2012 (6) TMI 908 - AT - Income Tax

Tribunal rules in favor of assessee, overturning addition under Income Tax Act

Rakesh M. Goyal Versus Income Tax Officer Ward-3 (4) Surat

The Tribunal allowed the assessee's appeal, overturning the addition made by the Assessing Officer under section 2(22)(e) of the Income Tax Act. The ... - Issues involved: Appeal against addition u/s.2(22)(e) of the Act for treating amount received in normal course of business against remuneration/business expenses as deemed dividend.Summary:1. The appeal was filed by the assessee against the order of the Learned CIT(Appeals)-II, Surat, challenging the addition u/s.2(22)(e) of the Act.2. The assessee received an amount of &8377; 3,33,550 from M/s. Foremost Finvest Pvt. Ltd. for advance to Director's remuneration and other expenses, which was later treated as a loan by the Assessing Officer.3. The first appellate authority upheld the addition, considering the transaction as deemed dividend u/s.2(22)(e) of the I.T. Act, despite the explanation provided by the assessee.4. The assessee contended that the amount received was against salary and trade advances, supported by relevant decisions such as CIT vs. Creative Dyg. & Printing (P) Ltd. and others.5. After considering the submissions from both sides, the Tribunal held in favor of the assessee, citing various court decisions to support that the advance received was not in the nature of a loan but a business transaction, hence not falling under the definition of deemed dividend u/s.2(22)(e) of the Act.6. Consequently, the Tribunal directed to delete the addition made by the Assessing Officer, and the appeal of the Assessee was allowed.