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2015 (3) TMI 1154 - AT - Income TaxDeemed dividend u/s. 2(22)(e) - Held that:- we find that the liquid funds available with the assessee were ₹ 31,24,44,463/- and assessee had granted loans during the year amounting to ₹ 11,26,65,003/-, which works out to 36.06% of total liquid funds available. Hence, it can be safely concluded that the lending activity is substantial part of the business of M/s. JAFPL from the factual position as stated herein above from the angle of funds deployment criterion. The provisions of section 2(22)(e) of the Act cannot be made applicable for inter corporate deposits as received by the assessee. Thus in respect of expression ‘substantial part of the business’ and the alternative argument of the assessee that what was received by the assessee from M/s. JAFPL is only in the nature of inter corporate deposits and not loans and advances. Hence, the provisions of section 2(22)(e) of the Act cannot be made applicable in the facts of the case, we hold that no addition could be made in the hands of the assessee u/s. 2(22)(e) of the Act. - Decided in favour of assessee Disallowance u/s. 14A - Held that:- We find that no satisfaction was recorded by the ld.AO in terms of Rule 8D(1) of the IT Rules, 1962, which is mandatory as in the instant case, the assessee had disallowed a sum of ₹ 15,451/- voluntarily in the return of income u/s. 14A and without giving a categorical finding how the said figure is incorrect having regard to the accounts of the assessee, the ld.AO cannot resort to directly adopt the Rule 8D(2) and make disallowance thereon. We find that both the ld. AO as well as the ld. CIT(A) had not addressed this aspect, which is crucial and it goes to the root of the matter. We hold that without recording satisfaction in terms of rule 8D(1), the ld.AO cannot directly apply the Rule 8D(2) of the I.T Rules 1962. Thus we have no hesitation in directing the ld. AO to delete the addition made on this count u/s. 14A of the Act - Decided in favour of assessee
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