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2010 (11) TMI 141 - ITAT, CHENNAISearch and seizure – Addition – Deemed dividend u/s 2(22)(e) - sister concern - property on lease - security deposit received does not fall in the category of ‘deemed dividend’. The Legislature has not used in its wisdom the word “deposit” in this section alongwith loans and advances. Thus, this provision is not attracted for security deposits received by an assessee in the normal course of its business activity. Advance Received for land - sister concern - shareholding pattern - transfer of shares - substantial interest - Held that: advance of more than Rs. 5 crores to Shri M. Rajkumar and the alleged clandestine embezzlement of the fund by him has no bearing on the addition made by the Assessing Officer However, the Assessing Officer is found to have erred in law while resorting to this addition because there is no cogent evidence brought on record by him to prove that the transfer of shares from Shri V. Ayyadurai/ Shri V.A. Shiva to their relatives was executed with the sole intention of defrauding the revenue. - the conditions stipulated in Section 2(22)(e) were not at all satisfied in the appellant’s case during the relevant accounting year. - No deemed dividend Interest under the head income from other sources - An amount of Rs. 10 lakhs was adjusted during the previous year 2005-06 on account of interest - it was stated by the assessee that this transaction was notional in nature and the assessee had not received any amount in cash or through cheque - There is no supporting evidence for treating Rs. 10 lakhs as interest income of the assessee particularly when the transaction has clearly not resulted pre-receipt of money or any benefit by the assessee – Decided in the favour of the assessee Payment of Rs. 1.5 crores - The appellant who is a director in both the companies holds 4.99 per cent of the share capital of MMPPL at the time of this transaction. - The issue to be decided is whether the payment of the amount of Rs. 1.5 crores by MMPPL to the appellant (even without going into the merits of whether the amount was paid as purchase consideration or was spent by the appellant for undisclosed purposes) would attract the provisions of section 2(22)(e) of the Act. Since the shareholding of the appellant in MMPPL is less than 10 per cent, - the provisions of section 2(22)(e) are not attracted in the instant case. Therefore the addition of Rs. 1.5 crores as deemed dividend under section 2(22)(e) is not warranted and is deleted
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