TaxTMI 
TaxTMI 
2015 (12) TMI 763
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....rief facts of the case are that the respondent assessee is an individual deriving income from salary from the company, namely, M/s A.K.G. Industries Ltd. The return of income for the assessment year 2009-10 was filed on 11.01.2005 declaring total income of Rs. 88,89,010/-. Against the said return of income, the assessment was completed under Section 143(3) of the Income-tax Act, 1961 (for short "the Act") vide order dated 30.12.2011, at a total income of Rs. 1,42,98,853/-. During the course of assessment proceedings, the Assessing Officer noticed that the assessee owns a sum of Rs. 53,29,843/- to M/s A.K.J. Industries Pvt. Ltd., which is a substantial shareholders and director. Therefore, the Assessing Officer was of the opinion that the said amount was in the nature of deemed dividend and therefore brought to tax in the hands of the assessee under the provisions of Section 2(22)(e) of the Act. Being aggrieved by this addition, the assessee preferred an appeal before the learned CIT(A)-IV, New Delhi, who vide order dated 27th February, 2013, deleted the addition vide para 5.3, which reads as under: "5.3 I have carefully considered the submission of the appellant and perused the ....
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....CIT Vs. Creative Dyeing and Printing Pvt. Ltd., 318 ITR 476 (Del.) whereby the Delhi High Court has held that the amount received by the assessee as an advance against future supply was a trade advance and not a deemed dividend under Section 2(22)(e) of the Income Tax Act. Accordingly, I hold that the amount received by the appellant is advance against future salaries was in the normal course of business and not a deemed dividend under Section 2(22)(e) of the Income Tax Act. Being aggrieved by the above order, the Revenue is before us with the present appeal. 3. Learned Sr. DR argued that once the money is received from the company in which the assessee had a substantial interest, the transaction is treated as a deemed dividend under the provisions of Section 2(22)(c) of the Act. Therefore, the CIT(A) was not justified in deleting the addition. 4. On the other hand, the learned counsel for the respondent assessee submitted that the respondent assessee was drawing a salary @ Rs. 7,50,000/-per month from M/s A.K.J. Industries Ltd. This salary is credited to current account maintained in the name of assessee in the books of account of the said Company. He submitted that there....
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.... Pvt. Ltd., ITA No. 1296, 1297/Del/2013, Dt. 02.02.2012 The ratio laid down in the above cases is followed by a coordinate bench of ITAT, Delhi in the case of M/s Percy Peshotan Batlivala Vs. ITO (supra), wherein the Bench held as follows: "We have heard the rival parties and have gone through the material placed on record. From the facts and circumstances of the case, we have observed that the debit balance in the account of assessee at a given point of time is not in the nature of loan or advance. But, it is a running account wherein the assessee had taken the amount as adjustable against future salaries which were being credited to his account monthly. Therefore, following various judicial pronouncements as relied upon by Ld. AR, we are of the view that advance was not in the nature of loan and hence cannot be treated as deemed dividend u/s 2(22)(e) of the Act. In view of the above, the appeal filed by the assessee is allowed." 6. A coordinate bench of ITAT, Delhi in the case of Ishwar Chand Jindal Vs. ACIT, ITA No. 4967/Del/2012, dt, 29th May, 2015; 2015 (8) TMI 119 - ITAT, Delhi, referring the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Arvi....
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.... corners of provisions of Section 2(22)(e) of the Act. Having held otherwise, the said judgments of the Supreme Court, in our view, will have no applicability to the facts of the instant case. 12. In view of the above, the question of law as framed by us is answered in favour of the assessee and against the Revenue. We hold that trade advance does not fall within the ambit of the provisions of Section 2(22)(e) of the Act. Resultantly, the appeal is dismissed. There shall be, however, no order as to costs." 12. Also in the case of CIT vs. Creative Dyeing and Printing (P) Ltd. (supra) it was held as under: "The counsel for the appellant has very strenuously urged that neither the Tribunal nor the judgment of this Court in Rajkumar's case(supra) deals with that part of the definition of deemed dividend under Section 2(22)(e) which states that deemed dividend does not include an advance or loan made to a shareholder by a company in the ordinary course of its business where the lending of money is a substantial part of the business of the company [Section 2(22)(e)(ii)] i.e. there is no deemed dividend only if the lending of moneys is by a company which is engaged in the bus....
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.... avoiding the payment of taxes by having these companies pay or distribute, what would legitimately be dividend in the hands of the shareholders, money in the form of an advance or loan. 10.5 If this purpose is kept in mind then, in our view, the word 'advance' has to be read in conjunction with the word 'loan'. Usually attributes of a loan are that it involves positive act of lending coupled with acceptance by the other side of the money as loan: it generally carries an interest and there is an obligation of repayment. On the other hand, in its widest meaning the term 'advance' may or may not include lending. The word 'advance' if not found in the company of or in conjunction with a word 'loan' may or may not include the obligation of repayment. If it does then it would be a loan. Thus, arises the conundrum as to what meaning one would attribute to the term 'advance'. The rule of construction to our minds which answers this conundrum is noscitur a sociis. The said rule has been explained both by the Privy Council in the of Angus Robertson v. George Day (1879) 5 AC 63 by observing "it is a legitimate rule of construction to constru....