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2015 (12) TMI 187 - AT - Income TaxAddition made by AO on account of low gross profit rate - CIT(A) deleted the addition - Held that:- AO has estimated the gross profit @ 6.46% on sales of spare being the same rates of profit shown by the assessee in the immediately preceding assessment year. The AO has examined the books of account including the stock register but could not point out any defect as is evident from the above that the assessee has maintained complete books of account including the stock register and complete details of purchase of spare parts were filed before the AO and none of the purchase and sales or opening or closing stock have been doubted or disputed. Another notable feature is that the AO has missed out to note that the three free services have to be provided to the customers after purchase of car with free spare parts. This fact has not been recognized by the AO above all. The AO has not rejected the books of account and without rejection of books of account no disturbance in the profit rate can be made by AO and hence, the issue is squarely covered in favour of assessee Addition of deemed dividend - CIT(A) deleted the addition - whether the transaction is commercial in nature and even otherwise the lender company is not a shareholder in the assessee company - Held that:- We find that the assessee has taken loan on interest from MTPL and paid interest to the tune of ₹ 9,55,288/- and the lender company's business is that of money lending. MTPL is not shareholder in assessee company although it is a sister concern. Only common feature is that one of the directors Shri M. D. Jindal is holding common shareholding of the assessee company at 50.25% and in MTPL at 64.16%. But admittedly, assessee is not a shareholder in MTPL nor MTPL is a shareholder in assessee company not holding 10% or more shares or voting powers. We find that the assessee has paid interest on the above loans and this is purely a commercial transaction. Once this is the position, the issue is covered by the judgment of Hon'ble Calcutta High Court in the case of Pradip Kr. Malhotra, [2011 (8) TMI 16 - CALCUTTA HIGH COURT] wherein it is held the authorities below erred in law in treating the advance given by the company to the assessee by way of compensation to the assessee for keeping his property as mortgage on behalf of the company to reap the benefit of loan as deemed dividend within the meaning of section 2(22)(e) of the Act. Also as none of the company i.e. neither lender nor the assessee company is registered shareholder in each other to the extent of 10% as mandated in the provision of section 2(22)(e) of the Act for charging deemed dividend. This issue is also covered by the order of Hon'ble Special bench of this Tribunal in the case of ACIT Vs. Bhaumick Colour Pvt. Ltd. (2008 (11) TMI 273 - ITAT BOMBAY-E ) wherein held deemed dividend could be assessed only in the hands of the person, who is a shareholder of the lender company and not in the hands of a person other than a shareholder, i.e., the concern. - Decided in favour of assessee.
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