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2018 (10) TMI 286 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - commercial transaction - interpretation of Section 2(22) (e) of the Act, in so for as it concerns the term "loan" and "advance" used therein - Held that:- Trading advances which were in the nature of commercial transactions would not come within the preview of Section of 2(22) (e) of the Act and such view had attained finality. As examine the transactions between M/s.ISML and assessee, in so far as application of Section2(22) ( e) of the Act is concerned there is no dispute that a sum of D20 Crores was received by the assessee from M/s.ISML by virtue of its agreement entered by the assessee with M/s.ISML on 10.12.2011. It is also not disputed that assessee had made available its entire capacity for manufacturing rough castings on captive basis to M/s.ISML on a regular basis. Assessee had also undertaken not to utilize its manufacturing capacity for any other party. It is obvious in our opinion, that the sum to the extent of D20 Crores received by the assessee based on the above agreement, through which it gave away all its manufacturing capacity, was nothing but a commercial transaction. Transactions between assessee and ISML had started much earlier to 20.12.2011 and we have already pointed a large number of instances when the balance in the name of the assessee was negative. In our opinion, ld. Assessing Officer fell in error in taking an isolated view and considering only a part of the transactions ignoring the transactions prior to 23.01.2012, which together clearly indicated that account was in the nature of a running trade account. Coming to the addition of D2,69,89,513/- sustained by the ld. Commissioner of Income Tax (Appeals), there is a clear finding by the ld. Commissioner of Income Tax (Appeals) that M/s.ISML had paid such sum towards statutory duties, TDS and wages of the assessee. Nevertheless, in our opinion, such payments would not take the transaction out of preview of a commercial transaction. Assessee had given its entire capacity to M/s.ISML and if M/s.ISML paid part of the statutory duties, TDS and wages of the assessee directly, in our opinion, such payments cannot be considered as loans or advances coming within the ambit of Section 2(22) (e) of the Act. We cannot say that assessee received any benefit since there was a quid-pro-quo in the nature of surrendering its entire production capacity to M/s. ISML. Thus in our opinion sums received by the assessee from M/s. ISML would not come within the preview of advances/ loans mentioned in Section 2(22)(e)- Decided in favour of assessee.
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