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2022 (4) TMI 1274 - AT - Income TaxDisallowing the interest free loans u/s 36(1)(iii) and thereby erred in treating the same as loans taken for non-business purposes - HELD THAT:- CIT(A) has observed that the funds have been diverted to non business purpose. The assessee was having the loan fund in sum of ₹ 12.19 crore in which an amount of ₹ 3.35 crore was not utilized exclusively for the business purpose. In brief 27% of the total loan fund was not utilized for the business purpose. The AO disallowed the interest on pro-rata basis. The facts are not distinguishable at this stage. There is nothing on record to which it can be assumed that the AO has wrongly disallowed the claim of the assessee. Factually also there is nothing on record in connection with the utilization of whole loan funds for business purpose. Accordingly, we affirm the finding of the Ld. CIT(A) on these issues and decide these issues in favour of the Revenue and against the assessee. Disallowance under section 2(22)(e) - main contentions of the appellant is that the transaction between the appellant firm and M/s. K.C. Kapadia and Sons Pvt. Ltd. are not in the nature of loan transactions, but rather are current account transactions and hence the Section 2(22)(e) cannot be applied - HELD THAT:- AR instead has not explained in any mode or manner by leading factual evidence as to how the classification as per the TAR is erroneous and that the transaction is actually not one of loan but relates to current account transactions. Further, the myriad of case laws cited by the Id. AR do not prove as to how the peculiar and solitary facts of the case of the appellant would absolve the matter to be taken out of the ambit of the rigours of Section 2(22)(e). Citation of case laws without cogently explaining their pinpointed relevance to the case at hand will be of little assistance in furthering the case of the appellant on this issue. As tin the case of Sh. Sahir Sami Khatib [2018 (10) TMI 250 - BOMBAY HIGH COURT] recently held that where assessee was holding more than 10 per cent of equity shares of lending company and also having substantial interest in borrowing company, amount of loan given by lender company to borrower company was rightly added to assessee's taxable income as deemed dividend. Going by the above analogy, the pattern of the inter-se holding pattern of shareholding and voting rights in the company M/s. K.C. Kapadia and Sons Pvt. Ltd. by the two partners of the firm to the tune of 20% will definitely attract provisions of Section 2(22)(e). Decided against the assessee.
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