R. Sudhakar, J.

1. This Tax Case (Appeal) is filed by the Revenue as against the order of the Income Tax Appellate Tribunal raising the following substantial questions of law:

“1. Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that a sum of Rs.40 lakhs paid is not assessable in the hands of the assessee company as per provisions of Section 2(22)(e) of the Income Tax Act, 1961?

2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that para 10.3 of circular No.495 dated 22.9.1987 issued by CBDT is not applicable?"

2. The assessment in this case relates to the assessment year 2005-06. The respondent/assessee, Printwave Services P. Ltd. received a sum of Rs. 41,46,588/- from another private limited company, namely, Front Line Printers P. Ltd., which is stated to be sister concern of the assessee company. On the date on which the above amount was received, the assessee paid a sum of Rs.42,96,677/- to one Shri. T.R. Jawahar, who is said to be the Director in both the companies and was having common interest in both the companies. On verification of the details furnished by t