TMI Blog2014 (5) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... e second ingredient of clause (ii) was duly fulfilled, thus, the matter is required to be remitted back to the Tribunal for fresh evaluation – Decided in favour of Assessee. - Income Tax Appeal Defective No. - 35 of 2014 - - - Dated:- 17-4-2014 - Hon'ble Dr. Dhananjaya Yeshwant Chandrachud,CJ And Hon'ble Dilip Gupta,JJ. For the Appellant : Shubham Agrawal For the Respondent : C.S.C, It ORDER This appeal by the assessee arises from a decision of the Income Tax Appellate Tribunal dated 29 November 2013. The assessment year to which the appeal relates is Assessment Year 2007-08. The assessee has raised several questions of law of which the following would cover the controversy which is raised in the appeal:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its total assets. Likewise M/s. Kukki Colour Prints Pvt. Ltd. had deployed 38.67% of its total assets towards interest bearing loans. These facts clearly show that the advance or loans have been made by these 2 companies in the ordinary course of their businesses and lending of money constitutes substantial part of the businesses of these companies. In view of the above facts decisions cited (Mrs. Rekha Modi vs. ITO and CIT V/s Parle Plastics Ltd.) the transaction between the appellant and the impugned companies would fall within the exception Clause (ii) of the section 2(22)(e) of the Act. Thus, there would be no occasion to term these transactions as falling within the meaning of deemed dividend . Accordingly, the addition made is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the public is not substantially interested holding not less than 10% of the voting power. The amount was received by the assessee by way of a loan or advance. The assessee, being a share holder with a beneficial ownership of shares with not less than 10% of the voting power, the substantive part of the definition was attracted but the issue which fell for consideration before the Tribunal was whether the exclusionary clause (clause ii) was attracted. Under the exclusionary clause, the expression dividend does not include any advance or loan made to a shareholder by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company. Hence, for the exclusion to apply, two c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the advance or loan must be made to the shareholder by a company in the ordinary course of its business. The first ingredient does not require that the company must be engaged in money lending business. Moreover, where the advance or loan was made in the ordinary course of the business of the company, the fact that the lending of surplus funds is not part of the main object but is at the same time permissible as an ancillary object, would not detract from the loan or advance being made in the ordinary course of its business. The second ingredient, undoubtedly, requires that the lending of money should be a substantial part of the business of the company. What is a substantial part of the business of the company has to be determined as a mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal test in holding that since the companies did not carry on money lending business, the advances which were made to the assessee would not be in the ordinary course of its business. This, as we have noted earlier, is not the test which is to be fulfilled in respect of the first ingredient of clause (ii). However, since the Tribunal has not considered the issue as to whether the second ingredient of clause (ii) was duly fulfilled, we are of the view that it would be proper to restore the proceedings before the Tribunal for fresh evaluation on the aforesaid aspect. Accordingly, we restore the appeal to the Tribunal for considering the applicability of the second ingredient of clause (ii) of the exclusion contained in section 2(22)(e). ..... X X X X Extracts X X X X X X X X Extracts X X X X
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