Smt. Rinku Chakraborthy Vs CIT (ITAT Bangalore)
ITAT Bangalore held that advances given to the director by the company for commercial purpose is outside the ambit of provisions of deemed dividend as provided under section 2(22)(e) of the Income Tax Act.
Facts-
Assessee is an individual and declared her income under the head ‘salary, house property’ and ‘other sources’. The assessee is a director and shareholder in the company viz., DTDC Ltd. The assessee along with other 5 Directors has received a loan and advance amounting to Rs. 39,60,000/-, which was shown by the company as an advance for the purchase of property. However, AO contented that there was no agreement between the assessee and the company at the time of giving such advance dated 20/3/1995. As such, the advance given by the company was simple advance without having any element of commercial transaction. Thus, the AO treated the sum of Rs. 6,60,000/- as deemed dividend u/s 2(22)(e) of the Act and added to the total income of the assessee.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion-
Hon’ble Delhi High Court in CIT vs. Raj Kumar it is observed that Trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provisions of section 2(22)(e) of the Act.
