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TMI Blog2019 (7) TMI 1365X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the case and without observing the principles of natural justice. 3. That in any case and in any view of the matter, action of Ld. AO in making addition without considering the submission of assessee that section 2(22)(e) is not applicable to a business transaction, is bad in law and against the facts of the case." ITA No. 271/ASR/2018 (For Assessment Year 2015-16) "1. That the order passed by the Hon'ble CIT(A) dated 11.02.2019 is against the law and facts of the case. 2. That having regard to the facts and circumstances of the case, Hon'ble CIT(A) has erred in law and on facts in confirming the action of ld.AO in making addition of Rs. 2,98,00,000/- as deemed dividend u/s 2(22)(e) of the Act without considering the facts of the case and without observing the principles of natural justice. 3. That in any case and in any view of the matter, action of Ld. AO in making addition without considering the submission of assessee that section 2(22)(e) is not applicable to a business transaction, is bad in law and against the facts of the case." 2. At the outset, Ld. AR submitted that the matter relating to A.Y 2014- 15 may be taken as the lead case. With the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan was given purely as a business transaction in pursuance to an agreement or contract also has no relevance once it is on record that the concern M/s Hazoor Sahib Milk Processing Pvt. Ltd.(wherein the assessee was holding a substantial interest of more than 20%) took a loan from a private limited company M/s Bhagwati Lacto Vegetarian Exports Pvt. (in which the assessee was having shareholding of more than 10%). Accordingly, the addition made by the Assessing Officer u/s 2(22)(e), on account of loan received by M/s Hazoor Sahib Milk Processing Pvt. Ltd. from M/s Bhagwati Lacto Vegetarian Exports Pvt. as deemed dividend in the hands of the assessee was sustained. Against the said finding, the assessee is now in appeal before us. 6. During the course of hearing, the Ld. AR submitted that during the year under consideration, M/s Bhagwati Lacto Vegetarian Exports Pvt. was engaged in the business of Rice Shellers etc. Further our reference was drawn to its Memorandum of Association which permits M/s Bhagwati Lacto Vegetarian Pvt. Ltd to carry on business of diary, butter, ghee, cheese etc. Further, it was emphasized that the name M/s Bhagwati Lacto Vegetarian Pvt. Ltd., includes th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany cannot be a basis for bringing whole of the amount as deemed dividend in the hands of the assessee. It was further submitted that it is a settled position of law that Revenue cannot decide how to carry on business and even the Courts have held that reasonableness of the expenditure/transactions has to be seen from the point of view of the businessman and that the Revenue cannot seek to put itself in the arm chair of businessman. Further our reference was drawn to the CBDT Circular Instruction No. 19/2017 dated 12.06.2017 wherein it was held as under:- "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 deem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a concern in which such shareholder has a substantial interest in both the companies is satisfied in the instant case. The 2nd condition which needs to be satisfied is that the amount which can be brought to tax will be to the extent to which the company possession the accumulated profits. There is no dispute in this regard and the accumulated profits far exceed the payment under consideration. So far as these two conditions are concerned, the same are satisfied in the instant case and therefore are not in dispute. At the same time, we now look at the contention of the Ld. AR which is that the subject transaction was purely a business transaction for diversifying and expanding the business of M/s Bhagwati Lacto Vegetarian Pvt. Ltd. and as part of the said transaction, the funds have been advanced to M/s Hazoor Sahib Milk Processing Pvt. Ltd and in return, M/s Bhagwati Lacto Vegetarian Pvt. Ltd. has been appointed as sole selling agent for the whole of India and therefore, the amount so advanced cannot be brought to tax in the hands of the shareholder as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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