Deemed Dividend u/s 2(22)(e) - Loan was given to the partnership firm in which the shareholders were having substantial interest through a conduit, i.e., M/s. Power Service Corporation - As the money was returned on the very same day to the company, thus, the amount is deemed dividend u/s 2(22)(e)
HELD THAT:- When there is no net outflow, there is no intention to give the money as a loan or an advance. If the intention was to give a loan or an advance, the question of the money being returned to assessee, on the same day does not arise.
The co-ordinate Bench of the Tribunal in case of G.M.J. THAMPY VERSUS ASSTT. COMMISSIONER OF INCOME-TAX [2010 (8) TMI 1017 - ITAT MUMBAI] held that " Relying on the findings of COMMISSIONER OF INCOME TAX VERSUS SHRI RAJ KUMAR [2009 (5) TMI 17 - DELHI HIGH COURT], we are of the opinion that the word 'advance' which appears in the company of the word 'loan' could only mean such advance which carries with it an obligation of repayment. Trade advance which are in the nature of money transacted to give effect to commercial transaction would not, in our view, fall within the ambit of the provisions of section 2(22)(e)"
Hence, in view of the finding of the Revenue that the transaction is not a genuine advance for purchase of goods, we have to take the conclusion to the logical end and hold that, in such a view of the matter, it is also not a loan or as advance, so as to attract section 2(22)(e)
Looking at the issue from any angle, if it is said that this is a trade advance given to M/s. Power Service Corporation, which had ultimately supplied machinery to the assessee, then, such an advance cannot be termed as a loan so as to bring it within the ambit of section 2(22)(e) - Therefore, we delete the addition in the hands of the assessee.
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