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TMI Blog2017 (11) TMI 1840X X X X Extracts X X X X X X X X Extracts X X X X ..... in reversing the AO's rejection as claimed by the regarding advance of Rs. 9800000/- received from M/s. Competent Holdings Ltd." 2. The brief facts of the case are that the assessee is an individual who filed his return of income of Rs. 5363400/- on 11.09.2008. During the appellate proceedings for Assessment Year 2009-10 the ld CIT (A) directed the Assessing Officer to verify the impugned assessment year where the assessee has taken an advance of Rs. 98 laks from M/s. Competent Holding ltd wherein the assessee is a Director and holding beneficial ownership of more than 10%. The Competent Holding Ltd has also held the accumulated profit of Rs. 10.27 crores. Hence, the provisions of section 2(22) (e) of the Act were invoked in reassessment proceedings. The assessee submitted that the above sum was received by assessee for advance against sale of property at basement of A-44, Kailash Colony, New Delhi and therefore, it is a business transaction hence, provisions of section 2(22)(e) of the Act do not apply. The ld Assessing Officer rejected the contention of the assessee and treated the above sum as deemed dividend u/s 2(22) (e) of the Act. Consequently, assessment u/s 143(3) read wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case are that assessee is a director with 36.30 % shareholding in the company M/s competent Holdings private limited. Both the assessee as well as that company is having one of the main business activities of real estate business. The assessee entered into an "Agreement to Sale" on 09/01/2008 with the company for sale of the basement of property at a - 44, Kailash colony, New Delhi which was used by the company as a rented premises since 2003. According to the agreement, the property was to be sold at Rs. 1.25 crores and up to 31.03.2008, the company gave assessee an advance of Rs. 98 lakhs. Later on, this property was not transacted for the reason that the company got a better property hence it cancelled the "Agreement To Sale" entered with the assessee through a "Memorandum of Understanding". According to the agreement to sell, the assessee was paid Rs. 5 Lacs by cheque No. 301849 on 09/01/2008. A further sum of Rs. 70 lakhs was to be paid to the assessee on or before 31st of January 2008 and further the balance sale consideration of Rs. 50 Lacs was to be paid before 30 of September 2008. In view of this only sum of Rs. 75 lakhs was to be paid to the assessee by the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yment 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. 2. The Board has observed that some Courts in the recent past have held that trade advances in the nature of commercial transactions would not fall within the ambit of the provisions of section 2(22) (e) of the Act. Such views have attained finality. 2.1 Some illustrations/examples of trade advances/commercial transactions held to be not covered under section 2(22) (e) of the Act are as follows: i. Advances were made by a company to a sister concern and adjusted against the dues for job work done by the sister concern. It was held that amounts advanced for business transactions do not to fall within the definition of deemed dividend under section 2(22) (e) of the Act. (CIT v. Creative Dyeing & Printing Pvt. Ltd.1, Delhi High Court). ii. Advance was made by a company to its shareholder to install plant and machinery at the shareholder's premises to enable him to do job work for the company so that the company could fulfil an export order. It was held that as the assessee proved business expediency, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also part of these transaction, even then a sum of Rs. 23 lakhs is required to be explained by the assessee that they are forming part of the consideration of these "sale agreement" between the assessee and the competent Holdings private limited. Furthermore, the confusion has also arisen because assessee has submitted the copy of the memorandum of understanding dated 1/9/2008 between the assessee and the competent Holdings Ltd wherein in the last paragraph of page No. 1 it has been mentioned that the competent Holdings Ltd has entered into an agreement to sell dated 09/01/2008 with the 1st party to purchase entire basement floor, for a sum of Rs. 1.25 crores and advanced the sum of Rs. 98 lakhs to the 1st party. However, in absence of the Ledger account it cannot be verified that on that particular date i.e. on 1/9/2008 the competent holding Ltd has paid a sum of Rs. 98 lakhs to the assessee or not. Now, we come to the argument of the ld DR, who has placed reliance on the decision of the Hon'ble Delhi High Court in CIT versus Sunil Chopra. We have carefully perused the decision and according to us, the facts of the present case are different from the case cited before us. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmed the above sum. Therefore, now assessee is in appeal before us. 11. The contention of the Ld. authorized representative remained the same that above transactions are "commercial transactions" in nature and therefore they are not covered as deemed dividend in the hands of the assessee. The Ld. departmental representative vehemently submitted that the order of the lower authorities have correctly interpreted the provisions of section 2 (22) (e). Further, the Ld. departmental representative relied upon the order of the Hon'ble Supreme Court in 105 ITR 642 in case of Sh. PK Badiani VS CIT and decision of the Hon'ble Delhi High Court in CIT versus Sunil Chopra 12 Taxmann.com 496. 12. The contention of the assessee is the same is being already recorded for in assessment year 2008 - 09 that above advances are trade advances and part of the "commercial transaction" between the assessee and the above company. Therefore, we examine the whole transaction with respect to the above agreement submitted before us. In the present case, the opening outstanding balance crediting the account of the above company is Rs. 98 lakhs. Thereafter on respective date assessee has repaid a sum of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X
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