TaxTMI 
TaxTMI 
2021 (1) TMI 827
X X X X Extracts X X X X
X X X X Extracts X X X X
....al sale of gold ornaments partly and balance repaid subsequently, which facts goes on to prove the business transaction and happened due to business expediency and were transaction which were carried in the normal course of business and hence, do not attract the mischief of the provision as provided in section 2(22)(e) of the Act and that the assessee's case is covered by the CBDT Circular No. 19/2017 dated 12.06.2017 and consequently Section 2(22)(e) of the Act is not attracted and therefore the AO's action of making addition was deleted. Against this action of the Ld. CIT(A) giving relief to the assessee, the Revenue has preferred this appeal before us. 3. The admitted facts in this case is that the assessee Shri Ramesh Chandra Kataria is a partner of M/s. Suman Jeweller (82.27% shareholding) and was also a director of M/s. Rohit Jeweller Pvt. Ltd. (50% shareholding). The AO noted that M/s. Suman Jeweller had received an advance of Rs. 10.10 cr. from M/s. Rohit Jeweller Pvt. Ltd. in the relevant assessment year (AY 2015-16). The AO noted that M/s. Rohit Jeweller Pvt. Ltd. had accumulated the profits of Rs. 12,62,27,687/- as per the company's Balance Sheet as on 31.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y at the shareholder's premises to enable him to do job work for the company so that the company could fulfill an export order. It was held that as the assessee proved business expediency, the advance was not covered by section 2(22)(e) of the Act. (CIT Vs. Amrik Singh, P&H High Court). iii. A floating security deposit was given by a company to its sister concern against the use of electricity generators belonging to the sister concern. The company utilised gas available to it from GAIL to generate electricity and supplied it to the sister concern at concessional rates, it was held that the security deposit made by the company to its sister concern was a business transaction 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 Depart....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ought to our notice that M/s. Suman Jeweller specializes in selling of casting light weight gold ornaments and was also one of the dealers of M/s. EJIIL (market leader in manufacturing of casting light weight jewellery, Coimbatore, Tamilnadu). The Ld. AR drew our attention to the fact that M/s. Suman Jeweller made purchases from M/s. EJIIL of about Rs. 26.7 cr. and the amount was paid by M/s. Suman Jeweller to M/s. EJIIL to the tune of Rs. 26.7 cr. 5. Further according to the Ld. AR, M/s. Rohit Jeweller wanted to explore during the relevant assessment year the overseas markets using stocks of casting light weight gold jewellery obtained from M/s. Suman Jeweller (which was specialized in casting light weight) which in turn was purchased from M/s. EJIIL. According to the Ld. AR, in terms of the arrangement between M/s. Suman Jeweller and M/s. Rohit Jeweller Pvt. Ltd. there was no requirement as such to maintain stock in itself but was to have access to the casting light weight gold jewellery obtained from M/s. EJIIL which is with M/s. Suman Jeweller. In order to part finance such stock to be maintained by M/s. Suman Jeweller, M/s. Rohit Jeweller Pvt. Ltd. was required to pay short....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l. Thus, according to Ld. AR, the transaction between the sister concerns were purely in the nature of trade advance with purchase and sale of gold ornaments and it cannot be termed as loan/advance as envisaged in section 2(22)(e) of the Act. It was also brought to our notice that in the subsequent assessment year i.e. AY 2016-17 M/s. Rohit Jeweller Pvt. Ltd. has purchased gold ornaments worth Rs. 7.35 cr. from M/s. Suman Jewellers and accounts between the two was finally settled in the FY 2016-17. Thus, according to ld. AR, the trade advances between the sister concerns were akin to that of running current account were both debit and credit of money took place intermittently/regularly between the two concerns. Therefore, according to the Ld. AR, the Ld. CIT(A) correctly appreciated the aforesaid facts by taking note that the aforesaid facts of the assessee's case falls squarely in the settled exemption given in CBDT Circular No. 19/2017 dated 12.06.2017, which action of Ld. CIT(A) according to him does not require any interference. 7. Per-contra, the Ld. CIT, DR assailing the action of the Ld. CIT(A) contended that the assessee being a partner of M/s. Suman Jeweller having ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act. This claim of the assessee was upheld by the Ld. CIT(A) taking note that the amount of Rs. 10.10 cr. which was given by M/s. Rohit Jeweller Pvt. Ltd. to the M/s. Suman Jeweller was a trade advance which in the facts discussed supra are in the nature of commercial transaction and would not fall within the ambit of the word "advance" as envisaged in section 2(22)(e) of the Act. We have to remind ourselves that while exercising our appellate jurisdiction it is settled position of law that we have to examine whether the impugned order of the Ld. CIT(A) is erroneous or not. If the Ld. CIT(A)'s view is not factually or legally not erroneous, then we cannot substitute our views with that of the Ld. CIT(A). So we have to examine whether there is any error in facts or law on the issue under consideration. For that we need to find whether the advance of Rs. 10.10 cr. was trade advance which was in the nature of a commercial transaction so that it does not fall in the ambit of advance as envisaged in section 2(22)(e) of the Act. We have taken note of the facts considered by the Ld. CIT(A) in the impugned order which we have discussed from Para 4 to 6 (supra) which are not repeated to....