TMI Blog2015 (12) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... alary, it was submitted that it was an advance salary received from the company. Therefore, in our considered opinion, these transactions one in ordinary course of business of the said company, cannot be treated as deemed dividend. - Decided in favour of assessee. - ITA No. 2917/Del/2013 - - - Dated:- 23-9-2015 - SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER For the Appellant: Sh. K.K. Jaiswal, DR For the Respondent: Sh. Ved Jain, Adv. ORDER PER INTURI RAMA RAO, A.M.: This is an appeal filed by the Revenue directed against the order of CIT(A)-IV, New Delhi, dated 27.02.2013, passed for the assessment year 2009- 10. The assessee has raised the following grounds of appeal: i. Whether the learned CIT(A) has erred on facts and in law in deleting the addition of ₹ 53,29,843/- on account of deemed dividend u/s 2(22)(e) ignoring the fact that the advances had not been made in the ordinary course of business expediency and the assessee had been regularly repaying the amount received from the company. ii. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed it to be a deemed dividend. This account of the appellant with the company cannot be considered to be a loan or advance hit by the provisions of Section 2(22)(e) of the Act. It is also an admitted fact that this loan or advance has been adjusted subsequently against the salary due to the appellant. Thus, it is not a case where the loan or advance was taken and it has been later on returned by the shareholder. 5.3.1 As regards the contention of the Assessing Officer that the account has been named as 'A.K. Garg Loan Account', it is a settled position that the account in substance has to be seen and not the name. On going through the account it is quite clear that this account is a salary account of the appellant. The issue before me is an appreciation offacts and on going through the account and the facts, as analyzed hereinabove, I am of the considered view that this account is in the normal course of the business activity between the employer and the employee and accordingly the provisions of Section 2(22)(e) of the Act shall not be applicable in respect of the debit balance arising in the account of the employee. My above view also gets support from the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted in the assessment order, it is clear that there were continuous transactions of receipt and payment of money to the assessee by the said company. There are some debit balance and after some time it was converted into credit balance and finally at the end of accounting year, there was a debit balance of ₹ 53,28,853/-. Out of this, there were entry made on 31st March, 2009 towards TDS payable of ₹ 29,51,460/-. Thus, there are mutual transactions between the said company and the assessee throughout the year. Therefore, in our considered opinion, this account is in the nature of a current account, and moreover, the salary payable is also credited in this account and wherever there are payments in excess of the salary, it was submitted that it was an advance salary received from the company. Therefore, in our considered opinion, these transactions one in ordinary course of business of the said company, cannot be treated as deemed dividend. The reliance is placed on the following judgments: i. CIT Vs. Raj Kumar, 318 ITR 462 (Del.) ii. CIT Vs. Ambassador Travels (P.) Ltd., 318 ITR 376 (Del.) iii. CIT Vs. Creative Dyeing and Printing (P.) Ltd., 318 ITR 476 (D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. The Hon'ble Delhi High Court in the case of CIT vs. Rajkumar (supra) has held as under: A close examination of the judgment of the Bombay High Court in the case of Nagindas M. Kapadia (supra) would show that the Court excluded from the ambit of 'dividend', monies which the assessee had received towards purchases. In our view both the CIT(A) and the Tribunal have correctly appreciated this aspect of the matter in the said judgment of the Bombay High Court. The relevant portion of the judgment of the Bombay High Court which sets out this aspect of the matter is already extracted by us ITA No.4967/Del /2012 ITA No.2002/D/2013 Assessment Year : 2005-2006 8 in the narrative give by us hereinabove. We are also in agreement with the view of the Tribunal that the judgment of the Supreme Court in the case of Ms. P. Sarada (supra) and Smt. Tarulata (supra) has no applicability to the present case. Both the judgments establish the principle that once the payment made to a shareholder is deemed as dividend then the mere fact that it is repaid would not take it out of the ambit of the tax net. In the instant case, however, a discussion with respect to which has been made her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urs is in accordance with the legislative intention of introducing Section 2(22)(e) and which has been extensively dealt with by this Court in the judgment in Raj Kumar's case(supra). This Court in Raj Kumar's case (supra) extensively referred to the report of the Taxation Enquiry Commission and the speech of the Finance Minister in the Budget while introducing the Finance Bill. Ultimately, this Court in the said judgment held as under: 10.3 A bare reading of the recommendations of the Commission and the Speech of the then Finance Minister would show that the purpose of insertion of clause (e) to section 2(6A) in the 1922 Act was to bring within the tax net monies paid by closely held companies to their principal shareholders in the guise of loans and advances to avoid payment of tax. 10.4 Therefore, if the said background is kept in mind, it is clear that sub-clause (e) of section 2(22) of the Act, which is pari material with clause (e) of section 2(6A) of the 1922 Act, plainly seeks to bring within the tax net accumulated profits which are distributed by closely held companies to its shareholders in the form of loans. The purpose being that persons who manage such ..... X X X X Extracts X X X X X X X X Extracts X X X X
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