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2014 (12) TMI 801 - ITAT KOLKATAAddition of deemed dividend u/s 2(22)(e) - loans taken by assessee Held that:- Both the parties are beneficiary of the transaction being current account of the above transactions i.e. shifting balances the same matter has been decided in Pradip Kumar Malhotra v. CIT [2011 (8) TMI 16 - CALCUTTA HIGH COURT] wherein it has been held that section 2(22)(e) of the Act was inserted to bring within the purview of taxation those amounts which are actually a distribution of profits but are disbursed as a loan so that tax thereon can be avoided - when dividends are declared by a company, it is solely the shareholders who benefit from the transaction - No benefits accrue to the company by way of dividend distribution - Thus, section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend - by giving and taking financial assistance from each other, both the assessee and the company were benefited and such transactions between them were nothing but commercial transactions and dividend attributable to the shareholder is nothing to do with such business transaction - it can be said that sec. 2(22)(e) of the Act covers only those transactions which benefit the shareholder alone and results in no benefit to the company - the loan account differs from current account and the provisions of section 2(22)(e) of the Act, being a deeming section, cannot be applied to current account thus, the addition is to be set aside Decided in favour of assessee. Interest payment made on utilization of borrowed fund by giving interest free advances to the relatives of the assessee and other group companies disallowed Held that:- The AO has simply disallowed the interest by observing that, the assessee deducted ₹ 1,34,988/- on account of payment of interest against interest from other sources consisting of Royalty and Interest of ₹ 1182/- from bank - borrowed fund was not utilized for earning the income - borrowed fund on which interest of ₹ 1,34,988/- was paid, was used mainly for giving interest free advance to the relatives of the assessee and to the concerns of the Group - hence, the borrowed fund cannot be said to have been used for purpose of earning income - interest paid on borrowed fund which was not used for earning income is disallowed and added to the total income of the assessee - for making disallowance the AO should have found out the nexus, first of all, and it is also a fact that the assessee is having substantial capital in the form of shares and other reserves and surpluses to meet out these loans - once this is the position, the interest on borrowed funds cannot be disallowed Decided in favour of assessee. Unexplained investment in jewellery disallowed Held that:- During the course of search on the residence of assessee on 04.10.2007 jewellery consists of 39 items valuing ₹ 24,51,316/- was found out of which jewellery valuing ₹ 17,26,660/- was seized - assessee was required to explain the jewellery found - details are described in the assessment order but the AO has not believed the explanation of the assessee and made addition but CIT(A) deleted the addition after considering the explanation of the assessee - CIT(A) only sustained the addition made by AO of jewellery valuing at ₹ 3,95,859/- Hence out of total addition of ₹ 10,36,187/- on account of undisclosed investment in jewellery, addition of ₹ 6,40,328/- is deleted and balance addition of ₹ 3,95,895/- is confirmed from the records it was found that the assessee has filed evidences of remodeling of jewellery that these jewellery to the extent of ₹ 3,95,895/- was made out of old jewellery, which was acquired prior to the date of search Decided in favour of assessee. Assessment in pursuance of research u/s 153A - claim of deduction which were not claimed earlier Demat Charges - deleting the addition under the head Capital Gain - Held that:- There is no seized incriminating materials found during the course of search and without any evidence the AO has made addition of deemed dividend following the decision in All Cargo Global Logistics Ltd., v. DCIT [2012 (7) TMI 222 - ITAT MUMBAI(SB)] as well as in Jai Steel (India) Versus Assistant Commissioner of Income Tax(Alongwith other 16 similar matters) [2013 (6) TMI 161 - RAJASTHAN HIGH COURT] Decided against revenue.
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