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2017 (11) TMI 506 - AT - Income TaxDeemed dividend u/s 2(22)(e) - whether there is no loan received by the Director but it is a current running account of a Director with company in normal course of business - Held that:- Assessee was having an opening credit balance of ₹ 4.28 crores in the books of M/s. Monachem Additives Pvt Ltd. There are regular transactions for movement of funds to and from between the two parties. The company is regularly providing for interest on the unsecured loans taken from the assessee. As discussed above, that the company was in urgent need of finance/credit facilities and on the insistence of the HDFC Bank, the credit facility was transferred from individual account to the company account. From perusal of all these transactions of movements of fund, we can clearly envisage that these were regular business transactions which cannot be categorized as loan and advance transactions with the intention to provide facility to the shareholder. We find that the judgment of Hon’ble jurisdictional High Court in the case of Schutz Dishman Bio-tech Pvt (2016 (1) TMI 84 - GUJARAT HIGH COURT) is squarely applicable on these facts and we are therefore of the view that the alleged transactions between the sole proprietary concern of assessee M/s. Monachem –Corporation and M/s. Monachem Additives Pvt Ltd are in the form of current accommodation adjustment entries and movement of funds are both ways on need basis and therefore, cannot be treated as loan and advance as contemplated in Section 2(22)(e) of the Act - Decided in favour of assessee. Default u/s 201(1)/201(1A) - addition on account of deemed dividend under Section 2(22)(e) - Held that:- As the business transactions of the assessee cannot be categorized as loan and advance transactions with the intention to provide facility to the shareholder and, therefore, cannot be treated as loan and advance as contemplated in Section 2(22)(e) of the Act and accordingly the addition has been deleted. In view of the matter, the question of demand under Section 201(1)/201(1A) of the Act does not arise; therefore, the same is cancelled - Decided in favour of assessee.
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