CIT v. Arvind Kumar Jain - Taxpublishers.in

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The Tax Publishers2012 TaxPub(DT) 0255 (Del-HC) : (2012) 043 (I) ITCL 0218 INCOME TAX ACT, 1961 --Dividend--Deemed dividend under section 2(22)(e)Transactions in the ordinary course of business--The assessee was in the business of trading i.e. purchase and sale of books and journals. During the assessment proceedings, the AO found that the assessee was a shareholder in a company called A & A. The assessee was holding 50% shares in this company. The AO further found that in the books of accounts the assessee had shown taking unsecured loan of Rs. 47,23,5318 from A & A. The assessee being 50% shareholder in the said company, the aforesaid purported loan received by the assessee was treated as deemed dividend under section 2(22)(e). Explanation furnished by the assessee was that the aforesaid amount was not a loan and in fact there was a business transaction between the assessee and A & A and the amount reflected running business relationship and there was a running account maintained by the assessee showing those transactions. This explanation was, however, not accepted by the AO as in the books of accounts, the amount was shown as unsecured loanÃ¢â‚¬. CIT(A) found, as a fact, that both the assessee as well as the A & A were in the business of trading i.e. purchase and sale of books and journals; there were business transactions between the assessee and the A & A; a running account was being maintained reflecting the regular transactions between the two business entities; and the amount of Rs. 47,25,318.80 paise was the result of those business transactions. From this, the CIT(A) concluded that the amount was not given by A & A to the assessee by way of loan but on this basis, allowing the appeal of the assessee, the CIT(A) deleted the additions. Held: In the present case after going through the relevant evidence as well as current account maintained between the parties, it has been established that the payment made were the result of trading transaction between the parties and the amount was not given by way of loan or advance. Thus the provisions of section 2(22)(e) where not attracted. Income Tax Act, 1961 Section 2(22)(e) IN THE DELHI HIGH COURT A.K. SIKRI & SIDDHARTH MRIDUL, JJ. CIT v. Arvind Kumar Jain ITA 589 of 2011 30 September, 2011 Appellantby : Abhishek Maratha, Sr. Standing Counsel with Anshul Sharma, Advocate, Respondent by : Mr. Ved Jain, Advocate, JUDGMENT The assessee is in the business of trading i.e. purchase and sale of books and journals. During the assessment proceedings, the assessing officer found that the assessee is a shareholder in a company called A & A Periodical Subscription Agency Pvt. Ltd. (hereinafter referred to as the A & A Periodicals). The paid up share capital of A & A Periodicals was 50,2000 [50,200 shares of Rs. 10 each]. The assessee was holding 50% shares in this company and remaining 50% shares were held by Smt. Sunita Jain. The Assessing officer further found that in the books of accounts the assessee had shown taking unsecured loan of Rs. 47,23,5318 from A & A Periodicals. The assessee being 50% shareholder in the said company, the aforesaid purported loan received by the assessee was treated as 'deemed dividend' under section 2 (22) (e) of the Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 0255 (Del-HC) : (2012) 043 (I) ITCL 0218

INCOME TAX ACT, 1961

--Dividend--Deemed dividend under section 2(22)(e)Transactions in the ordinary course of business--The assessee was in the business of trading i.e. purchase and sale of books and journals. During the assessment proceedings, the AO found that the assessee was a shareholder in a company called A & A. The assessee was holding 50% shares in this company. The AO further found that in the books of accounts the assessee had shown taking unsecured loan of Rs. 47,23,5318 from A & A. The assessee being 50% shareholder in the said company, the aforesaid purported loan received by the assessee was treated as deemed dividend under section 2(22)(e). Explanation furnished by the assessee was that the aforesaid amount was not a loan and in fact there was a business transaction between the assessee and A & A and the amount reflected running business relationship and there was a running account maintained by the assessee showing those transactions. This explanation was, however, not accepted by the AO as in the books of accounts, the amount was shown as unsecured loanÃ¢â‚¬. CIT(A) found, as a fact, that both the assessee as well as the A & A were in the business of trading i.e. purchase and sale of books and journals; there were business transactions between the assessee and the A & A; a running account was being maintained reflecting the regular transactions between the two business entities; and the amount of Rs. 47,25,318.80 paise was the result of those business transactions. From this, the CIT(A) concluded that the amount was not given by A & A to the assessee by way of loan but on this basis, allowing the appeal of the assessee, the CIT(A) deleted the additions. Held: In the present case after going through the relevant evidence as well as current account maintained between the parties, it has been established that the payment made were the result of trading transaction between the parties and the amount was not given by way of loan or advance. Thus the provisions of section 2(22)(e) where not attracted.

Income Tax Act, 1961 Section 2(22)(e)

IN THE DELHI HIGH COURT

A.K. SIKRI & SIDDHARTH MRIDUL, JJ.

CIT v. Arvind Kumar Jain

ITA 589 of 2011

30 September, 2011

Appellantby : Abhishek Maratha, Sr. Standing Counsel with Anshul Sharma, Advocate,

Respondent by : Mr. Ved Jain, Advocate,

JUDGMENT

The assessee is in the business of trading i.e. purchase and sale of books and journals. During the assessment proceedings, the assessing officer found that the assessee is a shareholder in a company called A & A Periodical Subscription Agency Pvt. Ltd. (hereinafter referred to as the A & A Periodicals). The paid up share capital of A & A Periodicals was 50,2000 [50,200 shares of Rs. 10 each]. The assessee was holding 50% shares in this company and remaining 50% shares were held by Smt. Sunita Jain. The Assessing officer further found that in the books of accounts the assessee had shown taking unsecured loan of Rs. 47,23,5318 from A & A Periodicals. The assessee being 50% shareholder in the said company, the aforesaid purported loan received by the assessee was treated as 'deemed dividend' under section 2 (22) (e) of the Act.