TaxTMI 
TaxTMI 
2008 (9) TMI 618
X X X X Extracts X X X X
X X X X Extracts X X X X
.... no benefit was derived on the imprest made by M/s. Alliance Merchandising Co. Pvt. Ltd., to the appellant, which, in fact, was for the purchase of an office complex for the company, remained unappreciated by the ld. CIT(A's). 3.That the addition has purely been confirmed by placing technical interpretation on the aforesaid provisions of section 2(22)(e), thereby holding that the amount advanced was a loan and therefore, taxable as deemed dividend in hands of the instant appellant. 4.That the ld. CIT(A's) on the facts and circumstances of the case was unjustified in holding that the imprest of Rs. 30 lakhs made by the company to the appellant was an advance within the meaning of section 2(22)(e) of the Income-tax Act and same amounted to deemed dividend, to be charged as income, in the hands of recipient. 5.That in any case, the ld. CIT(A's) has failed to appreciate that the prerequisites of section 2(22)(e) stood wholly unsatisfied to designate the genuine financial dealing for enabling the purchase of office for the employer company, which was remitted back immediately, when the transaction fell through." 2. The assessee is a Director in M/s. Alliance Merchandising Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of money is duly supported by the resolutions passed by the Board of Directors of the Company. The amount received by the assessee cannot be termed either as a "loan" or "advance" as envisaged in section 2(22)(e ) of the Act. It was submitted that there is no material on record to arrive at a conclusion that imprest was provided to the assessee by the company for the benefit of the assessee. The imprest was provided for making the investment in acquisition of an office complex for and on behalf of the company. It was submitted that the term "loan" as envisaged in section 2(22)(e) means lending, delivery by one party to and receipt by another party the sum of money upon agreement, express or implied to repay it. It was submitted that mind and intention of two parties, the lender and the borrower must be ad idem. It was submitted that the imprest, manifestly and evidently was made by the company to enable the assessee to acquire the property for and on behalf of the company and thus, the said payment could not be treated as deemed dividend. It was submitted that ascertainment of the nature of payment is essential. Considering these submissions of the assessee ld. CIT(A) has observed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The assessee is aggrieved hence in appeal. 5. After narrating the facts, it was vehemently pleaded by ld. AR that provisions of section 2(22)(e) are not applicable to sum of Rs. 30 lakhs given by the company to the assessee on the ground of business expediency and as the transaction was a transaction in the normal course of business. He contended that the assessee was having sufficient balance in his bank account when such amount was received by him from the company. It was contended that on the date when said sum of Rs. 30 lakhs was paid to the assessee the amount of balance outstanding in the bank account of the assessee was a sum of Rs. 5,185,965.65. It was pointed out that the said balance was never less than Rs. 31 lakhs up to the date of repayment of the said amount by the asssessee and when the amount was repaid, the remaining balance in the bank account of the assessee was Rs. 37,18,626.98. He, in this regard referred to the copy of bank account of the assessee submitted at pages 6 and 7 of the paper book. He further referred to the extract of minutes of the meeting of Board of Directors of Alliance Mercantile Company Pvt. Ltd. held at their registered office on 26-6-20....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ations the Board expressed that the company should always be on the look out for a proper office complex within the proposed area or in good location as Okhla. 7. Referring to the facts of the present case, it was pleaded by ld. AR that the provisions of section 2(22)(e) are not applicable to the transactions made in the ordinary course of business and this proposition of law has been accepted by jurisdictional High Court in the case of CIT v. Ambassador Travels (P.) Ltd. [2008] 173 Taxman 407 (Delhi). In that case the assessee was engaged in the business of travel agency and had entered into certain business transactions with M/s. Holiday Resort Pvt. Ltd. and M/s. Ambassador Tours India Pvt. Ltd. As a result of those business transactions, there were some financial transactions also. However, the Assessing Officer concluded that because of shareholding pattern, these financial transactions would fall in the category of "deemed dividend" defined under section 2(22)(e) of the Act and such view was upheld by CIT(A). In further appeal, the Tribunal accepted the submissions of the assessee on the ground that there was nothing on record to show that the amounts considered by the Asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of section 2(22)(e) are not applicable to the transactions entered into in the regular course of business. It was vehemently argued that there should be benefit arising to the shareholder and that is the starting point for invocation of section 2(22)(e) and in case the benefit is absent, then section 2(22) is not applicable. Referring to the facts it was pleaded that bank account of the assessee was always having balance more than Rs. 30 lakhs. Thus, no personal benefit was drawn by the shareholder and, therefore, section 2(22)(e) could not be applied. Thus, the ld. AR pleaded that provisions of section 2(22)(e) have wrongly been invoked in the present case and, therefore, addition should be deleted. 9. On the other hand, the ld. DR, referring to the language of the provisions of section 2(22)(e) pleaded that the language of section is clear and unambiguous. He contended that so-called "benefit" is not envisaged in the said section. A payment was received by the assessee from the company and all the conditions laid down in section 2(22)(e) existed, therefore, the Assessing Officer was right in invoking section 2(22)(e) and the CIT(A) has rightly upheld the same. Referring to th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n afterthought story. No material has been brought on record to suggest that what was explained by the assessee was incorrect. The sum has been treated as deemed dividend simply for the reason that it was given to the assessee. The Co-ordinate Bench has considered this issue in the case of Lakra Bros. (supra) wherein it has been observed that the definition of section 2(22)(e) cannot be stretched to include even legitimate transactions carried out in the ordinary course of business where the intention is neither to give a loan or advance or to confer some individual benefit on the shareholders. It is observed that the important words in the section are "loan or advance" and for individual benefit of such shareholder. The loan is something different from the debt. For a loan, there must be a lender, borrower as well as a contract/agreement between the parties for the return of the loan amount. Keeping in view the said decision of co-ordinate Bench and the facts of the present case, it is observed that the transaction was in the ordinary course of the business of the company, there was no intention of the company to give a loan or advance to the assessee for his individual benefit. I....