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2021 (7) TMI 316 - AT - Income TaxDeemed dividend u/ s 2(22)(e) - HELD THAT:- A perusal of the shareholding pattern placed before us shows that none of the shareholders of the lender company holding 10% or more of the voting power holds substantial interest in the assessee company. This being so, the basic condition s.2(22)(e) of the Act is not fulfilled in the present case. We, thus, totally fail to understand the approach of the AO in applying the law for additions of this magnitude. Secondly, we also affirmatively take note of the plea raised on behalf of the assessee that the lender company has given interest bearing loan to assessee and the loan is not interest free. The said loan cannot be said to be ‘for the individual benefit of any such shareholder’. In the similar circumstances, the Hon’ble Calcutta High Court in the case of Pradip Kumar Malhotra [2011 (8) TMI 16 - CALCUTTA HIGH COURT] has observed that advances given by the lender was not for the individual benefit of the shareholder but for business purposes and therefore such transactions would not fall within the sweep of deeming fiction created under s.2(22)(e) - This reason also on a standalone basis is sufficient to exclude the applicability of Section 2(22)(e) of the Act on the money received by the assessee. As seen from any angle, additions are totally unjustified made by way of deemed dividend in the case of the assessee as rightly held by the CIT(A) on the factual backdrop. We thus see no error in the conclusion drawn in the first appellate order albeit for the reasons noted above. Disallowance towards the excess interest paid to the persons covered u/ s 40A(2)(b) - HELD THAT:- Identical issue has come up before the co-ordinate bench in the earlier year relevant to AY 2011-12 wherein the co-ordinate bench has approved the reversal of disallowance made by the CIT(A) in these similar facts - AO has not discharged the onus which lay upon it to show that the interest paid is excessive or unreasonable having regard to fair market value of facility so provided. We thus see no reason to interfere with the order of the CIT(A). Accordingly, Ground no.2 of the Revenue’s appeal is dismissed.
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