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2020 (9) TMI 488 - AT - Income TaxDisallowance of 18% notional interest calculation on Advance given against property in the Real Estate business of Appellant Company - no agreement or receipt etc was furnished to evidence the advance against property - HELD THAT:- Assessee failed to substantiate its claim that the loan/advance was meant for real estate business i.e. purchasing the property. On record there is no agreement to purchase nor any receipt showing that the advance was meant for buying the property. In fact, in none of the cases, the purchase of property got materialized. AR submitted that the assessee company had advanced ₹ 6.37 crores towards purchase of property out of which ₹ 17 lacs had been paid in A.Y. 2007-08. These advances were received back in the subsequent assessment years (A.Y. 2009-10 and 2010-11) as the deal could not be materialized and the amount advanced towards it was received back. This aspect was not looked into by the AO as well as the CIT(A) and needs to be looked into in its entirety. Therefore, it will be appropriate to remand back this issue to the file of the AO for proper adjudication. Ground Nos. 1 and 2 are partly allowed for statistical purpose. Disallowance u/s 14A r.w.s. Rule 8D - proximate cause between exempt income and expenses incurred to earn such income - HELD THAT:- AR submitted that the assessee has earned exempt income to the tune of ₹ 2,86,370/- whereas the Assessing Officer has made disallowance amounting to ₹ 10,58,926/-. The CIT(A) as well as Assessing Officer has not looked into the aspect of actual exempt income and the investment at large. Therefore, this issue also needs to be verified in its entirety. Addition on account of deemed dividend u/s 2(22)(e) - HELD THAT:- Section 2(22)(e) of the Act is not applicable in cases of companies in which public are substantially interested and the assessee company is a Public Limited Company and therefore, provisions of Section 2(22)(e) cannot be applied. Admittedly, the assessee company is registered with stock exchange and fulfill all the conditions of Section 2(18) which is definition of “company in which public is substantially interested.” Thus, the submissions of the Ld. AR are acceptable and are supported by the decisions of the Tribunal in cases of DCIT vs. M/s Sindu Realtors Pvt. Ltd. [2016 (5) TMI 58 - ITAT DELHI]. In this case also Section 2(22)(e) of the Act is not applicable and as rightly deleted the addition by the CIT(A). Further, the Assessing Officer has also failed to substantiate as to how the amount in question is in the shape of a loan/advance received by the assessee company. Ground No. 1 of the Revenue’s appeal is dismissed. Interest disallowance on share application money investment - CIT-A deleted the addition holding that making investments in the shape of share application money was a normal business activity of the assessee and therefore, it cannot be held that it was not for business purposes - HELD THAT:- As observed by the CIT(A) that given share application money to the same company in A.Y. 2006-07 also, but no notional disallowance was made by the Assessing Officer in that assessment year. CIT(A) was right in deleting the said addition as similar share application money was given in earlier assessment year and no such disallowance of interest has been made therein. The Revenue cannot without any reasonable cause change its stand for the present assessment year. Therefore, when there is no change in the facts of the present case, then no disallowance in the present assessment year can be made. Ground No. 2 of the Revenue’s appeal is dismissed. Interest income on accrual basis - HELD THAT:- Assessing Officer made an addition in respect of un-matured interest charges treating the same as interest income for the year under consideration. The CIT(A) deleted the said addition holding that the said addition was made by the Assessing Officer without properly appreciating the facts of the present case and accounting principles adopted by the assessee. But the CIT(A) has not looked into the material on record which needs to be verified. Therefore, this issue needs to be verified by the Assessing Officer in its entirety. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice. Ground No. 3 of Revenue’s appeal is partly allowed for statistical purpose. Unexplained investment in property - HELD THAT:- In fact the amount has been shown much below the stamp duty amount. The Assessing Officer held that as per the registered documents the market value of land is higher and stamp duty has been paid on the higher value which proves the rate of land in that are at the relevant period. But from the perusal of the Assessment order it cannot be seen that the Assessing Officer has brought out any evidence to substantiate that any amount more than what has been recorded in the sale deed was paid by the assessee and in the absence of any such evidence, no addition can be made merely on the basis of presumption. CIT(A) rightly deleted this addition and there is no need to interfere with the findings of the CIT(A).
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