TaxTMI 
TaxTMI 
2019 (3) TMI 1243
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....arely 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 ftii) The Learned CIT (A) relied on the decision in the case of CIT Vs Impact containers Pvt Ltd which is now superseded by the decision of the Hon'ble Supreme Court in Gopal and Sons (HUF) Vs CIT Kolkata XI having Civil Appeal No. 12274 of 2016, in view of which the provisions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 squarely attracted. (iv) The Ld.CIT(A)'s order is contrary in law and on facts and deserves to be set aside and accordingly the appellant prays that the order of the CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored." 2. The brief facts of the case are that the assessee is a partnership firm which is engaged in the business of export of pharmaceutical machines and accessories, filed its return of income for AY 2012-13 on 29-12-2012 declaring total income at Rs. 20,54,390. The case was selected for scrutiny and notice u/s 143(2) and 142(1) of the Act were issued. In response to notices, the authorised representative of the assessee appeared from time to time and filed various details, as called for. During the course of assessment proceedings, the AO noticed that the assessee had....
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....f purchase transactions as the assessee is having regular business transactions with the assessee, therefore, normal commercial transactions cannot be considered as loans and advances which comes within the ambit of provisions of section 2(22)(e) of the I.T. Act, 1961. 4. The Ld.CIT(A), after considering relevant submissions of the assessee and also by relying upon various judicial precedents, including the decision of Hon'ble Supreme Court in the case of CIT vs NSN Jewellers Pvt Ltd (2016) 285 CTR 18 (SC) held that the 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 foun....
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....nt is given as advance to be ascertained or as such per so without any further obligation behind receiving such advances, may be 'ted is "deemed dividend", but it it is otherwise, the amount given cannot be branded as 'advances " within the meaning Of deemed dividend under section 2(22) (e) . Just as per clause (ii) of section 2(22)(e), dividend is not to include advance or loan made by a company in the ordinary course of business where the lending of money is a substantial part of the business of the company advance in the ordinary course of carrying on business cannot be considered as "dividend" within the meaning of section 2(22)(e). By granting advance of the business purpose of the company is served and which is not the sum, which it otherwise would have distributed as dividend, cannot be brought within the deeming provision of treating such "Advance" as deemed dividend." 6.4 to 6.7xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 6.8 After considering the totality of facts, rival submissions, the applicable law and on the basis of discussion mentioned above, I find force in the argument of the appellant and draw strength from the decision given by the Hon'ble Mu....
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....ividend u/s 2(22)(e) of the Act. In this case, the assessee has filed enough evidences to prove that the transactions between the parties are 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 this case, the Ld.CIT(A) has recorded categorical finding that the transactions between the assessee and M/s Arbes Tools Pvt Ltd has arisen out of normal business transactions, for which the assessee has filed comparative purchases for last three years, as per which, the assessee is regularly dealing with th....