2014 (4) TMI 891

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....P). Ltd. He filed his Return of Income [ROI] for A.Y. 2003-04 in Form No. 2D on 30.5.2003 declaring total income of Rs. 1,20,320/-. Subsequently, a notice u/s 148 of the Income-tax Act, 1961 ['the Act', for short], was issued on 25.3.2010 after recording requisite reasons for reopening. The assessee complied with this notice and also filed objections against the reassessment proceedings. However, assessment was completed on 20.12.2010 u/s 143(3) r.w.s 148 of the Act at a total income of Rs. 63,74,845/-. The A.O. has made addition of Rs. 62,54,525/- u/s 2(22)(e) of the Act. The assessee is stated to be the key management personnel holding 2,50,100 shares valued at Rs. 25,01,000/- in the company. Thus, he is holding 50% share of M/s S....

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....y the company to the firm in which both the assessee has substantial interest would attract deeming provision of section 2(22)(e) of the Act. As per the assessee, there has been no advance by the company as has been alleged by the A.O. But this advance is in relation to business transactions entered into legally between the firm and the company. Therefore, business transactions cannot fall under the category of advance in the sense in which it has been envisaged in section 2(22)(e) of the Act. It is found from records that the firm and the company are indulging in ordinary course of business for last several years. We have found for a fact that the assessee has not received any loan either from the company or from the firm. At any point of ....

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....es were for supply of goods and failing to supply the agreed quality and quantity of guwar gum powder, it would return the money back without interest. Thus from the records, we have also concluded that the transactions between the company and firm are business transactions and amounts advanced by this company to the firm is only advance for business purpose and not as loan. In the balance sheet of the company, the amount has been shown as advance for business purposes. Likewise in the balance sheet of the firm, this amount has been shown under the head "unsecured loan". We are in agreement with the ld. A.R. that the nature of the transactions has to be decided on the basis of true nature of transactions and not as per nomenclature given in....

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....ed as deemed dividend. In this regard, the following decisions are relevant:          1. CIT Vs. Rajkumar 318 ITR 462         2. CIT Vs. Ambassador Travels P. Ltd. 318 ITR 376        3. CIT Vs Creative Dyeing & Printing P Ltd. 318 ITR 476        4. DCIT Vs. Timeless Fashions P. Ltd. 33 DTR 48 6. But, the ld. CIT(A), Bikaner, in assessee's own case while passing order u/s 201(1)/201(1A) for A.Ys. 2003-04 to 2009-10 passed by the DCIT[TDS], Jodhpur in the case of M/s Shree India Sino Gums (P) Ltd. has held that the said company having failed to deduct tax at source u/s 194 of the deemed dividend paid by t....