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2019 (3) TMI 1243 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - business exigency - Norman business transactions or otherwise - assessee firm is holding more than 20% share in the lender company through two of its partners - case selected for scrutiny and notice u/s 143(2) and 142(1) - HELD THAT:- In this case, CIT(A) has recorded categorical finding that the transactions between the assessee and M/s Arbes Tools Pvt Ltd has arisen out of normal business transactions, for which the assessee has filed comparative purchases for last three years, as per which, the assessee is regularly dealing with the company for purchase of raw materials. Once a particular transaction is not in the nature of loans and advances, then the provisions of section 2(22)(e) could not be applied. Therefore, to that extent, we are in agreement with the findings of Ld.CIT(A). Insofar as the finding of CIT(A) with regard to the beneficial shareholder and registered shareholder and further, only an amount received by a shareholder from a company where he is holding beneficial interest is taxable as deemed dividend, is devoid of merit in view of the decision of Gopal And Sons, HUF vs CIT [2017 (1) TMI 331 - SUPREME COURT] wherein held that even if HUF is not a registered shareholder in lending company, advances / loans received by HUF is taxable as deemed dividend u/s 2(22)(e) if karta shareholder has substantial interest in HUF. There is no dispute with regard to this legal proposition rendered by the Hon’ble Supreme Court. To that extent, the findings of facts recorded by the CIT(A) are incorrect. Fact remains that the assessee has succeeded in his attempt on the issue of business exigency, where the assessee has filed complete details to prove that the transactions between the assessee and the lending company is arising out of normal commercial transactions for purchase of goods. Therefore, we are of the considered view that the AO was erred in treating loans received from lending company as deemed dividend u/s 2(22)(e) - Decided against revenue.
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