TaxTMI 
TaxTMI 
TaxTMI 
2019 (3) TMI 1243
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....l matrix as clearly brought out by the Assessing Officer in his assessment order. (ii) The Learned CIT (A) has erred on facts and in law in not appreciating that since the loan was received by the assessee from concerns, wherein the partners in the assessee firm were shareholders having more than 2O% share - holding in the lender concern, the provisions of Sec 2(22)fe) of the Act were squarely attracted. ftii) The Learned CIT (A) relied on the decision in the case of CIT Vs Impact containers Pvt Ltd which is now superseded by the decision of the Hon'ble Supreme Court in Gopal and Sons (HUF) Vs CIT Kolkata XI having Civil Appeal No. 12274 of 2016, in view of which the provisions of sec 2(22)(ej of the Income-tax Act, 1961 were square....
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....tions as the assessee is having regular business transactions with the company for purchase of materials, therefore, the normal business transactions cannot be considered within the provisions of section 2(22)(e) of the Act. The AO, after considering relevant submissions of the assessee and also by following certain judicial precedents, held that there is no merit in the arguments of the assessee that this is a business transaction on account of purchases as the assessee has failed to prove how loans and advances classified in the balance-sheet in the name of the assessee is related to purchase transactions. The AO further observed that the business exigencies of the group companies have no bearing on the amount received from the company wh....
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....e amount advanced for a business transaction would not fall within the definition of deemed dividend as provided u/s 2(22)(e) of the Act. The Ld.CIT(A) further observed that if assessee is not a registered shareholder of lending company, provisions of section 2(22)(e) of the Act did not apply. For this purpose, he relied upon the decision of Hon'ble Bombay High Court in the case of CIT vs Impact Continents Pvt Ltd 367 ITR 666(Bom). The relevant observations of the Ld.CIT(a) are extracted below:- "6.2 I have considered the submissions of appellant and observation of the A.O. in the assessment order. During the course of assessment proceedings, it is found that the appellant firm is not a share holder of Arbes Tools Pvt.Ltd. The shares i....
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.... As two shareholders of SIPL had a beneficial ownership of shares ofassesse. Asessing Officer held that payment by way of loan or advance was a dividend under section2(22)(e). The High Court held that since recipient of loan, namely, asessee, was not a shareholder of SIPL, provisions of section 2(22)(e) would not apply. The Hon'ble Bombay High Court in the case of CIT vs. NagindasM.Kapadia 177 ITR (BOM) is held that business transactions are outside the purview of section 2(22)(e) of I.T.Act. IN the course of carrying on business transaction between a company and a stockholder, the company may be required to give advance in mutual interest. There is no legal bar in having such transaction. What is be ascertained is what is the purpose....
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....39;ble Bombay High Court in the case of CIT vs. Nagindas N.Kapadia 177 ITR 393 is held that business transaction are outside the purview of section 2(22)(e). Further, the Jurisdictional Hon'ble Bombay High Court has applied the principle of consistency on similar facts in Gopal Purohit's case (supra). It is held that principle of consistency has to be applied where facts are identical. On identical facts, there is no such addition u/s.2(22)(e) of the I.T.Act were made neither in past nor in the subsequent year." 5. The Ld.DR submitted that the Ld.CIT(A) was erred in deleting addition made by the AO towards deemed dividend u/s 2(22)(e) of the Act, without appreciating the factual and legal matrix clearly brought out by the AO. The L....
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....re business transaction arising out of purchase / sales, therefore, the ratio laid down by the Hon'ble Supreme Court has no application. 7. We have heard both the parties and perused the material available on record. The provisions of section 2(22)(e) deals with a case where any amount received by an assessee from a company, where he holds beneficial interest in the lending company, then the amount received from such company to the extent of reserves and surplus is taxable as deemed dividend in the case of recipient shareholder. In order to fix an amount within the ambit of provisions of section 2(22)(e), the revenue has to prove that the said loans and advances are really in the nature of loans, but not normal commercial transactions. In ....