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2016 (2) TMI 625 - AT - Income TaxDeemed dividend under Section 2(22)(e) - Held that:- It is only the payment by a company during the relevant previous year which could be brought to tax (when it satisfies other conditions of section 2(22)(e) as deemed dividend. The phrase used u/s 2(22)(e) is "any payment by company”. In case the AO's action is to be upheld, then the appellant becomes liable to tax every year as long as the opening balance of advance continues in his books of accounts. This could not be the meaning of section 2(22)( e). Therefore, find no merit in the addition made by the AO under this head - Decided in favour of assessee Addition under Section 36(1)(iii) - Held that:- The appellant company had taken TOD (Temporary Over Draft) from Central Bank of India on which it has paid ₹ 72,618/- Bank of Punjab. The AO has not established in his order-that the borrowed funds have been diverted for making investment. In fact the AR has submitted that except for the TOD no loan was raised and just ₹ 72,618/- was expended on the same. An investment of ₹ 4.5 crores has been made during the previous year relevant to current assessment year and no fresh loans have been raised. There are fresh funds in the form of sundry creditors & advances from customers which more or less match with the fresh quantum of investment. The secured loan at the year end was Nil. All these facts go to show that the AO has not been able to show-that the borrowed funds have not been utilized for the purpose of business and that they have been diverted to finance the non-business tax exempt activity. Therefore the disallowance u/s 36(1 )(iii) cannot be made - Decided in favour of assessee Disallowance u/s 14A - applicability of rule 8D - Held that:- Assessing Officer has not complied with the requirement of recording dissatisfaction as to the correctness of claim of the assessee as held in Judgement of Delhi High Court in the case of Maxopp Investement [2011 (11) TMI 267 - Delhi High Court] the action of the AO in invoking rule 8D was not justified. Despite the observation, the CIT(A) has upheld disallowance of ₹ 4,22,000 towards administrative expenses. In view of the above discussion, we find that the order of ld. CIT(A) on the issue in dispute is well reasoned and, therefore, no interference is required - Decided against revenue
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