2018 (6) TMI 57

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..../s.2(22)(e) of the Income Tax Act on the ground that the appellant had taken loan from his closely held company M/s Khatore Earthmovers Pvt. Ltd. 2. For that M/s Khatore Earthmovers Pvt. Ltd. had opening balance of Rs. 83,71,112/- as on 01.04.2011 with the appellant and the total reserve of the company was less than the amount of advance given. The fresh loan of Rs. 25,000/- and Rs. 3,68,000/- by account payee cheque was for the purposes of business. M/s Khatore Earthmovers Pvt. Ltd. had earned profit of Rs. 15,376/- for financial year 2011-12, as such, advance of Rs. 28,68,000/- cannot be considered as deemed dividend. Ld. CIT(A) was not justified in confirming the addition made u/s.2(22)(e). 3. For that the total advance....

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....he Act. The AO disallowed 1% of the expenditure on repairs & maintenance under the head operating expenses thereby making an addition of Rs. 10,464/- and assessed total income at Rs. 38,90,040/- and passed order u/s.143(3) of the Act, dated 12.03.2015. 3. Aggrieved by the assessment order, the assessee has filed an appeal with the CIT(A). In the appellate proceedings the assessee argued the grounds and reiterated the submissions made before the AO. The CIT(A) after considering the submissions of assessee and the findings of AO, partly allowed the appeal of the assessee. 4. Aggrieved by the order of CIT(A), the assessee has filed an appeal before the Tribunal. 5. Ld. AR submitted that the CIT(A) has erred in confirming the addition ....

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.... being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. 2, The Board has observed that some Courts ....

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....arising in the normal course of business between two concerns and the transaction did not attract section 2(22) (e) of the Act. ( CIT, Agra vs Atul Engineering Udyog, Allahabad High Court) 3. In view of the above it is, a settled position that trade advances, which are in the nature of commercial transactions would not fall within the ambit of the word 'advance' in section 2{22)(e) of the Act. Accordingly, henceforth, appeals may not be filed on this ground by Officers of the Department and those already filed, in Courts/Tribunals may be withdrawn/not pressed upon. 4. The above may be brought to the notice of all concerned." 8. On perusal of the above CBDT Circular and considering the facts and circumstances of the case....