Jayson Industries Vs ITO (ITAT Delhi)
Assessee firm has obtained loans from the sister concern on commercial basis. On facts it has emerged that the lender company has charged interest on advances made to assessee firm. The assessee has taken plea that the advances made by the lender company to the borrower assessee firm is not a loan/advance but is beset with the character of quid pro quo owing to charge of interest for the benefit of lender company. In the circumstances, the Hon’ble Calcutta High Court in the case of Pradip Kumar Malhotra vs. CIT, (2011) 338 ITR 538 (Cal.) has observed that advances given by lender firm was not for the individual benefit of the shareholder but for business purposes and therefore such transactions could not fall within the sweep of deeming fiction created under Section 2(22)(e) of the Act. This reason on a standalone basis is sufficient to exclude the applicability of Section 2(22)(e) of the Act on the money received by the assessee firm. Similar view has been expressed in PCIT vs. Mohan Bhagwatprasad Agrawal, (2020) 115 taxmann.com 69 (Guj.). Also, the same view has been followed by the Co-ordinate Bench of the Tribunal in Smt. San geeta Jain vs. ITO in ITA No.1817/Kol/2009; Assessment Year 2006-07, order dated 11th March, 2016. Hence, the loan obtained being not gratuitous in nature, do not fall within the mischief of Section 2(22)(e) of the Act.
FULL TEXT OF THE ORDER OF ITAT DELHI
The captioned Appeals arises from the respective orders of CIT(A) for different assessment years tabulated hereunder:
