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2016 (5) TMI 58 - AT - Income TaxDeemed dividend u/s 2(22) - Loan / Advances received from public company cum NBFC - Held that:- The assessee before the Assessing Officer and the learned Commissioner of Income-tax (Appeals) has submitted that both these companies are public limited companies and they have produced evidences to substantiate that the STLL is a listed company at the Delhi Stock Exchange and Jaipur Stock Exchange and also the shareholding pattern as on March 31, 2008. And that section 2(22)(e) is not applicable to loans or advances by non-banking finance companies (NBFC). In order to substantiate that STLL is NBFC, it was submitted that they are registered with the Reserve Bank of India since 1998 in category of loan investment company and engaged in the activities of shares sale, financing activities, loan syndication activities and hypothecation activities. It is a well-settled principle of law that deeming provision has to be interpreted strictly and it cannot be stretched to more than that for which the deeming provision can be literally interpreted. Nothing can be added or implied while interpreting a deeming provision. One can only look at the language used. Therefore, we concur with the learned Commissioner of Income-tax (Appeals) that the lender company, i.e., M/s. STLL is a public limited company and so the loan/advance/ICD given to the assessee does not fall in the ken of section 2(22)(e) and moreover, the lender company is a NBFC which is also excluded from the said deeming provision, therefore, we do not find any merit in this ground of appeal and we uphold the learned Commissioner of Income-tax (Appeals)'s order and dismiss this ground. - Decided in favour of assessee. Disallowance of total interest - Held that:- We find that the assessee-company had sufficient free funds and that the assessee had stated before the Assessing Officer that the borrowed funds have been used for business purposes only and not for the investment, could not be controverted by both the authorities below. The Assessing Officer erred in concluding that since the assessee-company is incurring interest expenditure so no surplus fund is available to the assessee-company is erroneous on the fact that the total shareholder fund without interest burden is to the tune of ₹ 34.46 crores and, therefore, thus we have no hesitation to delete the disallowance. See East India Pharmaceutical Works Ltd. v. CIT [1997 (3) TMI 5 - SUPREME Court ] - Decided in favour of assessee.
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