COMMISSIONER OF INCOME TAX Vs. ARVIND KUMAR JAIN

JUDGEMENT

(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.

(2.) We may note that 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 Periodicals 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 Assessing Officer as in the books of accounts, the amount was shown as "unsecured loan".

(3.) The assessee challenged the said addition by filing appeal before the CIT (A) who accepted the explanation furnished by the assessee. It was found, as a fact, that both the assessee as well as the A & A Periodicals 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 Periodicals; 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 Periodicals to the assessee by way of loan but on this basis, allowing the appeal of the assessee, the CIT (A) deleted the additions. The matter was taken in further appeal before the ITAT by the Revenue. However, the appeal of the Revenue has been dismissed by the Tribunal vide impugned order dated 16.7.2010 holding that the payment made by the A & A Periodicals to the assessee is not in the nature of loan or advance. The finding of the CIT (A) is affirmed by the ITAT, on the basis of books of accounts produced before the Assessing Officer and shown to the Tribunal as well that all the transactions between the two entities are recorded in the current account maintained by the parties and outstanding in the said account was merely because of the trade transaction and did not represent any advance or loan.