TMI Blog2014 (12) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... han 10% of the shareholding of two private limited companies, namely Kukki Color Photos Pvt. Ltd. and Kukki Color Prints Pvt. Ltd. - The assessee had received loans and advances from the two companies during the assessment year - neither of the companies lent any money to any entity, save and except to the assessee - The lending of money was not a part of the business of the Company, nor for that matter, could it constitute a substantial part of the business - there was no organized course of activity involving dealings with anyone else, save and except for the assessee - The assessee was unable to establish that the exclusion was attracted – thus, the order of the Tribunal is upheld, as such no substantial question of law arises for consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 matter of fact. On remand, the Tribunal has rendered its impugned decision on 25 July 2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits; but 'dividend' does not i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expression 'major part of the business' but has designedly used the expression 'substantial part of the business of the company'. The expression 'business' contemplates an organized course of activity which is actually continued or contemplated to be continued with a profit motive and not for a sport or pleasure. In each case, the true test is whether the lending of money constituted a substantial part of the business of the company. Therefore, two requirements must be attracted. Firstly, the business of the Company must consist of the lending of money in the ordinary course of its business during which an advance or loan was made to a shareholder. Secondly, the lending of money must constitute a substantial part ..... X X X X Extracts X X X X X X X X Extracts X X X X
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