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2021 (7) TMI 409 - AT - Income TaxDeemed dividend u/s 2(22) - assessee' s share holding in the company exceeded 10% therefore loan received from KSPPL - CIT-A deleted the addition - HELD THAT:- We find that the CIT(A) has acted on sound legal principles in the light of the facts broadly noticed above. On facts, it has emerged that the lender company has charged interest on the advances made to the assessee company. As 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) of the Act. This reason 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. It is case of the assessee than money lent to the assessee was received in the ordinary course of business for fulfillment of business supply through consolidated negotiation. It is also demonstrated by the assessee that similar advance was obtained in the earlier years right from AY 2010- 11 where assessee was not a shareholder in the lender company at all. It is also simultaneously the case of the assessee that the lender company was substantially engaged in money lending activity. CIT(A) has acted on sound legal principles in the light of the facts broadly noticed above. On facts, it has emerged that the lender company has charged interest on the advances made to the assessee company. Also 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) of the Act. This reason 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. We also simultaneously find merit in the other line of argument advanced on behalf of the assessee - money lent to the assessee was received in the ordinary course of business for fulfillment of business supply through consolidated negotiation. It is also demonstrated by the assessee that similar advance was obtained in the earlier years right from AY 2010- 11 where assessee was not a shareholder in the lender company at all. It is also simultaneously the case of the assessee that the lender company was substantially engaged in money lending activity. No addition could be made by way of deemed dividend in the case of the assessee as rightly held by the CIT(A) - Decided in favour of assessee.
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