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The assessee claimed deduction of expenditure incurred for handling and disposal of spent solvents/scrap against unaccounted cash receipts from their sale. The ITAT held that while there is no direct evidence, the possibility of incurring such expenditure cannot be ruled out considering the nature of materials. It estimated 60% of receipts as reasonable expenditure. Regarding addition of deemed dividend u/s 2(22)(e) and consequent dividend distribution tax, the ITAT held that payments to associated concerns were trade advances in the ordinary course of business and not loans/advances attracting deemed dividend. The transactions were current adjustment account entries reflecting movement of funds both ways as per business requirements among group companies, not loans/advances to shareholders. Payments were utilized for recipient companies' business, not diverted to common substantial shareholder's benefit. Hence, the ITAT deleted the addition of deemed dividend and consequent levy of dividend distribution tax.
The assessee claimed deduction of expenditure incurred for handling and disposal of spent solvents/scrap against unaccounted cash receipts from their sale. The ITAT held that while there is no direct evidence, the possibility of incurring such expenditure cannot be ruled out considering the nature of materials. It estimated 60% of receipts as reasonable expenditure. Regarding addition of deemed dividend u/s 2(22)(e) and consequent dividend distribution tax, the ITAT held that payments to associated concerns were trade advances in the ordinary course of business and not loans/advances attracting deemed dividend. The transactions were current adjustment account entries reflecting movement of funds both ways as per business requirements among group companies, not loans/advances to shareholders. Payments were utilized for recipient companies' business, not diverted to common substantial shareholder's benefit. Hence, the ITAT deleted the addition of deemed dividend and consequent levy of dividend distribution tax.
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