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2022 (10) TMI 532 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - monies advanced to the assessee are not in the natural course of the business and in no way, the assessee is not in the business of money lending as substantial part of his the business - accumulative profit up to the date of loan on 28/03/2013 was Rs. 4052528/- and on pro rata basis the balance of security premium was of Rs. 72.00 lacs - HELD THAT:- No one off loan that was given to the assessee nor have any funds of the company been divested; what exists is a current account which keeps fluctuating as per requirement of the funds. The fluctuating balances correlates to requirement that arise in the ordinary course of business and hence cannot be treated as deemed dividend under section 2(22)(e). We find that the case of the assessee throughout the proceedings is that the appellant was having two accounts with the said company; one is a loan account wherein appellant has received loan to the extent of Rs. 1,58,20,000/- whereas another account is a Trade account of appellant’s proprietary concern, in which the appellant has credit balance of Rs. 5,36,20,634/-. The details of both the accounts were furnished to the Range head during the proceedings under section 144A and to the CIT(A) at the time of first appellate stage. We find that Hon'ble Punjab & High Court in the case of CIT Vs Suraj Devi Dada [2014 (5) TMI 625 - PUNJAB & HARYANA HIGH COURT] held that where assessee had running current account with a company and it had been advancing money to it for business purposes, and had not gained any benefit from funds of company, and there was credit period only for 55 days, said credit in account could not be treated as deemed dividend under Section 2(22)(e) in the hands of assessee. Hon'ble Andhra Pradesh High Court in India Fruits [2014 (10) TMI 749 - ANDHRA PRADESH HIGH COURT] held where subsidiary company was advancing money to assessee company for purchase of raw material and to make payments to a company to meet their business liabilities, said amount could not be considered as deemed dividend income of assessee company within purview of Section 2(22)(e). Tribunal in Iswar Chand Jindal [2015 (8) TMI 119 - ITAT DELHI] held that nomenclature cannot be a basis to conclude that business transactions between two entities constitute deemed dividend under Section 2(22)(e), therefore, current account transactions between two group companies which were business/commercial transactions could not be regarded as deemed dividend under Section 2(22)(e). Thus in view of the aforesaid factual and legal discussion, we find that merits in the submissions of the Ld. AR of the assessee no funds of the company is divested; there exists a current account which keeps fluctuating as per requirement of the funds that arise in the ordinary course of business and hence cannot be treated as deemed dividend under section 2(22)(e). DR for the revenue that the Ld. CIT(A) reduced the accumulated profit of Rs. 40,52,528/- on the date of loan as on 28.03.3013 to Rs. 13,52,095/- on whims and fences and without basis is absolutely baseless as this appeal is filed by the assessee, if the Ld. DR for the revenue has any grievances against the finding, he should have file cross objection or cross appeal against the finding in the impugned order. Thus, the assessee succeeded on primary submissions of the assessee. hence, ground No. 1& 2 of the appeal is allowed.
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