TMI Blog2008 (9) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... l intention of the company was to purchase the premises and there was no other hidden purpose. It also cannot be the case of revenue that returning of the amount was afterthought as the amount was returned by the assessee within a short span of a week. There is no material on record to suggest that the transaction of the company with the assessee was in any way arranged to give any benefit to the assessee. Therefore, applying the ratio of decision in the case of Lakra Bros. (supra) the amount could not be considered to be deemed dividend in the hands of the assessee. The provisions of section 2(22)( e ) were not applicable. Hence, the addition made on account of applicability of section 2(22)( e ) is deleted and the appeal filed by the assessee is allowed. - I.P. BANSAL AND P.M. JAGTAP, JJ. K. Sampath and Kapil Dev for the Appellant. Sushil Kumar for the Respondent. ORDER I.P. Bansal, Judicial Member. - This is an appeal filed by the assessee. It is directed against the order of CIT(A) dated 26-2-2007. Grounds of appeal read as under : "1.The ld. CIT(A s) erred in misinterpreting the provisions of section 2(22)( e ) of the Income-tax Act, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22)( e ), therefore, the conditions laid down in this section are fulfilled and the sum is liable to be added to the income of the assessee as deemed dividend. The Assessing Officer required the assessee to explain as to why the said sum should not be treated as deemed dividend in the hands of the assessee. It was explained that the sum was received by the assessee in the routine course of business from the company by way of an imprest of Rs. 30 lakhs to enable the assessee to make the payment of a proposed office complex to be purchased in Okhla Industrial Area, Phase-II, New Delhi and such amount was advanced on 27-6-2003 and as the deal could not be materialized the same was returned on 4-7-2003. It was submitted that the said amount was an "imprest money" for a specific business purpose of the company without intending any advantage or benefit providing to the assessee. Thus, it was submitted that the imprest amount does not take character of either of loan or advance within the meaning of section 2(22)( e ) of the Act. However, the Assessing Officer did not accept such submission of the assessee. So as it relates to return of the money after a short period, the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) observed that though the amount which is paid to assessee is not a loan but it is undoubtedly an advance and referring to the concept of advance which is explained in the commentary of Chaturvedi and Pithisharia in their books in 5th Edition at page 202 included payment of cash or the transfer of goods for which accounting must be rendered by the recipient at some latter date. Thus, the ld. CIT(A) has held that the amount received by the assessee was an "advance" within the meaning of section 2(22)( e ) of the Act and therefore, it is assessable as deemed dividend in the hands of the assessee. So as it relates to the contention of the assessee that such loan was an advance made in the ordinary course of business, therefore, will not be covered by the mischief of section 2(22)( e ), it is observed by the CIT(A) that it is applicable only in a case where the substantial part of the business of the assessee-company is lending of money. It is observed by CIT(A) that no substantial part of the business of the company relates to lending of the money therefore, the said argument was not available with the assessee. He also rejected the contention of assessee that the transaction should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... main road in Okhla Industrial Area Phase II having a market value of around 3 crores. In order to effectively deal with such proposals it was proposed by the assessee that it will be appropriate if 10 per cent of the proposed market value is kept as imprest. Thus, it was proposed by the assessee to the company for giving him Rs. 30 lakhs as an imprest to enable him to pay the advance in case the proposal is materialized and after considering all these proposals and having deliberated on such proposals a sum of Rs. 30 lakhs was given to assessee for negotiation and dealing with and to give findings and take all necessary steps for purchase of the proposed office complex in Okhla Industrial Area Phase II, New Delhi. 6. The ld. AR further invited our attention to the extract of minutes of the meeting of Board of Directors of Alliance Merchandising Company Pvt. Ltd. held at their Registered Office on 4-7-2003 at 11 hours a copy of which is placed at page 9. According to the said minutes the assessee placed before the board on account of these proposals and it was informed that the conditions enforced by the proposed sellers and the location was not suitable to the working of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Hon ble Delhi High Court has confirmed such findings of the Tribunal with the following observations : "5. We are of the view that the order passed by the Tribunal does not suffer from any error of law. It is quite clear that the assessee was a travel agency and the above two concerns that it had dealings with, that is, M/s. Holiday Resort (P.) Ltd. and M/s. Ambassador Tours (India) (P.) Ltd. were also in the tourism business. The assessee was involved in the booking of resorts for the customers of these companies and entered into normal business transactions as a part of its day-to-day business activities. The financial transactions cannot in any circumstances be treated as loans or advances received by the assessee from these two concerns." 8. Ld. AR further relied on the decision of Chandigarh Bench in the case of Dy. CIT v. Lakra Bros. [2007] 162 Taxman 170 (Mag.) wherein it is observed that important words in the section are "loan or advance" and for the individual benefit of such shareholder. It is observed that loan is something different from debt. For a loan there must have a lender, borrower as well as contract/agreement between the parties for the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esenting a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten pet cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits;" 11. So far as it relates to other conditions, there is no dispute and the only basis on which the invocation of section 2(22) is contested is that the amount given to the assessee was neither loan nor advance and it was not for the individual benefit of the shareholder. It has been the contention of the assessee that a sum of Rs. 30 lakhs was given to him for the purpose of making advance with respect to certain land dealings which were proposed to be entered into by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the case of revenue that returning of the amount was afterthought as the amount was returned by the assessee within a short span of a week. There is no material on record to suggest that the transaction of the company with the assessee was in any way arranged to give any benefit to the assessee. The amount was paid for a very short period for specific purpose and there is documentary evidence on record to substantiate the explanation of the assessee that the amount was given for the business purposes of the company i.e., to purchase a suitable business premises and assessee could validly act on behalf of the company as the said act of assessee would be in accordance with the authority held by him through resolution of the Board of Directors of the company. In our opinion, applying the ratio of decision of Chandigarh Bench in the case of Lakra Bros. ( supra ) the amount of Rs. 30 lakhs could not be considered to be deemed dividend in the hands of the assessee. The provisions of section 2(22)( e ) were not applicable. 12. So as it relates to the decision in the case of Ms. P. Sarada ( supra ) on which reliance has been placed by the revenue, it is observed that in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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