Yogesh Pratpsinh Jadhav, Kolhapur V. Assistant Commissioner of Income-tax,

ITA 1930/PUN/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2923 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT HALDER
• Assessee Lawyers: SUNIL PATHAK
• Keywords: Deemed dividend

Judgement Text

] IQ.KS ] IQ.KS ] IQ.KS ] IQ.KS IQ.KS IQ.KSIQ.KS IQ.KS IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE . . , , ! ' BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1930/PN/2013 !$ $ / ASSESSMENT YEAR : 2008-09 SHRI YOGESH PRATAPSINH JADHAV, PUDHARI BHAVAN, 2318C WARD, BHAUSINGHI ROAD, KOLHAPUR PAN NO. AAZPJ0542K . / APPELLANT V/S ACIT, CIRCLE-1, KOLHAPUR . / RESPONDENT / ASSESSEE BY : SHRI SUNIL PATHAK / DEPARTMENT BY : SHRI ABHIJIT HALDER / ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER DATED 29-08-2013 OF THE CIT(A), KOLHAPUR RELATING TO ASSE SSMENT YEAR 2008-09. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN TAKEN BY TH E ASSESSEE THEY ALL RELATE TO THE ORDER OF THE CIT(A) IN SUSTAINING THE ADDITION OF RS.2 CRORES MADE BY THE AO U/S.2(22)(E) OF THE I.T. ACT. / DATE OF HEARING : . 17.11.2015 / DATE OF PRONOUNCEMENT:18.01.2016 2 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A N INDIVIDUAL AND DERIVES INCOME FROM SHARE OF PROFIT IN FIRM, OTHER SOURCE S, CAPITAL GAIN, SALARY ETC. HE FILED HIS RETURN OF INCOME ON 31-03-201 0 DISCLOSING TOTAL INCOME OF RS.29,64,790/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSE E MR. YOGESH JADHAV IS A DIRECTOR OF M/S.PUDHARI PUBLICATIONS PVT. LTD. (P PPL) KOLHAPUR HOLDING 23.95% SHARE AS ON 31-03-2010. SIMILARLY, HE IS ALSO A PARTNER IN SHRI CHHATRAPATI PRESS HAVING 25% SHA RE IN PROFIT AND LOSS IN THE SAID FIRM. THE AO NOTED THAT DURING THE YE AR, I.E. ON 31-03-2008 SHRI CHHATRAPATI PRESS HAS RECEIVED A SUM O F RS. 2 CRORES BY CHEQUE FROM M/S. PPPL. FURTHER DETAILS WERE CALLED FOR AND ON EXAMINING THE SAME IT CAME OUT THAT SHRI CHHATRAPATI PRE SS RECEIVED A SUM OF RS. 2 CRORES VIDE EIGHT CHEQUES EACH OF RS. 25 LAKH S ON 31/03/2008. ON THE SAME DAY I.E. ON 31/03/2008, SHRI CHHA TRAPATI PRESS TRANSFERRED RS. 2 CRORES TO THE CAPITAL ACCOUNT OF ITS FOUR PARTNERS VIZ. SHRI G G JADHAV (HUF) (RS. 75 LAKHS), MRS. G P JAD HAV (RS. 55 LAKHS), SHRI P G JADHAV (HUF)(RS. 15 LAKHS) AND THE ASSE SSEE SHRI YOGESH JADHAV (RS. 55 LAKHS). ALL THESE FOUR PARTNERS HE LD EQUAL SHARE OF 25% IN SHRI CHHATRAPATI PRESS. THEN, AS PER THE LEDGER OF SHARE APPLICATION MONEY IN THE BOOKS OF M/S. PPPL, IT WAS FOUND THAT ON THE SAME DAY I.E. ON 31/03/2008 IDENTICAL AMOUNTS WER E RECEIVED BY CHEQUE FROM THESE FOUR PERSONS AS SHARE APPLICATION MONEY. THE AMOUNT OF SHARE APPLICATION MONEY WAS RS. 75 LAKHS FROM SH RI G G JADHAV (HUF), RS. 55 LAKHS FROM MRS. G P JADHAV, RS. 15 LAKHS FR OM SHRI P G JADHAV (HUF) AND RS. 55 LAKHS FROM THE ASSESSEE , SHRI YOGESH JADHAV. ALL THE CHEQUES, THOSE DRAWN BY M/S PPPL , SHRI CHHATRAPATI PRESS AND PARTNERS, WERE DEPOSITED IN BANK ON 11/06/2008. A SHOW CAUSE NOTICE WAS ISSUED TO THE ASSE SSEE ASKING TO EXPLAIN WHY THE ADVANCE OF RS. 2 CRORES SHOULD NOT BE CONSIDERED AS 3 DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT IN HIS HANDS SINC E HE HOLDS SUBSTANTIAL INTEREST IN M/S PPPL AS WELL AS SHRI CHH ATRAPATI PRESS AND M/S. PPPL HAS GIVEN THIS AMOUNT TO SHRI CHHATRAPATI PRESS . 4. IT WAS EXPLAINED BY THE ASSESSEE THAT THE AMOUNT G IVEN TO SHRI CHHATRAPATI PRESS WAS NOT IN THE NATURE OF LOAN OR ADVA NCE BUT IT WAS TO REIMBURSE LABOUR CHARGES FOR PRINTING OF NEWSPAPERS. I T WAS SUBMITTED THAT M/S. PPPL HAS TO MAKE PAYMENT FOR LABOU R CHARGES FOR PRINTING NEWSPAPERS WHICH WAS RS.4,38,393/- FOR THE F.Y. 200 7-08. RELYING ON VARIOUS DECISIONS IT WAS FURTHER SUBMITTED THAT THE ADVANCE IN THE NATURE OF BUSINESS/COMMERCIAL TRANSACTION CANNOT BE CONSIDERED AS DEEMED DIVIDEND. 5. THE SECOND PLANK OF ARGUMENT BEFORE THE AO WAS THAT THE CHEQUES WERE GIVEN ON 31-03-2008 BUT THESE WERE NOT ENCASHED IMMEDIATELY DUE TO THERE BEING NO SUFFICIENT BANK BALANCE AND THESE WERE ENCASHED ON 11-06-2008. THEREFORE, THE TRANSACTIO N RELATES TO A.Y. 2009-10 AND NOT CURRENT A.Y. 2008-09 AND THEREFORE, NO ADDITION U/S.2(22)(E) OF THE ACT CAN BE MADE IN THIS YEAR. 6. HOWEVER, THE AO WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. HE ANALYSED THE PROVISIONS OF SECTION 2(22 )(E) AND WAS OF THE OPINION THAT FOR ATTRACTING THE PROVISIONS OF SECTION 2 (22)(E) THE FOLLOWING CONDITIONS SHOULD BE SATISFIED : I) PAYMENT SHOULD BE MADE BY A COMPANY IN WHICH PUB LIC ARE NOT SUBSTANTIALLY INTERESTED. II) THE PAYMENTS SHOULD BE MADE TO THE PERSON (OR CONC ERN) WHO IS HOLDING NOT LESS THAN 10% OF THE VOTING POWER. III) SUCH BENEFICIAL SHAREHOLDER SHOULD HAVE SUBSTANTIA L INTEREST (NOT LESS THAN 20%) IN THE CONCERN WHICH RECEIVES THE PAYME NT. IV) THE PAYMENTS BY THE COMPANY SHOULD BE TO THE EXTE NT OF ACCUMULATED PROFITS POSSESSED BY THE COMPANY. 4 7. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE TH E AO NOTED THAT ALL THE CONDITIONS MENTIONED ABOVE ARE SATISFIED WHIC H ARE AS UNDER : I) PPPL, KOLHAPUR IS A PRIVATE LIMITED COMPANY AND NOT A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED. II) THE ASSESSEE HOLDS 23.95% SHARES IN PPPL, KOLHAPUR AS O N THE DATE OF THE ADVANCE, I.E. 31-03-2010. III) THE PAYMENT IS MADE TO A FIRM IN WHICH THE ASSESSEE HAS SUBSTANTIAL INTEREST, I.E. HIS SHARE OF PROFIT THEREIN I S 25 PER CENT. IV) THE PAYMENT IS GIVEN IN THE FORM OF ADVANCE AND AS PER THE ENTRIES MADE IN THE BOOKS OF ACCOUNTS IT IS CLASSIFIED AS ADVANCE . V) PPPL, KOLHAPUR HAS SUFFICIENT ACCUMULATED PROFIT W HICH EXCEEDS THE ADVANCE GIVEN. 8. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE ADVANCE WAS GIVEN BY THE COMPANY TO THE FIRM AS THE FIRM REQUIRED THE MONEY FOR EXPANSION OF ITS BUSINESS, THE AO NOTED THAT THE MONEY RECEIVED BY THE FIRM SHRI CHHATRAPATI PRESS WAS NOT UTILIZED BY IT FOR EXPAN DING ITS BUSINESS BUT IT WAS IMMEDIATELY TRANSFERRED TO THE PARTN ERS ON THE SAME DAY WHO IN TURN TRANSFERRED IT TO THE COMPANY AS SHARE APPLICATION MONEY. THIS CLEARLY SHOWS THAT THE ADVANCE A MOUNT IS NOT IN THE NATURE OF BUSINESS OR COMMERCIAL TRANSACTION AND THERE WAS NO BUSINESS COMPULSION OR BUSINESS EXPEDIENCY TO ADVANCE THE SAME . 9. AS REGARDS THE ARGUMENT OF THE ASSESSEE THAT THE C HEQUES WERE ENCASHED AFTER 31-03-2008 AND THEREFORE RELATE TO A.Y. 2 009-10, THE AO NOTED THAT IT IS NOT THE CASE OF THE ASSESSEE THAT THE CHEQUES ISSUED ON 31-03-2008 WERE CANCELLED AND FRESH CHEQUES W ERE ISSUED FOR ENCASHING ON 11-06-2008. REJECTING THE VARIOUS EXPLANATIONS G IVEN BY THE ASSESSEE AND DISTINGUISHING THE VARIOUS DECISIONS C ITED BEFORE HIM THE AO MADE ADDITION OF RS.2 CRORES IN THE HANDS OF TH E ASSESSEE U/S.2(22)(E) OF THE I.T. ACT 5 10. BEFORE CIT(A) THE ASSESSEE MORE OR LESS MADE SIMILAR AR GUMENTS. HOWEVER, THE CIT(A) ALSO WAS NOT CONVINCED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO . WHILE DOING SO, HE NOTED THAT THE PLEA OF THE ASSESSEE THAT AN AMO UNT OF RS. 2 CRORES WAS GIVEN BY PPPL TO SHRI CHHATRAPATI PRESS AS ADVANCE FOR FUTURE WORK TO BE DONE IS NOT WELL FOUNDED SINCE SHRI CHH ATRAPATI PRESS DID NOT KEEP THIS MONEY TO BE UTILIZED FOR ITS BUSINE SS BUT ON THE SAME DAY CHEQUES WERE ISSUED AND ENTRY WAS MADE TO C REDIT OF THE PARTNERS CAPITAL ACCOUNT. THEN , THESE PARTNERS ISSUED CHEQUES FOR SAME AMOUNTS TO PPPL AS SHARE APPLICATION MONEY. THUS, MONEY ADVANCED BY PPPL CAME BACK TO IT IN CIRCULAR TRANSACTION WITHOUT BEING UTILISED BY SHRI CHHATRAPATI PRESS. THEREFORE, THE AR GUMENT THAT IT WAS BUSINESS ADVANCE FOR EXPANSION OF BUSINESS DOES NO T HOLD WATER. 11. AS REGARDS THE YEAR OF TAXABILITY IS CONCERNED THE LD .CIT(A) NOTED THAT NOT ONLY THE ASSESSEE BUT PPPL AND SHRI CHHATRA PATI PRESS IN WHICH HE HAS SUBSTANTIAL INTEREST HAVE RECOGNIZED THESE TRANSACTIONS IN THEIR RESPECTIVE BOOKS ON 31-03-2008. THEREFORE, THE PLEA THAT THE ACTUAL PAYMENTS TOOK PLACE LATER ON CANNOT BE ENTERTAINED. 12. AS REGARDS THE CONTENTION OF THE ASSESSEE THAT THE AMOUNT WAS RECEIVED BY SHRI CHHATRAPATI PRESS TO EXPAND ITS BUSINES S HE NOTED THAT DURING A.Y. 2008-09 RS. 2 CRORES HAS BEEN DEBITED T O SHRI CHHATRAPATI PRESS AS PURPORTED PAYMENT FOR PRINTING WO RK. HOWEVER, NO DATES HAVE BEEN MENTIONED FOR THESE TRANSACTIONS. F URTHER, PPL HAD NEVER MADE ANY SUCH ADVANCE TO SHRI CHHATRAPATI P RESS IN THE PAST AND THE PAYMENTS WERE ALWAYS MADE AFTER THE AMO UNT OF LABOUR CHARGES WAS DEBITED TO PPPL BY SHRI CHHATRAPATI PRESS. HE ACCORDINGLY UPHELD THE ADDITION MADE BY THE AO. 6 13. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 14. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SAM E ARGUMENTS AS MADE BEFORE THE AO AND THE CIT(A). REFERRING TO PAGE 49 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE A TTENTION OF THE BENCH TO THE SUMMARY OF TRANSACTION WITH SHRI CHHATRAPA TI PRESS BY PUDHARI PUBLICATION PVT. LTD. FOR THE F.Y. 2005-06 TO 2009-1 0. REFERRING TO THESAID TABLE HE SUBMITTED THAT THE BILLS FO R PRINTING LABOUR CHARGES RAISED BY SHRI CHHATRAPATI PRESS AGAINST PPPL ARE SUBSTANTIAL, I.E. RS.3.50 CRORES FOR F.Y. 2005-06, RS.4.12 CROR ES FOR A.Y. 2006-07, RS.4.38 CRORES FOR F.Y. 2007-08, RS.4.76 CRORES FOR A.Y. 2008-09 AND RS.5.28 CRORES FOR F.Y. 2009-10. HE SUBMITTED THAT THE PAYMENT OF RS.2 CRORE WAS MADE ON 31-03-2008 BY 8 CH EQUES WHICH WERE ENCASHED ON 11-06-2008. THERE IS NO REPAYMENT O F THE AMOUNT BY SHRI CHHATRAPATI PRES BUT THE SAME WAS ADJUSTED A GAINST THE BILLS RAISED. HE SUBMITTED THAT THERE IS NO LIABILITY TO REPAY AN D THE PAYMENT WAS ADJUSTED FROM THE BILLS. THEREFORE, IT IS A COM MERCIAL TRANSACTION AND A COMMERCIAL TRANSACTION IS OUTSIDE THE P URVIEW OF PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. 15. REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. RAJKUMAR REPORTED IN 318 ITR 462 HE SU BMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT THE WORD ADVANCE WHICH APPEARS IN THE COMPANY OF THE WORD LOA N IN SECTION 2(22)(E) COULD ONLY MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT. TRADE ADVANCE WHICH IS IN THE NAT URE OF MONEY TRANSACTED TO GIVE EFFECT TO A COMMERCIAL TRANSACT ION DOES NOT FALL WITHIN THE AMBIT OF PROVISIONS OF SECTION 2(22)(E) OF THE I. T. ACT. SINCE IN THE INSTANT CASE THERE IS NO LIABILITY TO REPAY, THEREFORE, IN VIEW 7 OF THE ABOVE DECISION THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE. 15.1 REFERRING TO THE DECISION OF THE HONBLE DELHI HIGH COU RT IN THE CASE OF CIT VS. ARVIND KUMAR JAIN VIDE ITA NO.589/2011 OR DER DATED 30-09-2011 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE TO A CASE WHERE THE AMOUNT REPRESENTED THE CREDIT BA LANCE AS A RESULT OF TRANSACTION BETWEEN THE TWO ASSESSEE ON ACCOUNT OF BUSINESS RELATIONS AND THE PAYMENT WAS NOT IN THE NATURE OF LOAN OR ADVANCE AND THE TRANSACTIONS WERE THE RESULT OF TRADING TRANSACTIONS. 16. REFERRING TO THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING AND PRINTING PVT. LTD. REPORTED IN 318 ITR 476 HE SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT ADVANCE TO BE ADJUSTED AGAINST DUES FOR JOB WORK TO BE DONE BY ASSESSEE IS A BUSINESS TRANSACTION AND THEREFORE ADV ANCE IS NOT ASSESSABLE AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT. 17. REFERRING TO THE DECISION OF THE CHANDIGARH BENCH OF TH E TRIBUNAL IN THE CASE OF AMRIK SINGH, PROP. VS. ACIT REPORTED IN 36 CCH 0037 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECIS ION HAS HELD THAT ADVANCE GIVEN DURING ORDINARY COURSE OF BUSINE SS FOR BUSINESS EXPEDIENCY COULD NOT BE COVERED UNDER THE PRO VISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. HE ALSO RELIED ON THE DECIS ION OF THE CHENNAI BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. SMT. G. SREEVIDYA REPORTED IN 24 TAXMANN.COM 754 AND THE DECIS ION OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTR A VS. CIT VIDE ITA NO.219/2003 ORDER DATED 02-08-2011. 8 18. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CHEQUES WERE ENCASHED ON 11-06-2008, THEREFORE, DEEMED DIVIDEND, IF ANY, RELATES TO A.Y. 2009-10. HE SUBMITTED THAT A CHEQUE CON STITUTES PAYMENT WHEN IT IS ENCASHED. SINCE THE CHEQUES WERE EN CASHED ONLY IN F.Y. 2008-09, THEREFORE, ADDITION, IF ANY, CAN BE MADE ONLY IN A.Y. 2009-10 AND NOT IN THE IMPUGNED ASSESSMENT YEAR. 19. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED TH AT THE COMPANY WANTED TO INCREASE THE SHARE CAPITAL AS PER TH E DIRECTION OF THE BANK FOR DISBURSEMENT OF THE LOAN OF RS.10 CRORES. FO R THE ABOVE PROPOSITION THE LD. COUNSEL FOR THE ASSESSEE DREW THE AT TENTION OF THE BENCH TO PAGES 278 TO 282 OF THE PAPER BOOK. HE DREW THE ATTENTION OF THE BENCH TO SCHEDULE 2 OF THE BALANCE SHEET WHICH GIVES THE DETAILS OF RESERVES AND SURPLUS FOR THE YEAR ENDED 31-30-2008 A ND SUBMITTED THAT AFTER THE PROFIT FOR THE CURRENT YEAR AMOUNTING TO RS.2.66 CRORES THE TOTAL PROFIT AND LOSS ACCOUNT OF PPPL FOR THE YEAR EN DED 31-03- 2008 WAS RS.4.29 CRORES. THERE WAS A REVALUATION RESERV E ON ACCOUNT OF VASHI PREMISES AMOUNTING TO RS.7.71 CRORES. THUS, DUE T O INCREASE IN SHARE CAPITAL FOR OBTAINING OF LOAN FROM THE BANK THE COM PANY HAS GAINED SUBSTANTIALLY. 20. IN HIS ALTERNATE CONTENTION THE LD. COUNSEL FOR THE A SSESSEE DREW THE ATTENTION OF THE BENCH TO THE DETAILS OF SHAREHOLDING PERCENTAGE AND PROPORTIONATE FREE RESERVES AS ON 31-03-2008 WHICH IS AS UND ER : PUDHARI PUBLICATIONS PVT. LTD. DETAILS OF SHAREHOLDING % PROPORTIONATE FREE RESERVES AS ON 31.03.2008 NAME OF SHAREHOLDER PAID UP SHARE CAPITAL % OF SHARE HOLDING PROPORTIONATE SHARE OF FREE RESERVE % OF PROFIT SHARE IN FIRM CHHATRAPATI PRESS PRATAPSINH G. JADHAV 45,000,000 75.00% 32,174,273 - 9 YOGESH P. JADHAV YOGESH P. JADHAV 14,370,000 23.95% 10,274,318 25% GEETADEVI P. JADHAV 600,000 1.00% 428,990 25% P. G. JADHAV HUF 6,000 0.01% 4,290 25% SHEETAL M. PATIL 6,000 0.01% 4,290 - MANDAR M. PATIL 6,000 0.01% 4,290 - SUBHASH L ATIGRE 6,000 0.01% 4,290 - NIKHIL 5 ATIGRE 6,000 0.01% 4,290 - P G JADHAV INVESTMENT - 0.00% - - G. G. JADHAV HUF - 0.00% - 25% TOTAL 60,000,000 100% 42,899,030 100% 21. HE SUBMITTED THAT WHEN THERE ARE MANY SHAREHOLDERS THEN IN THAT CASE ONLY PROPORTIONATE AMOUNT CAN BE ADDED U/S.2(22)(E) AN D NOT THE WHOLE AMOUNT. REFERRING TO THE DECISION OF THE PUNE B ENCH OF THE TRIBUNAL IN THE CASE OF KEWAL KUMAR JAIN VS. ACIT REPORTED I N 144 ITD 672 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISION HA S HELD THAT WHILE DETERMINING THE AMOUNT TAXABLE U/S.2(22)(E) ADDITION HAS TO BE RESTRICTED TO SUCH PERCENTAGE OF ACCUMULATED PROFIT AS CORRESPONDS TO ASSESSEES SHARE HOLDING IN COMPANY IN QUESTION. 22. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED THAT SINCE THE COMPANY HAS GIVEN LOAN/ADVANCE WITHIN THE MEANING OF SECTION 2(22)(E ) TO SHRI CHHATRAPATI PRESS, WHICH IN TURN HAS GIVEN THE SAME TO T HE PARTNERS AND THE PARTNERS HAVE INVESTED THE AMOUNT IN THE SHAR E APPLICATION MONEY OF THE COMPANY PPPL, THEREFORE, THE PROVISION OF SEC TION 2(22)(E) ARE CLEARLY ATTRACTED. HE ALSO RELIED ON THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF SMT. SUNITA JINDAL VS . DCIT REPORTED IN 45 TAXMANN.COM 29 AND THE DECISION OF THE MU MBAI BENCH OF THE TRIBUNAL REPORTED IN 57 TAXMANN.COM 13. 23. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SUBM ITTED THAT BOTH THE DECISIONS RELIED ON BY THE LD. DEPARTMENTAL REPR ESENTATIVE ARE DISTINGUISHABLE AND NOT APPLICABLE TO THE FACTS OF THE P RESENT CASE. HE SUBMITTED THAT SO FAR AS THE DECISION OF THE CHANDIGA RH BENCH IN 10 THE CASE OF SMT. SUNITA JINDAL (SUPRA) IS CONCERNED, THERE WAS NO BUSINESS TRANSACTION WHEREAS IN THE INSTANT CASE THERE IS SUBSTANTIAL BUSINESS TRANSACTION. IN THE CASE OF THE DECISION OF THE MUMBAI TRIBUNAL RELIED ON BY LD. DEPARTMENTAL REPRESENTATIVE, THE RE ALSO, THE LOAN WAS SIMPLY GIVEN AND THERE WAS NO COMMERCIAL EXPEDIE NCY. IN THE INSTANT CASE NO MONEY HAS BEEN GIVEN AS LOAN AND THE TRANSACTION IS A COMMERCIAL ONE. THEREFORE, BOTH THE DECISIONS RELIED O N BY THE LD. DEPARTMENTAL REPRESENTATION ARE DISTINGUISHABLE AND NOT A PPLICABLE TO THE FACTS OF THE PRESENT CASE. 24. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SID ES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIO US DECISIONS CITED BEFORE US. WE FIND IN THE INSTANT CASE SHRI CHHATRAP ATI PRESS HAS RECEIVED A SUM OF RS. 2 CRORES ON 31-03-2008 BY 8 CHEQ UES FROM PUDHARI PUBLICATION PVT. LTD. THE ASSESSEE SHRI YOGESH JADH AV IS A DIRECTOR OF PUDHARI PUBLICATION PVT. LTD. (PPPL) HOLDING 23.92 % OF THE SHARES. SIMILARLY, THE ASSESSEE IS ALSO A PARTNER IN THE FIR M SHRI CHHATRAPATI PRESS WITH 25% SHARE OF PROFIT OR LOSS. SINCE THE AMOUNT OF RS. 2 CRORES WAS RECEIVED BY SHRI CHHATRAPATI PRESS FR OM THE COMPANY PPPL AND IN TURN HAS BEEN TRANSFERRED TO THE CAPITAL ACCO UNT OF THE PARTNERS ON THE SAME DAY, THEREFORE, THE AO, APP LYING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT MADE ADDITION OF RS.2 C ROEES IN THE HANDS OF THE ASSESSEE. THE ARGUMENTS OF THE ASSES SEE THAT IT IS A COMMERCIAL TRANSACTION AND THEREFORE THE PROVISIONS OF SEC TION 2(22)(E) ARE NOT APPLICABLE AND THAT THE CHEQUES WERE ENCASHED IN A.Y. 2009- 10 AND THEREFORE NO ADDITION CAN BE MADE DURING THIS YEA R WERE REJECTED BY THE AO. WE FIND IN APPEAL THE LD.CIT(A) ALSO UP HELD THE ADDITION MADE BY THE AO. 11 25. IT IS THE CASE OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT OF RS.2 CRORES RECEIVED FROM PPPL BY THE PARTNERSHIP FIRM . SHRI CHHATRAPATI PRESS HAS BEEN ADJUSTED AGAINST THE BILLS FOR PRINTING LABOUR CHARGES AND THE MONEY HAS NEVER BEEN RETURNED . THEREFORE, THE SAME IS NEITHER A LOAN NOR AN ADVANCE WITHIN THE MEA NING OF PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. FURTHER, THE T RANSACTION RELATES TO A.Y. 2009-10. IT IS ALSO THE SUBMISSION OF THE L D. COUNSEL FOR THE ASSESSEE THAT ALTHOUGH THE CHEQUES WERE ISSUED ON 31-03- 2008, HOWEVER, THE SAID CHEQUES WERE ENCASHED ON 11-06 -2008. ACCORDING TO HIM, A CHEQUE CONSTITUTES PAYMENT ONLY WHEN THE S AME IS ENCASHED. SINCE IN THE INSTANT CASE ALL CHEQUES WERE ENC ASHED IN A.Y. 2009-10, THEREFORE IT RELATES TO A.Y. 2009-10. IT IS ALSO T HE SECOND ALTERNATE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THERE ARE 8 SHAREHOLDERS OF PPPL, THEREFORE, FOR DETERMININ G THE AMOUNT TAXABLE U/S.2(22)(E) IN THE HANDS OF THE ASSESSEE ADDITION HAS TO BE RESTRICTED TO SUCH PERCENTAGE OF ACCUMULATED PR OFIT AS CORRESPONDS TO ASSESSEES SHAREHOLDING IN PPPL. 26. WE FIND MERIT IN THE ABOVE SUBMISSIONS OF THE LD. COUNSE L FOR THE ASSESSEE. IT IS AN ADMITTED FACT THAT SHRI CHHATRAP ATI PRESS RAISES BILLS FOR PRINTING LABOUR CHARGES AGAINST PPPL. IT HAS RAISE D BILLS FOR PRINTING LABOUR CHARGES AMOUNTING TO RS.3,49,72,854/- DURIN G F.Y. 2005-06, RS.4,12,22,425/- FOR F.Y. 2006-07, RS.4,38,33,311/- FOR F.Y. 2007-08, RS.4,76,44,924/- DURING F.Y. 2008-09 AND RS.5,27,74,74 0/- FOR F.Y. 2009-10. IT HAS ALSO RECEIVED BUILDING RENT FROM PP PL AMOUNTING TO RS.5,40,000/- PER YEAR DURING F.Y. 2005-06 TO 2009-10. THE ABOVE DETAILS ARE AVAILABLE AS PER PAGE 49 OF THE PAP ER BOOK. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE A MOUNT OF RS.2 CRORES RECEIVED FROM PPPL HAS BEEN ADJUSTED AGAINS T THE BILLS FOR PRINTING LABOUR CHARGES AND THE AMOUNT HAS NOT BEEN RE FUNDED BY 12 SHRI CHHATRAPATI PRESS ALSO COULD NOT BE CONTROVERTED B Y THE LD. DEPARTMENTAL REPRESENTATIVE. 27. WE FIND AN IDENTICAL ISSUE HAD COME UP BEFORE THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. CREATIVE DYEING AND PRI NTING PVT. LTD.(SUPRA) IN THAT CASE THE ASSESSEE COMPANY WAS E NGAGED IN THE BUSINESS OF DYEING AND PRINTING OF CLOTH AND WAS AN ANCILLARY UNIT OF P. BOTH THE ASSESSEE COMPANY AND P HAD COMMON SHAREHOLD ERS AND DIRECTORS, TWO OF WHOM HELD MORE THAN 20% OF THE SHARES IN BOTH COMPANIES AND P HELD 50% OF THE SHARES IN THE ASSESSEE COMPANY. P, IN ORDER TO INCREASE ITS EXPORT BUSINESS AND TO COMPETE WITH THE INTERNATIONAL STANDARDS IN GARMENTS EXPORTS PROPOSED MO DERNIZATION AND EXPANSION OF THE PLANT AND MACHINERY OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY BEING UNABLE TO INVEST SUCH A LARG E AMOUNT, P AGREED TO INVEST 50 PER CENT OF THE PROJECT COST, THE REST OF THE 50 PER CENT TO BE ARRANGED BY THE SHAREHOLDERS/DIRECTORS OF T HE COMPANY. THE FUNDS ADVANCED WERE TO BE ADJUSTED AGAINST THE DU ES PAYABLE BY P TO THE ASSESSEE-COMPANY IN SUBSEQUENT YEARS FOR THE J OB WORK OF PRINTING AND DYEING TO BE DONE BY THE ASSESSEE FOR P. T HE ASSESSING OFFICER HELD THAT THE AMOUNT PAID TO THE ASSESSEE-COMPAN Y WAS A DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT, 1961. THE TRIBUN AL HELD THAT IT WAS AN ADVANCE FOR A COMMERCIAL PURPOSE TO THE ASSESSEE COMPANY BY ITS SISTER CONCERN P AND NOT A DEEMED DIVIDE ND U/S.2(22)(E) OF THE ACT. ON FURTHER APPEAL BY THE REVENUE T HE HONBLE HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENUE BY OB SERVING AS UNDER : WE FIND THAT THE TRIBUNAL IN THE PRESENT CASE HAS VE RY EXTENSIVELY DEALT WITH THE LEGISLATIVE INTENTION OF INTRODUCING SECTION 2(22)(E) AND HAS REFERRED TO SUCH LEGISLATIVE INTENTION BY REFERENCE TO THE SUPREME COURT JUDGMENT IN THE CASE OF NAVNIT LAL C. JHAVERI V. K. K. SEN, AAC [1965] 56 ITR 198 WHERE A SIMILAR PROVISION OF THE INDIAN INCOM E-TAX ACT, 1922, I.E., SECTION 2(6A)(E) WAS IN ISSUE BY REPRODUCING THE RELEVA NT PARA IN NAVNIT LAL' S CASE AS UNDER (PAGE 207) : 13 ' IN DEALING WITH MR. PATHAK' S ARGUMENT IN THE PRESE NT CASE, LET US RECALL THE RELEVANT FACTS. THE COMPANIES TO WHICH THE IMPUGN ED SECTION APPLIES ARE COMPANIES IN WHICH AT LEAST 75 PER CENT. OF THE V OTING POWER LIES IN THE HANDS OF OTHER THAN THE PUBLIC, AND THAT MEANS THAT T HE COMPANIES ARE CONTROLLED BY A GROUP OF PERSONS ALLIED TOGETHER AND HAVING THE SAME INTEREST. IN THE CASE OF SUCH COMPANIES, THE CONTROLLIN G GROUP CAN DO WHAT IT LIKES WITH THE MANAGEMENT OF THE COMPANY, ITS AFFA IRS AND ITS PROFITS WITHIN THE LIMITS OF THE COMPANIES ACT. IT IS FOR THIS GROUP TO DETERMINE WHETHER THE PROFITS MADE BY THE COMPANY SHOULD BE DIST RIBUTED AS DIVIDENDS OR NOT. THE DECLARATION OF DIVIDEND IS ENTI RELY WITHIN THE DISCRETION OF THIS GROUP. WHEN THE LEGISLATURE REALIZE D THAT THOUGH MONEY WAS REASONABLY AVAILABLE WITH THE COMPANY IN THE FORM OF PROFITS, THOSE IN CHARGE OF THE COMPANY DELIBERATELY REFUSED TO DISTRIB UTE IT AS DIVIDENDS TO THE SHAREHOLDERS, BUT ADOPTED THE DEVICE OF ADVANCING THE SAID ACCUMULATED PROFITS BY WAY OF LOAN OR ADVANCE TO ONE OF ITS SHAREHOLDERS, IT WAS PLAIN THAT THE OBJECT OF SUCH A LOAN OR ADVANC E WAS TO EVADE THE PAYMENT OF TAX ON ACCUMULATED PROFITS UNDER SECTION 2 3A. IT WILL BE REMEMBERED THAT AN ADVANCE OR LOAN WHICH FALLS WITHI N THE MISCHIEF OF THE IMPUGNED SECTION IS ADVANCE OR LOAN MADE BY A COMPANY WHICH DOES NOT NORMALLY DEAL IN MONEY-LENDING, AND IT IS MADE WITH THE FULL KNOWLEDGE OF THE PROVISIONS CONTAINED IN THE IMPUGNED SECTION. THE OBJECT OF KEEPING ACCUMULATED PROFITS WITHOUT DISTRIBUTING THEM OBVIOUSL Y IS TO TAKE THE BENEFIT OF THE LOWER RATE OF SUPER-TAX PRESCRIBED FOR COMPANIES. THIS OBJECT WAS DEFEATED BY SECTION 23A WHICH PROVIDES THAT IN THE CASE OF UNDISTRIBUTED PROFITS, TAX WOULD BE LEVIED ON THE SHAR EHOLDERS ON THE BASIS THAT THE ACCUMULATED PROFITS WILL BE DEEMED TO HAVE BEEN DISTRIBUTED AMONGST THEM. SIMILARLY, SECTION 12(1B) PROVIDES THAT IF A CONTROLLED COMPANY ADOPTS THE DEVICE OF MAKING A LOAN OR ADVANC E TO ONE OF ITS SHAREHOLDERS, SUCH SHAREHOLDERS WILL BE DEEMED TO HAVE R ECEIVED THE SAID AMOUNT OUT OF THE ACCUMULATED PROFITS AND WOULD BE L IABLE TO PAY TAX ON THE BASIS THAT HE HAS RECEIVED THE SAID LOAN BY WAY OF DIVIDEND. IT IS CLEAR THAT, WHEN SUCH A DEVICE IS ADOPTED BY A CONTROLLED C OMPANY, THE CONTROLLING GROUP CONSISTING OF SHAREHOLDERS HAVE DELIB ERATELY, DECIDED TO ADOPT THE DEVICE OF MAKING A LOAN OR ADVANCE. SUCH AN ARRANGEMENT IS INTENDED TO EVADE THE APPLICATION OF SECTION 23A. TH E LOAN MAY CARRY INTEREST AND THE SAID INTEREST MAY BE RECEIVED BY THE COMPANY ; BUT THE MAIN OBJECT UNDERLYING THE LOAN IS TO AVOID PAYMENT OF TAX' . THE TRIBUNAL HAS ALSO REFERRED TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF CIT V. NAGIN DAS M. KAPADIA [1989] 177 ITR 393 (BOM) IN WHICH IT WAS HELD THAT BUSINESS TRANSACTIONS ARE OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. IN THE SAID CASE, THE COM PANY IN WHICH KAPADIA WAS HAVING SUBSTANTIAL INTEREST HAD PAID VARIOUS AMOUNTS TO KAPADIA. THE TRIBUNAL HAD FOUND THAT KAPADIA HAD BUSINESS TRANSACTIO NS WITH THE COMPANY AND ON VERIFICATION OF THE ACCOUNTS, THE TRI BUNAL DELETED THE AMOUNTS WHICH WERE RELATING TO THE BUSINESS TRANSACTIONS AND WHICH FINDING WAS UPHELD BY THE HIGH COURT. IN THE PRESENT CASE, THE TRIBUNAL ON CONSIDERING DECISI ONS IN VARIOUS CASES HELD AS UNDER : ' FROM THE RATIO LAID DOWN IN THE ABOVE CASES AND ON THE BASIS OF JUDICIAL INTERPRETATION OF THE WORDS, ` LOANS' OR ` ADVANCES' , IT CAN BE HELD THAT SECTION 2(22)(E) CAN BE APPLIED TO ` LOANS' OR ` ADVA NCES' SIMPLICITER AND NOT TO THOSE TRANSACTIONS CARRIED OUT IN THE COURSE OF BUSINESS AS SUCH. IN THE COURSE OF CARRYING ON BUSINESS TRANSACTION BETWEEN A COMPANY AND A STOCKHOLDER, THE COMPANY MAY BE REQUIRED TO GIVE ADV ANCE IN MUTUAL INTEREST. THERE IS NO LEGAL BAR IN HAVING SUCH TRANSACT ION. WHAT IS TO BE ASCERTAINED IS WHAT IS THE PURPOSE OF SUCH ADVANCE. IF THE AMOUNT IS GIVEN 14 AS ADVANCE SIMPLICITER OR AS SUCH PER SE WITHOUT ANY FUR THER OBLIGATION BEHIND RECEIVING SUCH ADVANCES, MAY BE TREATED AS ` DE EMED DIVIDEND' , BUT IF IT IS OTHERWISE, THE AMOUNT GIVEN CANNOT BE BR ANDED AS ` ADVANCES' WITHIN THE MEANING OF DEEMED DIVIDEND UNDER SECTION 2(22)(E). JUST AS PER CLAUSE (II) OF SECTION 2(22)(E), DIVIDEND IS NOT TO IN CLUDE ADVANCE OR LOAN MADE BY A COMPANY IN THE ORDINARY COURSE OF BUSINESS WH ERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE CO MPANY, ADVANCE IN THE ORDINARY COURSE OF CARRYING ON BUSINESS CANNOT BE CONSIDERED AS ` DIVIDEND' WITHIN THE MEANING OF SECTION 2(22)(E). BY GRANTING ADVANCE IF THE BUSINESS PURPOSE OF THE COMPANY IS SERVED AND WHICH IS NOT THE SUM, WHICH IT OTHERWISE WOULD HAVE DISTRIBUTED AS DIVIDEND, CANNOT BE BROUGHT WITHIN THE DEEMING PROVISION OF TREATING SUCH ` ADVAN CE' AS DEEMED DIVIDEND' WE AGREE WITH THE AFORESAID OBSERVATIONS. TH E FINDING OF FACTS, ARRIVED AT BY THE TRIBUNAL, IN THE PRESENT CASE, IS T HAT THE TRANSACTION IN QUESTION WAS A BUSINESS TRANSACTION AND WHICH TRANSACTION WOULD HAVE BENEFITED BOTH THE ASSESSEE-COMPANY AND M/S. PEE EMPRO E XPORTS PVT. LTD. IN FACT, AS STATED ABOVE, THE COUNSEL FOR THE APP ELLANT HAS CONCEDED THAT THE AMOUNT IS IN FACT NOT A LOAN BUT ONLY AN AD VANCE BECAUSE THE AMOUNT PAID TO THE ASSESSEE-COMPANY WOULD BE ADJUSTED AG AINST THE ENTITLEMENT OF MONEYS OF THE ASSESSEE-COMPANY PAYABLE B Y M/S. PEE EMPRO EXPORTS PVT. LTD. IN THE SUBSEQUENT YEARS. THE COUNSEL FOR THE APPELLANT HAS VERY STRENUOUSLY URGE D THAT NEITHER THE TRIBUNAL NOR THE JUDGMENT OF THIS COURT IN RAJKUMAR' S CASE [2009] 318 ITR 462 (DELHI) ; [2009] 181 TAXMAN 155 DEALS WITH T HAT PART OF THE DEFINITION OF DEEMED DIVIDEND UNDER SECTION 2(22)(E) WHICH STATES THAT DEEMED DIVIDEND DOES NOT INCLUDE AN ADVANCE OR LOAN MADE TO A SHAREHOLDER BY A COMPANY IN THE ORDINARY COURSE OF IT S BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY [SECTION 2(22)(E)(II)], I.E., THERE IS NO DEEMED DIV IDEND ONLY IF THE LENDING OF MONEYS IS BY A COMPANY WHICH IS ENGAGED IN THE BUSIN ESS OF MONEY- LENDING. DILATING FURTHER THE COUNSEL FOR THE APPELL ANT CONTENDED THAT SINCE M/S. PEE EMPRO EXPORTS PVT. LTD. IS NOT INTO THE BUSINE SS OF LENDING OF MONEY, THE PAYMENTS MADE BY IT TO THE ASSESSEE-COMPANY WOULD, THEREFORE, BE COVERED BY SECTION 2(22)(E)(II) AND CO NSEQUENTLY PAYMENTS EVEN FOR THE BUSINESS TRANSACTIONS WOULD BE A DEEMED DI VIDEND. WE DO NOT AGREE. THE TRIBUNAL HAS DEALT WITH THIS ASPECT AS REPRO DUCED IN PARA (9) ABOVE. THE PROVISION OF SECTION 2(22)(E)(II) IS BASICAL LY IN THE NATURE OF AN EXPLANATION. THAT CANNOT, HOWEVER, HAVE A BEARING O N INTERPRETATION OF THE MAIN PROVISION OF SECTION 2(22)(E) AND ONCE IT IS HELD THAT THE BUSINESS TRANSACTIONS DO NOT FALL WITHIN SECTION 2(22)(E), WE N EED NOT GO FURTHER TO SECTION 2(22)(E)(II). THE PROVISION OF SECTION 2(22)(E )(II) GIVES AN EXAMPLE ONLY OF ONE OF THE SITUATIONS WHERE THE LOAN/ADVANCE WILL NOT BE TREATED AS A DEEMED DIVIDEND, BUT THAT IS ALL. THE SAME CANNOT B E EXPANDED FURTHER TO TAKE AWAY THE BASIC MEANING, INTENT AND PURPORT OF T HE MAIN PART OF SECTION 2(22)(E). WE FEEL THAT THIS INTERPRETATION OF OURS IS IN ACCORDANCE WITH THE LEGISLATIVE INTENTION OF INTRODUCING SECTIO N 2(22)(E) AND WHICH HAS BEEN EXTENSIVELY DEALT WITH BY THIS COURT IN THE JUDGMENT IN RAJKUMAR' S CASE [2009] 318 ITR 462 (DELHI) ; [2009] 181 TAXMAN 155. THIS COURT IN RAJ KUMAR' S CASE (SUPRA) EXTENSIVELY REFERRED TO THE R EPORT OF THE TAXATION ENQUIRY COMMISSION AND THE SPEECH OF THE FINA NCE MINISTER IN THE BUDGET WHILE INTRODUCING THE FINANCE BILL. ULTI MATELY, THIS COURT IN THE SAID JUDGMENT HELD AS UNDER (PAGE 473) : ' A BARE READING OF THE RECOMMENDATIONS OF THE COMMI SSION AND THE SPEECH OF THE THEN FINANCE MINISTER WOULD SHOW THAT TH E PURPOSE OF THE INSERTION OF SUB-CLAUSE (E) TO SECTION 2(6A) IN THE 192 2 ACT WAS TO BRING WITHIN THE TAX NET MONIES PAID BY CLOSELY HELD COMPAN IES TO THEIR PRINCIPAL SHAREHOLDERS IN THE GUISE OF LOANS AND ADVANCES TO AVOID PAYMENT OF TAX. 15 THEREFORE, IF THE SAID BACKGROUND IS KEPT IN MIND, IT IS CLEAR THAT SUB-CLAUSE (E) OF SECTION 2(22) OF THE ACT, WHICH IS IN PARIMAT ERIA WITH SUB-CLAUSE (E) OF SECTION 2(6A) OF THE 1922 ACT, PLAINLY SEEKS TO BR ING WITHIN THE TAX NET ACCUMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSELY H ELD COMPANIES TO ITS SHAREHOLDERS IN THE FORM OF LOANS. THE PURPOSE BEING TH AT PERSONS WHO MANAGE SUCH CLOSELY HELD COMPANIES SHOULD NOT ARRANGE T HEIR AFFAIRS IN A MANNER THAT THEY ASSIST THE SHAREHOLDERS IN AVOIDING TH E PAYMENT OF TAXES BY HAVING THESE COMPANIES PAY OR DISTRIBUTE, WHAT WOUL D LEGITIMATELY BE DIVIDEND IN THE HANDS OF THE SHAREHOLDERS, MONEY IN TH E FORM OF AN ADVANCE OR LOAN. IF THIS PURPOSE IS KEPT IN MIND THEN, IN OUR VIEW, THE WORD ` ADVANCE' HAS TO BE READ IN CONJUNCTION WITH THE WORD ` LOAN' . USUAL LY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES POSITIVE ACT OF LENDING COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS LOAN : IT GENERALLY CARRIE S AN INTEREST AND THERE IS AN OBLIGATION OF REPAYMENT. ON THE OTHER HAND, IN ITS WIDEST MEANING THE TERM ` ADVANCE' MAY OR MAY NOT INCLUDE LENDING. THE WORD ` ADVANCE' IF NOT FOUND IN THE COMPANY OF OR IN CONJUNCTION WITH A WO RD ` LOAN' MAY OR MAY NOT INCLUDE THE OBLIGATION OF REPAYMENT. IF IT DOES, THEN IT WOULD BE A LOAN. THUS, ARISES THE CONUNDRUM AS TO WHAT MEANING ONE WOULD ATTRIBUTE TO THE TERM ` ADVANCE' . THE RULE OF CONSTRUCTION TO OUR MI NDS WHICH ANSWERS THIS CONUNDRUM IS NOSCITUR A SOCIIS. THE SAID RULE HAS BEEN EX PLAINED BOTH BY THE PRIVY COUNCIL IN THE CASE OF ANGUS ROBERTSON V. GE ORGE DAY [1879] 5 AC 63 BY OBSERVING ` IT IS A LEGITIMATE RULE OF CONSTR UCTION TO CONSTRUE WORDS IN AN ACT OF PARLIAMENT WITH REFERENCE TO WORD S FOUND IN IMMEDIATE CONNECTION WITH THEM' AND OUR SUPREME COURT IN THE CASE OF ROHIT PULP AND PAPER MILLS LTD. V. COLLECTOR OF CENTRAL EXCISE, AIR 1991 SC 754 AND STATE OF BOMBAY V. HOSPITAL MAZDOOR SABHA, AIR 1960 SC 610.' THEREFORE, WE HOLD THAT THE TRIBUNAL WAS CORRECT IN HOLDING THAT THE AMOUNTS ADVANCED FOR BUSINESS TRANSACTION BETWEEN THE PA RTIES, NAMELY, THE ASSESSEE-COMPANY AND M/S. PEE EMPRO EXPORTS PVT. LTD. WAS NOT SUCH TO FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND UN DER SECTION 2(22)(E). THE PRESENT APPEAL IS, THEREFORE, DISMISSED. 28. WE FIND SLP FILED BY THE REVENUE AGAINST THE ABOVE DE CISION OF THE HONBLE DELHI HIGH COURT HAS BEEN DISMISSED BY THE HO NBLE SUPREME COURT IN CIT VS. CREATIVE DYEING AND PRINTING (P) LTD. IN SLP (C) NO.1819 OF 2010 ORDER DATED 07-07-2010. THE VARIOUS OTHER DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE ALS O SUPPORT THE CASE OF THE ASSESSEE. SINCE THERE IS CONTINUOUS AN D SUBSTANTIAL BUSINESS TRANSACTION BETWEEN PPPL AND SHRI CHHATRAPATI PRESS AND CONSIDERING THE FACT THAT THE AMOUNT OF RS.2 CRORES HAS BEEN ADJUSTED AGAINST THE BILLS FOR PRINTING LABOUR CHARGES, THEREFORE, IN VI EW OF THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CREA TIVE DYEING AND PRINTING PVT. LTD. CITED (SUPRA) THE AMOUNT OF RS.2 CROR ES CANNOT 16 BE TAXED U/S.2(22)(E) OF THE I.T. ACT. IN THIS VIEW OF THE MA TTER, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO DELET E THE ADDITION. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 29. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18-01-2016. SD/- SD/- ( VIKAS AWASTHY ) ( R.K. PANDA ) ! / JUDICIAL MEMBER / ACCOUNTANT MEMBER IQ.KS PUNE ; DATED : 18 TH JANUARY, 2016 LRH'K ' (!* + / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ ( ) , / THE CIT(A), KOLHAPUR 4. $ , / THE CIT, KOLHAPUR 5. ' **+ , + , IQ.KS / DR, ITAT, A PUNE 6. / / GUARD FILE. / BY ORDER , ' //TRUE COPY // 12 * + / SR. PRIVATE SECRETARY +, IQ.KS / ITAT, PUNE