT [IT Appeal No. 43 OF 2013, dated 10 th February, 2021] held that the Tribunal was not justified in law in holding that the amount received in lieu of Security Deposit and Lease Rentals were loans or advances within the meaning of section 2(22)(e) of the Act. The Hon ble High Court observed that: Loan or advance given to shareholders or to a concern would not normally qualify as dividend and only in case, where such l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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