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2016 (4) TMI 382 - AT - Income TaxDeemed dividend u/s 2(22) - whether the advances received by the assessee after 11.8.2008 were towards purchases of plant and machinery or could be treated as deemed dividend? - Held that:- During the year the assessee received amounts on various dates aggregating to ₹ 1,09,75,000/- and supplies could not be made as the purchase orders were changed and replaced with fresh proposal of 200 TPH feeding Mobile Crushing and Screening machineries. The fact is also corroborated that during the year under consideration as the sale and supplies came down drastically as stated elsewhere in this para. The assessee had duly provided interest on money borrowed and also treated the trade advance against the sale of machinery accordingly however the AO as well as the CIT(A) held the trading advances to be covered under the deeming provisions of section 2(22)(e) of the Act. In view of the foregoing facts, we are of the considered opinion that money received by the assessee which was engaged in the manufacturing and sale of machinery and more particularly when in the earlier and subsequent years the sale of machineries were made to the said concern by the assessee from whom the money towards the supply of machinery were taken could not fall within the meaning of section 2(22)(e) of the Act. In the catena of decisions relied on by the assessee the ratio laid down is that the advances taken against the supply are not covered by the provisions of section 2(22)(e) of the Act. We, therefore, hold that order of CIT(A) confirming the order of AO is wrong and cannot be sustained and accordingly delete the addition - Decided in favour of assessee.
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