Section 2(22)(e) – ‘Trade Advances’ are Not ‘Loans and Advances’ – Delhi High Court

CIT vs. Arvind Kumar Jain (Delhi High Court)- Trade advance which are in the nature of money transacted to give effect to a commercial transactions would not, in our view, fall within the ambit of the provisions of Section 2(22)(e) of the Act. This interpretation would allow the rule of purposive construction with noscitur a sociis, as was done by the Supreme Court in the case of LIC of India v. Retd. LIC Officers Assn. [2008] 3 SCC 321.

IN THE HIGH COURT OF DELHI AT NEW DELHI

ITA No. 589 OF 2011

Judgement Reserved On: 19.09.2011

Judgement Delivered On:30.09.2011

Commissioner of Income Tax Vs. Arvind Kumar Jain

 JUDGEMENT

A.K. SIKRI, J

1. 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 AO 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.