TMI Blog2019 (10) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... had categorically given a finding that from the books of accounts of M/s DEPL and the assessee , it is clear that the transactions between the assessee and M/s DEPL were frequent by way of frequent advancing of monies to assessee and frequent repayments made by the assessee to M/s DEPL. This finding clearly goes in favour of the assessee as the subject mentioned transaction is only in the nature of current account transaction carried out by the assessee. From the perusal of the ledger account of assessee as appearing in the books of M/s DEPL for the period 1.4.2007 to 31.3.2008, we find that there was a opening credit balance of ₹ 20,25,000/- lying to the credit of the assessee in the books of M/s DEPL. Against such credit, the monies were paid to the assessee by M/s DEPL on a periodical basis. This itself goes to prove the existence of account being operated on a current account basis and not loan or advance so as to fall within the ambit of provisions of section 2(22)(e) We direct the ld AO to delete the addition made towards deemed dividend u/s 2(22)(e) of the Act in the facts and circumstances of the instant case.- Decided in favour of assessee - ITA No.5805/Mum/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also a partner in 4 firms. The ld AO observed that the assessee had received advances of ₹ 48,75,000/- during the year under consideration from M/s Dheeraj Estate Private Limited (DEPL) , in which assessee is a Director, having 20% of shareholding in the company. The assessee stated that the advances were in the nature of current account transactions in the ordinary course of business and cannot be treated as advancing loan u/s 2(22)(e) of the Act. During the course of assessment proceedings, a Memorandum of Understanding (MOU) entered into between M/s DEPL and assessee dated 2.5.2006 wherein the assessee was shown as Aggregator of lands and M/s DEPL was shown as Developer . Pursuant to the said MOU, it was agreed that the Developer would provide periodical advances to the assessee aggregator for procuring lands either in the individual name of the assessee or in his group concerns name and as per the MOU, such procurement made by all means, would have to be construed as procurement been made for and on behalf of M/s DEPL for the purpose of development. Accordingly, M/s DEPL started making payments to the assessee on a periodical basis. Since this MOU was unregistered, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of real estate business. Hence the assessee assuming the role of an aggregator in the MOU dated 2.5.2006 entered into with M/s DEPL for procuring lands on behalf of DEPL cannot be summarily dismissed. Hence the intention of the assessee and M/s DEPL while entering into MOU cannot be ignored. It is a fact that the assessee has received periodical advances from DEPL during the year and had also repaid it regularly to DEPL. It is not in dispute that the advances received by the assessee from M/s DEPL have been utilized for making investments by him in the partnership firms owned by him. It is not in dispute that the said partnership firms are also engaged in real estate activities only. Moreover, the MOU clearly provides for a mandate that pursuant to advances made by DEPL to assessee, even if the lands were procured by the assessee in his individual name , or in his firm s name or in any other concerns name, the same would have to be construed as lands procured in the capacity of aggregator as defined in MOU for and on behalf of M/s DEPL only. We are convinced that the entire transactions of receipt of advances and repayment thereon falls within the ambit of tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, the advance was not covered by section 2(22)(e) of the Act. (CITv. Amrik Singh, P H High Court)2. iii. A floating security deposit was given by a company to its sister concern against the use of electricity generators belonging to the sister concern. The company utilised gas available to it from GAIL to generate electricity and supplied it to the sister concern at c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and M/s DEPL were frequent by way of frequent advancing of monies to assessee and frequent repayments made by the assessee to M/s DEPL. This finding clearly goes in favour of the assessee as the subject mentioned transaction is only in the nature of current account transaction carried out by the assessee. From the perusal of the ledger account of assessee as appearing in the books of M/s DEPL for the period 1.4.2007 to 31.3.2008, we find that there was a opening credit balance of ₹ 20,25,000/- lying to the credit of the assessee in the books of M/s DEPL. Against such credit, the monies were paid to the assessee by M/s DEPL on a periodical basis. This itself goes to prove the existence of account being operated on a current account basis and not loan or advance so as to fall within the ambit of provisions of section 2(22)(e) of the Act. The law is now well settled that the current account transactions are outside the ambit of provisions of section 2(22)(e) of the Act. The ld AR rightly placed reliance on the decision of the Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra vs CIT reported in 338 ITR 538 (Cal). We find that a similar vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inabove in the case of Shri Mukesh Thakurdas Jaisinghani would apply with equal force for Shri Raju Thakurdas Jaisinghani also for both the assessment years in dispute before us in view of identical facts, except with variance in figures and variance in extent of shareholding in M/s DEPL. Accordingly, the appeal of the assessee for Asst Year 2008-09 is partly allowed and appeal of the assessee for Asst Year 2009-10 is allowed. 10. TO SUM UP:- ITA No. AY Appeal By Result 5805/Mum/2016 2008-09 assessee Partly Allowed 6928/Mum/2016 2009-10 assessee Allowed 5806/Mum/2016 2008-09 assessee Partly Allowed 6929/Mum/2016 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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