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I.T.O. Versus Shri Bhimji Nanaji Patel

2016 (2) TMI 223 - ITAT MUMBAI

Deemed dividend addition u/s 2(22)(e) - CIT(A) deleted the addition - Held that:- In the case of Parle Plastics Ltd.(2010 (9) TMI 726 - BOMBAY HIGH COURT) wherein it has been held that provisions of section 2(22)(e) of the Act are not applicable if the money borrowed by the share holder from the company in the ordinary course of business. The facts of the assessee’s case are squarely covered by the above mentioned decision as the assessee borrowed money in the ordinary course of business of the .....

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l rate of interest. We note that out of 26 parties only to 3 parties interest was paid at the rate of 15%. We also note that assessee was engaged in the business of money lending in the ordinary course of business and for the purpose of doing its business the assessee had to borrow money from the market at the prevailing market rate of interest which are governed by several factors such as urgency of funds required, availability of funds in the market, notice at which fund are required and credi .....

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ity in the order of CIT(A) and uphold the same on this point.- Decided in favour of assessee - ITA NO 5605/Mum/2012 - Dated:- 20-11-2015 - SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For the Petitioner : Shri Samir tekriwal For the Respondent : Shri P. R. Raiyani ORDER PER RAJESH KUMAR, ACCOUNTANT MEMBER This appeal by the assessee is directed against the order dated 05.06.2012 of Commissioner of Income Tax (Appeals) {(hereinafter referred to as CIT(A)} for A.Y. .....

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ts and in the circumstances of the case and in law, the Ld. CIT (A) has failed to appreciate that the assessee did not furnish any evidence in the form of approval of RBI or application for NBFC to prove that the assessee's main business is money lending." 4. "On the facts and in the circumstances of the case and in law. The Ld CIT (A) has failed to appreciate that in the case of CIT Vs Parle Plastics Ltd (Bom), it was held that the business of the assessee was complimentary to the .....

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st the deletion of addition by CIT(A) of ₹ 17,35,000/- made by the AO u/s 2(22)(e) of the Act. 3. The facts in brief are that the assessee was 50% share holder as well as Director of M/s Monika Realtors Pvt. Ltd. The assessee borrowed money from the said company in the earlier years and the amount outstanding as on 31.03.2009 was ₹ 2,41,65,631/-. The assessee had paid interest of ₹ 29,03,360/- to M/s Monika Realtors Pvt. Ltd on the said borrowings. The assessee repaid ₹ 4 .....

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90 lakh as rental income and ₹ 35,30,540/- as interest income on the loans advanced to the various parties. The CIT(A) deleted the addition on the ground that the loan taken by the assessee from M/s Monika Realtors Pvt. Ltd was taken in the ordinary course of business of the company and, therefore, covered by the Explanation provided in clause (ii) of section 2(22)(e) of the Act wherein it is mentioned that the provisions of section 2(22)(e) of the Act does not include any advance or loan .....

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the order of AO. We note that the assessee is holding 50% of the paid up capital and also was Director of the company. The company was having income from property to the tune of ₹ 90,00,000/- and ₹ 35,30,540/- as income from interest from the money lending division. From the income portion of the company, it is clear that 28% of the gross total income is from money lending business carried on in the ordinary course of business and 43% of the total funds deployed were by way of loan .....

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,65,631/-. The ld counsel for the assessee submitted that in the case of Krish Ltd. 119 ITD 49 (Ahd) it has been held that the activity with more than 20% of the fund deployment of the total funds will be substantial business for the purpose of section 2(22)(e). The ld AR also submitted that assessee s case also got support from the Judgment of Hon ble Bombay High Court in the case of Parle Plastics Ltd. 332 ITR 63 (Bom.), wherein it has been held that provisions of section 2(22)(e) of the Act a .....

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T(A) on this issue. Accordingly ground No 1 is dismissed. 5. Ground no. 5 to 7 relates to deletion of addition of ₹ 8,06,719/- on account of interest . 6. The facts in brief are that the assessee used to raise money from the market at the market rate of interest and used to lend the same as part of his money lending business. The AO on noticing the fact that the assessee was receiving interest at the rate of 12% and paying interest on the money raised from the market ranging between 13% to .....

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that the assessee had taken loan from 26 parties out of which interest was paid at the rate of 12% to twenty parties whereas remaining six parties were paid at the rate of 12% to 15% depending upon the urgency of funds , market conditions and prevalent interest rates in the market. Further that the AO did not make out a case that the assessee deflated its profit by paying higher rate of interest on the money borrowed. AO also failed to prove that the funds were available in the market at the lo .....

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ntial interest and prayed that the order of CIT(A) may be reversed and that of AO be restored. 9. The Ld. AR on the other hand submitted that the assessee had raised money from the market on the prevalent rate of interest and several other factors such as availability of funds in the market, urgency of funds required etc. During the year, the appellant raised money from 26 parties out of which from 20 parties money was raised at the rate of 12%, from two parties it was raised at the rate of 13% .....

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