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The AO noticed that the assessee has received loan/advance from M/s. Malpani Cottons Pvt. Ltd., Adilabad. The assessee is having 12.42% of the share holding in Malpani Cottons Pvt. Ltd., and the company is not a company in which public are substantially interested. Since Section 2(22)(e) of the Act will be attracted, assessee was asked to explain. Held that—To attract the deemed dividend provision, it should be otherwise around. Further, we noticed that the opening balance stood as on 01-04-2003 was 1,05,15,883/- as debit balance which means assessee owes to the company and at the end of the year, closing balance stood at 85,56,232/- debit balance which means still assessee owes to the company. While comparing opening and closing balances, it is noticed that about 20 Lakh was reduced that means assessee has repaid 20 Lakh to the company. It clearly shows that assessee has not taken any fresh loan from the company during the current assessment year.
On the other hand, to invoke Section 2(22)(e) of the Act during this year, assessee should have received loans or advances and pays the same subsequently. In the given case, no such things were noticed. Therefore, in our considered view, assessee is having business connection and in that process, assessee may have received certain advances which can be treated as ‘trade advances’. Therefore, we cannot cherry pick certain transactions and term them as ‘loans and advances’ in order to invoke the provisions of Section 2(22)(e) of the Act. Therefore, the ground raised by assessee is allowed.

Shanti Prime Publication Pvt. Ltd.

Section 2(22) of Income Tax Act, 1961—Deemed dividend—In the instant case, appeal is preferred by assessee against the order passed by CIT wherein CIT has confirmed the findings of the Assessing Officer.

The AO noticed that the assessee has received loan/advance from M/s. Malpani Cottons Pvt. Ltd., Adilabad. The assessee is having 12.42% of the share holding in Malpani Cottons Pvt. Ltd., and the company is not a company in which public are substantially interested. Since Section 2(22)(e) of the Act will be attracted, assessee was asked to explain.

Held that—To attract the deemed dividend provision, it should be otherwise around. Further, we noticed that the opening balance stood as on 01-04-2003 was 1,05,15,883/- as debit balance which means assessee owes to the company and at the end of the year, closing balance stood at 85,56,232/- debit balance which means still assessee owes to the company. While comparing opening and closing balances, it is noticed that about 20 Lakh was reduced that means assessee has repaid 20 Lakh to the company. It clearly shows that assessee has not taken any fresh loan from the company during the current assessment year.
On the other hand, to invoke Section 2(22)(e) of the Act during this year, assessee should have received loans or advances and pays the same subsequently. In the given case, no such things were noticed. Therefore, in our considered view, assessee is having business connection and in that process, assessee may have received certain advances which can be treated as ‘trade advances’. Therefore, we cannot cherry pick certain transactions and term them as ‘loans and advances’ in order to invoke the provisions of Section 2(22)(e) of the Act. Therefore, the ground raised by assessee is allowed.[NUTAN MALPANI VERSUS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1, NIZAMABAD] [2018] [7] [ITCD Online] [16] [ITAT HYDERABAD]