TaxTMI 
TaxTMI 
2016 (8) TMI 1420
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....ro private Ltd. (SAPL), that it had received advances from the said companies. The AO was of the opinion that the provisions of section 2 (22) (e) of the Act were applicable in the case under consideration to the extent of committed profits retained by those companies. In reply to the show cause notice issued by the AO, the assessee replied that both the partners did not have substantial interest in the firm, that SRMAFPL had received unsecured loans from both the partners amounting to Rs. 64.26 lakhs and Rs. 5.40 lakhs respectively, that during the year at any point of time loans and advances given by the company to the assessee did not exceed loan given by the directors to the company, that any some due to assessee could not be considered as deemed dividend, that the amount of Rs. 35.30 lakhs, advanced by the company to the firm was less than advance received of Rs. 64.26 lakhs by the company from its directors and who were also partners of the assessee-firm. With regard to the advance received from SAPL it was contended that both the partners of the assessee firm were also shareholders of the company, that during the year under consideration the assessee had sale and purchase tr....
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....nsactions in question were business transactions. He relied upon the cases of CIT v. Raj Kumar [2009] 318 ITR 462/181 Taxman 155 of the Hon'ble Delhi High Court. 5. We have heard the rival submissions and taken note of the material available on record. The undisputed fact, not contravened by the AO, is that the assessee firm is not the share holder of the companies i.e. it is also a fact that in case of one of the companies the transactions were in the course of regular business-it was neither loan nor advance. As the assessee was not registered shareholder of the companies, so, the provisions of section 2(22)(e)were not applicable to it. The FAA has held that section had to be applied in the cases of the individual partners. 5.1 Here, we would like to refer to the case of CIT v. Subrata Roy [2015] 375 ITR 207 of Hon'ble Delhi High Court. In that matter the Hon'ble Court has held as under: "Section 2(22)(e) of the Income-tax Act, 1961, enacts that payment by a company, not being a company in which the public are substantially interested, of any sum (whether representing a part of the assets of the company or otherwise) made after May 31, 1987, but by way ....
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....er or partner and in which he had substantial interest. The third category is any payment by any such company for individual benefit of any such shareholders to the extent of which the company in either case possesses accumulated profits. The latter part of this definition states what is not included in "dividend" and the Legislature has carefully specified that any advance or loan made to a shareholder or concern in which shareholder is a member or partner and in which he has substantial interest, by the company in the ordinary course of his business where the lending of money is a substantial part of the business of the company or any dividend paid by a company which is set off by the company against the whole of any part of sum previously paid by it and treated as a dividend within the meaning of sub-clause (e) to the extent to which it is set off, is not dividend within the meaning of this definition. A High Court must not brush aside the binding precedent or the judgment of a co-ordinate Bench simply because some of the arguments were either not canvassed or if canvassed were not considered. The binding precedent can be ignored only if it is per incuriam. The....
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....ayments, as the payments were made to non-resident entities. In its reply, the assessee admitted that no tax was deducted at source, that the non-resident agents were operating from their respective countries and procured export orders for the assessee firm outside India, that the commission was also paid outside India, that no tax was required to be deducted u/s.195 of the Act. However, the AO held that commission payable to agents abroad was deemed to arise in the group in India, that provisions of section 40 were applicable to the payments in question. 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA. After considering the available material, he held that the AO had disallowed the payment made to foreign agents only on the ground that no tax was deducted at source as per the provisions of section 195 of the Act, that there was no other ground for disallowance of such payments, that the foreign agents procured export orders, that the entire services were rendered outside India, that the commission agents did not have any Permanent Establishment in India, that the amounts paid by it to the agents for rendering services did not accrue in India....