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2017 (11) TMI 1761 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - when the assessee company is neither a registered nor a beneficial shareholder of the lender companies, the loan/advance received by the assessee company from these group companies could be taxed in its hand as “deemed dividend” within the provisions of section 2(22)(e) - Held that:- The issue in dispute as to applicability of section 2(22)(e) to a non shareholder recipient of loan / advance, thus, now stands settled. As far case laws, cited by the Ld DR, are concerned it would be suffice to say that they do not address the specific issue of treating receipt of an advance/loan as deemed dividend in the hands of the non shareholder recipient which is the core dispute in the present appeal. In the present case, the assessee company is neither a registered nor a beneficial shareholder of the lender companies and the loan / advance is also not alleged to have been received by the assessee company on behalf of or for the benefit of its alleged shareholder i.e. Sh Charanjeet Nagpal. No error in the order of the CIT(Appeals) in deleting the addition made by the AO u/s 2(22)(e) of the Act. Therefore, appeal this ground of appeal of revenue is dismissed. Addition under the head “Income from House Property” - reasonable rent for which the property may be let out - Held that:- Where a property is fully let out, its Annual Value is to be taken at higher of the actual rent received / receivable from the said property or the sum for which the said property might reasonably be expected to let out from year to year. In the present case, municipal valuation of the concerned property was made on 27/06/2009 by the Municipal Corporation fixing the annual value of the property at ₹ 7,22,640/- relevant for the Assessment Year under appeal. In view of the decision in the case of John Tipson& Co. (P) Ltd [2006 (10) TMI 94 - HIGH COURT OF DELHI] as well Calcutta Hugh Court in the case of Commissioner of Income Tax Vs Satya Co. Ltd [1993 (8) TMI 293 - CALCUTTA HIGH COURT] as discussed the “reasonable rent” for which the property might be let out cannot exceed thesaid amount fixed as annual value by Municipal Corporation. As against this the assessee received total rent of ₹ 22,25,200/- which is much higher than the municipal valuation. Thus, same is to be treated as “standard rent” for the property in question. So far as different rent fetched from different tenants is concerned it is suffice to say that area as well as terms of both the tenants were different and distinguishable in features. Rent received from M/s Axis Bank cannot be the basis of determining the rent from M/s Tanushaka Automobiles Pvt Ltd. Moreover, the property did not consist of different units. It was a compact property some part of which was let out to one tenant and some part to other. Thus, the annual value of the said property was to be considered as a single unit as is done by the Municipal Corporation. In our opinion there is considerable force in the arguments of the Ld AR. AO was not justified to make the impugned addition. Therefore, we find no reason to interfere in the order of CIT(A) on this issue. - decided against revenue Addition u/s 40A(2)(b) - assessee had received security deposit from other tenant and had given security deposits to others for the premises taken on rent - No interest was either received or paid on such other deposits - Held that:- Before making any disallowance it is to be established that the payment for such expenditure was “excessive or unreasonable” having regard to the “fair market value” for similar expenditure. Unless the expenditure is found excessive or unreasonable it cannot be disallowed. CIT(A) discussed the matter in detail and has deleted the addition after examining the records as well as legal position of disallowance u/s 40A(2)(b). We also find from the records that the interest @ 6% p.a was paid by the assessee to M/s Tanushaka Automobiles Pvt Ltd under a contractual obligation. AO has not doubted the correctness of agreement nor has found it to be frivolous. The rate of interest i.e. 6% p.a too is not found to be excessive comparing to fair market rates. No infirmity in the order of the CIT(Appeals) in deleting the addition made by the Assessing Officer U/s 40A(2)(b) - Decided against revenue.
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