TaxTMI 
TaxTMI 
2021 (7) TMI 146
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.... of the business, which cannot be termed as 'loan or advance' within the meaning of section 2(22)(e) of the Act for appropriation of Rs. 5.25 crores by the assessee front the money received by his proprietory concern in ordinary course of business does not arise", without appreciating that neither the assessee submitted work order given by M/s. Artee Roadways Pvt. Ltd., nor furnished the break-up of cost of raw materials, direct & indirect cost/expenses, profit element in respect of sale proceeds received of Rs. 12.50 crores, nor furnished the details called for by the A.O. during the assessment proceedings and that a sum of Rs. 5.25 crores was not in the nature of trading advance, or had it been trading advance, the assessee should have utilised it for trading/business activities and not for personal consideration as has been resorted to by the assessee & that on perusal of Balance Sheet of C.R. Transport System, it is noticed that the said sum of Rs. 5.25 crores withdrawn by the assessee was not reflected as drawing from Capital A/c., since there was neither opening balance of capital and net profit as per P fk L A/c. transferred to capital A/c. to the extent of Rs. 5.25 ....
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....ellate order , without appreciating that the said judicial decisions relied upon by the C.I.T. (A) are distinguishable from the facts of the present case in as much in those cases, the assessee did not appropriate for personal use out of trade advance/loan received for business consideration. 3. The only issue raised by the Revenue is that the learned CIT (A) erred in deleting the addition made by the AO for an amount of Rs.5.25 crores on account of deemed dividend under the provisions of section 2(22)(e) of the Act. 4. The facts in brief are that the assessee in the present case is an individual and is a proprietor of 2 concerns as well as the chairman/managing director in a company namely Aartee Roadways private Ltd in which he is holding shares to the extent of 94.15%. The details of the business of the assessee stand as under: i. Proprietor of M/s CRS logistics and Mega carriers which carries on the business of road transportation. ii. Proprietor of M/s CRS transport system which carries on the business of fabrication work for trucks and containers. iii. Chairman/managing director of Aartee Roadways private Ltd in which the assessee holds shares to the extent of 94.15%.....
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....ion of section 2(22)(e) of the Act. The fact of receiving the money by the assessee as trading advance was also acknowledged by the AO in his order. Furthermore, the amount borrowed by M/s Aartee Roadways private Ltd from the bank was directly disbursed to the assessee for providing refrigerated truck bodies. Accordingly the amount received by the assessee represents the trading receives and not the loan and advances as alleged by the AO. 6.1 Once the assessee has received the money from M/s Aartee Roadways private Ltd in the course of the business, the same is available at its disposal and therefore it cannot be alleged that such receipts is subject to deemed dividend in the event the assessee utilizes such funds for his personal purposes. 7. The learned CIT (A) after considering the submission of the assessee deleted the addition made by the AO by observing as under: 5.8 It is clear from the material available on the records that the sum advanced by M/s Artee Roadways Pvt. Ltd. to M/s CRS Transport System was a trade advance. Even the Assessing Officer has noted this point in para 3.1 of the assessment order. M/s Artee Roadways Pvt. Ltd. had procured a loan of Rs. 11.67 crore....
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....ction 2(22)(e)(ii). 5.10 Hon'ble Karnataka High Court in the case of Bagmane Constructions (P.) Ltd. vs CIT [2015] 57 taxmann.com 120 (Karnataka), has held that if any sum is paid to a shareholder as a trade advance, as a consideration for goods received or for purchase of a capita! asset which indirectly would benefit company advancing loan, such advance would not fall within ambit of provisions of section 2(22}(e) of the Act. 5.11 Hon'bie Punjab and Haryana High Court in the case of CIT vs Amrik Singh [2015] 56 taxmann.com 460 (Punjab & Haryana) has held that advances received by assessee shareholder under an agreement to do job work for company advancing money, could not be treated as deemed dividend u/s 2(22)(e) of the Act. 5.12 In view of the above discussion, it is clear that the sum advanced by M/s Artee Roadways Pvt. Ltd. to M/s CRS Transport System was a trade advance made for purchase of capital goods i.e. refrigerated body for trucks owned by M/s Artee Roadways Pvt. Ltd. It was not a one off transaction since M/s CRS Transport System was in the business of fabricating bodies for the trucks owned by M/s Artee Roadways Pvt. Ltd. for quite some time. It was an....
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....t constitute the loans and advances as provided under section 2(22)(e) of the Act for holding such loans and advances as deemed dividend. 10.1 The Hon'ble Delhi High Court in the case of CIT v. Raj Kumar [2009] 181 Taxman 155/318 ITR 462 held that "the word 'advance', which appears in company of word 'loan' in section 2(22)(e), can only mean such advance which carries with it an obligation of repayment and that trade advance, which is in nature of money transacted to give effect to a commercial transaction, cannot be treated as 'deemed dividend' falling within ambit of provisions of section 2(22)(e) of the Act. 10.2 The Allahabad High Court in the case of CIT v. Atul Engineering Udyog [2014] 51 taxmann.com 569/228 Taxman 295 held that security deposit made by affiliates in normal course of business won't constitute loan/advance under section 2(22)(e) of the Act. 10.3 The Bombay High Court in the case of CIT v. Nagindas M. Kapadia [1989] 42 Taxman 128 (Bom.) held that advances made by a company to the assessee towards purchases to be made by the said company from the assessee could not be treated as "deemed dividends. 10.4 The CBDT vide Circular No. 1....