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TMI Blog2013 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 57(ii) of the IT Act being the interest paid on overdrawn capital with partnership firm Vs M/s Sagar Construction." 3. Ground no. 1 is regarding deemed dividend u/s 2(22)(e). 3.1 The assessee is a beneficial shareholder in M/s Koradia Construction Pvt Ltd,, and having 50% of shares holding. The Assessing Officer noted that the assessee has taken loan of Rs. 78,10,000/- various dates from this company which has accumulated profit of Rs. 8,00,97,861/-. In the absence of explanation, the Assessing Officer treated the loan as deemed dividend u/s 2(22)(e) of the Act and added Rs. 78,00,000/- to the income of the assessee. 3.2 Aggrieved from the action of the Assessing Officer, the assessee contended before the CIT(A) that the impugned su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upport of his contention, he has referred the statement of account with M/s Korodia Construction P Ltd as well as Schedule to the balance Sheet and the P&L account of M/s Koradia construction P Ltd. The ld AR has pointed out that Schedule E to the Balance Sheet for current asset, loans and advances indicates the advances given by the company to the assessee as advance for the purchase of flat. The accounts of M/s Korodia construction P Ltd are already available on the website of Registrar of Companies. He has further submitted that return of income for the company was filed electronically on 31.10.2007 and the copy of which was filed with the ITO, Ward 9(2)(2). Thus, the ld AR has submitted that this material clearly indicates that the adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the Hon'ble High Court has held that if payments are made by such a company to even its shareholders having substantial interest but are the result of business transactions between the parties, then such payments cannot be treated as loan or advance and the money so received cannot be treated as deemed dividend within the meaning of sec. 2(22)(e) of the Act. He has also relied upon the decision of the Hon'ble Delhi High Court in the case of CIT vs Arvind Kumar Jain reported in and submitted that if the advance which have been granted to give the effect to a commercial transaction, the same would not fall under the ambit of sec. 2(22)(e) of the act. He has relied upon the following decisions: i) CIT vs Nagindas Kapadia ( 177 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll as the relevant material on record. The dispute before us is regarding the advance of Rs. 58 lacs stated to have been given to the assessee by the company for purchase of flat. The assessee has filed a copy of the resolution of M/s Koradia Construction P Ltd dt 9.9.2006 wherein the company had decided to purchase the flat Nos C-402 and C-403 situated at Gokul Divine, Irla, S V Road, Vile Parte (W)Mumbai 400056 from the assessee and her husband. From the books of accounts and audit report of M/s Koradia Construction P Ltd, it is evident that the company has shown this amount of Rs. 58 lacs as advance for the purchase of property. As per the Schedule E to the balance Sheet of M/s Koradia construction P Ltd, the amount of Rs. 58 lacs has be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in the nature of commercial transaction between the parties, then in the absence of proving contrary by the department, the addition to the extent of Rs. 58 lacs is not justified. This view is fortified by series of decisions as relied upon by the assessee. Hence, in view of the above discussion and in the facts and circumstances of the case, the addition to the extent of Rs. 58 lacs u/s 2(22)(e) is deleted and consequently, the addition of balance amount of Rs. 7,99,604/- is confirmed. 6. Ground no. 2 is regarding disallowance of Rs. 65,429/- on account of interest. 6.1 The assessee is a partner in two partnership firms i.e M/s Aditya Developers and M/s Sagar Constructions. She earned interest income of Rs. 1,08,333/- on capital with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [(v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm : Provided that where any interest, salary, bonus, commission or remuneration, by whatever name called, or any part thereof has not been allowed to be deducted under clause (b) of section 40, the income under this clause shall be adjusted to the extent of the amount not so allowed to be deducted ;]" 8.1 There is no dispute about the fact that the assessee has overdrawn from the partnership firm M/s Sagar Construction; therefore, the interest paid to the Sagar Construction for debit balance in the capital account is an allowable expenditure against the business income of the assessee and partic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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