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2016 (2) TMI 223 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - CIT(A) deleted the addition - Held that:- In the case of Parle Plastics Ltd.(2010 (9) TMI 726 - BOMBAY HIGH COURT) wherein it has been held that provisions of section 2(22)(e) of the Act are not applicable if the money borrowed by the share holder from the company in the ordinary course of business. The facts of the assessee’s case are squarely covered by the above mentioned decision as the assessee borrowed money in the ordinary course of business of the company where the money lending was substantial part of the business activity and had paid interest on such borrowings’. We ,therefore, respectfully following the above decisions, uphold and sustain the conclusion drawn by the CIT(A) on this issue - Decided in favour of assessee Addition on account of payment of excessive interest @15% - reasonableness - Held that:- As considered the relevant material on record find that the assessee has raised money from the market at the differential rate of interest. We note that out of 26 parties only to 3 parties interest was paid at the rate of 15%. We also note that assessee was engaged in the business of money lending in the ordinary course of business and for the purpose of doing its business the assessee had to borrow money from the market at the prevailing market rate of interest which are governed by several factors such as urgency of funds required, availability of funds in the market, notice at which fund are required and creditworthiness of the persons raising the money. The Ld. CIT(A) had given a very detailed observation for arriving at his decision. In the case of Bansidhar Omkarlal (1964 (12) TMI 50 - ORISSA HIGH COURT), it has been decided that there was no scope for application of the test of the reasonableness to a case of payment of interest and therefore the rate of interest could not be scaled down. Thus in view of the ratio laid down in the above decision by the Honble Orissa High Court , we find no infirmity in the order of CIT(A) and uphold the same on this point.- Decided in favour of assessee
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