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2021 (7) TMI 146 - AT - Income TaxDeemed dividend u/s 2(22)(e) - AO concluded that the assessee by adopting the colourable device has received a sum from Aartee Roadways private Ltd which is nothing but the deemed dividend - HELD THAT:- It is the settled position of law that the trading advance, received by the assessee from a company in which he holds the substantial interest, does not constitute the loans and advances as provided under section 2(22)(e) of the Act for holding such loans and advances as deemed dividend. The Hon’ble Delhi High Court in the case of CIT v. Raj Kumar [2009 (5) TMI 17 - DELHI HIGH COURT] held that "the word 'advance', which appears in company of word 'loan' in section 2(22)(e), can only mean such advance which carries with it an obligation of repayment and that trade advance, which is in nature of money transacted to give effect to a commercial transaction, cannot be treated as 'deemed dividend' falling within ambit of provisions of section 2(22)(e). Once it has been established that the amount received by the assessee represents the trading receipt i.e. in the course of the business, the usage of the same whether for commercial or personal purposes cannot change the character such receipt. As such the trading receipt is available at the disposal of the assessee and the revenue cannot direct to him for the usage of such trading receipts in a particular manner. In the given case, the assessee was to supply 150 refrigerated truck bodies and against such supply the assessee inter-alia received a sum which was directly disbursed by the bank on behalf of M/s Aartee Roadways private Ltd. There may be several reasons for transferring the sum to the personal saving account of the assessee such as the fund was not immediately required for use in the business or there was sufficient capital of the assessee in his business which has been withdrawn or for any other reason. But such withdrawal cannot be a basis to draw an inference that such trading receipts represents the loans and advances in the nature of deemed dividend as provided under section 2(22)(e) - There was no colourable device adopted by the assessee in the given facts and circumstances as alleged by the AO by holding that the transfer of a sum represents the deemed dividend in the hands of the assessee. Hence we do not find any infirmity in the order of the learned CIT (A). Thus the ground of appeal of the Revenue is hereby dismissed.
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