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2013 (4) TMI 779 - AT - Income TaxWhether the advances given to the assessee has to be considered as a deemed dividend u/s 2(22)(e) - Held that:- advances to the assessee is for the import of specialized machinery from out of India and for meeting other incidental requirements required for doing job work - it was mutually agreed that assessee shall do the job work of M/s Nexo Industries exclusively and at lower rates than the market rate and the amount of job work will be adjusted against the advances - the advances were out of Business compulsion and business expediency/ necessity and not for the personal use/benefit of the assessee and therefore these do not fall under the purview of section 2(22) (e) - Hon'ble Calcutta High Court rendered in the case of Pradeep Kumar Malhotra V CIT reported [338 ITR 538] - The job work is being done by the assessee exclusively for M/s Nexo Industries (P) Ltd. ( sistercompany) of which the assessee is a Director - the assessee even charged 10% less than the market rate for job work, which resulted into a mutual benefit of both the parties - The assessee was not allowed to adjust advances against the job work done by it as per the terms of the agreement. As a result, the sister-concern took over the entire business of the assessee - there is no personal benefit to the assessee from this arrangement but the assessee has suffered therefrom - Hence the security deposit cannot be construed as a loan - Reliance is placed on the decision of Delhi High Court in (2000) [161 CTR (Del) 432 : (2000) 244 ITR 358] - Decided in favor of assessee
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