Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2015 (10) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2015 (10) TMI 755 - HC - Income TaxDeemed dividend u/s 2(22)(e) - as per revenue alleged loan taken by the appellant was a deemed dividend and, therefore an income from other sources - Whether the loan/advance given by the Finance Company to the assessee, who is a share holder in the Finance Company was made in the ordinary course of its business, hence outside the scope of Section 2(22)(e)? - Held that:- It is not possible to give a fixed definition of the word "substantial" in relation to a substantial business of a Company. We are of the opinion that any business of a Company which is not trivial or inconsequential as compared to the whole of the business would be termed as substantial part of the business. In the instant case, the assessing officer has held that the business of giving loans and advances by Sarnath Finance Company constituted less than 20% of the total investment and, therefore, the same is not a substantial part of the business of the Company. In our view, such reasoning is per se misconceived. We find from a perusal of the order of the Tribunal that Sarnath Finance Co. is admittedly engaged in the business of loans and advances, as is clear from the memorandum of association. The Tribunal picks holes from the balance sheet of the Sarnath Finance Co. contending that under the heading "Loans and Advances" the Company had made sub groups, namely, "Loans and Advances" and "stocks on hire including hire purchase". The Tribunal, therefore, concluded that a substantial part of the business of the said Finance Company was hire purchase. In our view, the Tribunal has side tracked the issue without realising that "stocks on hire" was also shown under the heading of "Loans and Advances" in the balance sheet of the Finance Company. The break up of different kinds of loans and advances indicated by the said Finance Company in its balance sheet was for its convenience. The fact remains that the Finance Company was substantially carrying on the business of lending money which was its main business. We are of the view that the Tribunal and the authorities below committed a manifest error in holding that the loan and advance given by the Sarnath Finance Company to the appellant was a deemed dividend. In fact, it was covered by the exclusionary clause (ii) of Section 2(22)(e) of the Act. - Decided in favour of assessee.
|