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2015 (10) TMI 596 - AT - Income TaxDisallowance of interest paid as non-business purpose expenditure - Held that:- The partners have withdrawn their capital, which were credited in the firm. There is no bar to withdraw their capital as they have withdrawn their capital out of the total capital invested in the firm. They have advanced these amounts to another firm i.e. M/s Raju Steel Industries on which they have charged interest and that interest income has been shown in the hands of these partners. Similarly, the partner of M/s Raju Steel Industries has withdrawn some capital from their partnership firm and advanced the money to this partnership concern. This partnership concern has paid interest to them and the interest income has been shown in their respective hands. Therefore, in our considered view, there is no loss of revenue at all. The firm is paying interest and claiming deduction in profit and loss account, on the other hand, the lenders have shown the interest income in their hands and paying due tax on that income. The rate of tax is same, therefore, in our considered view, disallowance of interest paid was not justified under Section 37(1). This is the business man who knows how to run his business activity. The assessee has run his business activities in a way which they like and was beneficial for them. If by any reason they have made some tax planning, that tax planning is also in the four corner of law, which is permissible. Therefore, for this reason also, disallowance of interest was not justified - Decided in favour of assessee. Deemed dividend - CIT(A treating that loan and interest accrued thereupon given on the assessee firm by OCAPL did not fall within the ambit of section 2(22)(e) - Held that:- The deemed dividend can be assessed only in case of person who is a shareholder of lender company and not in the hands of the person other than the shareholder. See COMMISSIONER OF INCOME TAX Versus ANKITECH PVT LTD. & OTHERS [2011 (5) TMI 325 - DELHI HIGH COURT] - Decided in favour of assessee.
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