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2012 (12) TMI 871 - AT - Income TaxDisallowance u/s 14A r.w.s. 8D - Held that:- Godrej Boyce Mfg. Co. Ltd. v. Dy. CIT [2010 (8) TMI 77 - BOMBAY HIGH COURT] holding that Rule 8D is applicable prospectively from assessment year 2008-09 & disallowance u/s 14A for the years prior to assessment year 2008-09 has to be made by adopting some reasonable method. As AY for the present case if 2005-06 impugned order of the CIT(A) confirming the disallowance u/s 14A is set aside and restore the matter to the file of the AO to recompute the disallowance - in favour of assessee for statistical purposes. Addition on deemed dividend u/s 2(22)(e) - loans taken from M/s JMC Securities Pvt. Ltd - Held that:- Interest income earned by M/s JMC Securities Pvt. Ltd. during the year under consideration was to the tune of Rs.9,16,088/- which constituted about 70% of its total business income amounting to Rs.13,04,088/-. Moreover, the maximum amount of loan advanced by M/s JMC Securities Pvt. Ltd. during the year under consideration was to the tune of Rs.95,45,000/- which constituted 32% of the total funds available with the said company. If these facts and figures are considered in the light of the decision in the case of Parle Plastics Ltd. (2010 (9) TMI 726 - BOMBAY HIGH COURT), it becomes abundantly clear that lending of money was a substantial part of a business of M/s JMC Securities Pvt. Ltd. and the loan in question to the assessee was made by the said company in the ordinary course of its business. It, therefore, follows that the conditions stipulated in section 2(22)(e)(ii) were duly satisfied and the amount of loan advanced by M/s JMC Securities Pvt. Ltd. to the assessee could not be regarded as a deemed dividend. As the assessee has also filed a copy of the assessment order passed u/s 143(3) in the case of M/s JMC Securities Pvt. Ltd. for the assessment year 2006-07 wherein the nature of the business of the said company was clearly indicated as "finance" and it was further mentioned in the body of order that the said company continued into business of short term finance of idle funds. Thus the addition made by the AO u/s 2(22)(e) on account of the loan advanced by M/s JMC Securities Pvt. Ltd. to the assessee by treating the same as deemed dividend is not sustainable - in favour of assessee.
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