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Commissioner of Income Tax Jaipur-II Jaipur Versus Krishna Behari Goyal

Deemed dividend u/s 2(22)(e) - Held that:- Advances being for trade and business considerations, assessee having not derived any benefit out of it and rather having acquired disadvantage for the betterment of the company's business cannot be saddled with additions u/s 2(22)(e) - D.B. Income Tax Appeal No. 137/2016 - Dated:- 19-10-2016 - K. S. Jhaveri And Mahendra Maheshwari, JJ. For the Appellant : R. B. Mathur ORDER 1. By way of this appeal, the department has challenged the judgment and order .....

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t, Mr. R.B. Mathur, has taken us to the order of the CIT (Appeals) and contended that the interest free advances given by the company has been assessed only with a view to reduce the profit of the company and to make it available to HUF which had made losses. In that view of the matter, he has placed reliance on the decision of the Supreme Court in Commissioner of Income Tax Vs Mukundray K. Shah (2007) 290 ITR 433 (SC) wherein it has been observed at page 448 as under: "The above two judgme .....

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two factors, namely, whether payment is a loan and whether on the date of payment there existed "accumulated profits". These two factors have to be correlated. This correlation has been done by the Tribunal coupled with the fact that all withdrawals were debited in the capital account of the firm leading to the debit balance of ₹ 8.18 crores. The High Court has erred in disturbing the findings of fact." 4. The tribunal has seriously committed an error in rejecting the appea .....

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es from the record the factual submissions about the advantages derived by company M/s Dwarka Gems from the mortgage of assessee and his family members properties have not been properly appreciated. Beside it has been demonstratively explained that assessee being MD and pioneer of the company had to carry on bulk of business transactions like, purchases, sales, overseas operations, the impugned account was the means to carry out such operations. To be fair, assessee paid interest on the remainin .....

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in the case of Rajkumar (supra) has considered the legislative intent and other judgments on the issue and held that keeping the aforesaid rule in mind 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 a commercial transactions would not, in our view, fall within the ambit of the prov .....

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