TMI Blog2008 (6) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... below section 2(22) and holding that PSPL is not carrying on money-lending business. It is the case of the assessee that loan is in fact falling within the purview of the exemption under clause (ii) below section 2(22) and, accordingly, be not charged as deemed dividend. In this case, the assessee filed the return on 30-10-2002 declaring income at ₹ 24,71,285. The Assessing Officer noticed from the Balance Sheet of the assessee for the year under consideration that the assessee has received a loan of ₹ 9 lakhs from PSPL, in which the assessee was holding 50 per cent equity shares as on 1-4-2001 and 31-3-2002. From the Balance Sheet of PSPL as on 31-3-2002, the Assessing Officer noticed that it had reserve and surplus of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particularly referred to item Nos. 51, 71 and 83, which mentions money-lending was one of the permitted business activity of the assessee under the object clause. The assessee was constantly, regularly and uninterruptedly lending money and earning interest from this activity. In support of the above contention that these are loans, the assessee also relied on the following decisions:- (i) Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765 (SC), (ii) Mazgaon Dock Ltd. v. CIT [1958] 34 ITR 368 (SC), (iii) Karnani Properties Ltd. v. CIT [1971] 82 ITR 547 (SC), (iv) S.G. Mercantile Corpn. (P.) Ltd. v. CIT [1972] 83 ITR 700 (SC), (v) Narasingha Kar Co. v. CIT [1978] 113 ITR 712 (Ori.), (vi) CIT v. Motilal Hirabhai Spg. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hareholder [or the concern] 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. 6. The learned Representative of the assessee brought our attention particularly paper book page 4 of the written submission, which reproduces the memorandum of association of the assessee-company, particularly clause 83, which reads as under:- 83. To carry on the business as financier and to undertake and carry out and execute all kinds of financial operations including bill discounting, pawn broker, money lender subject however to the condition that the company should not carry on the business of booking. 7. The learned Representative of the assessee also brought our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her brought our attention to paper book page 32, which is the summarized statement of funds. For all the years from 1994-95 to 2001-02, it appears that the assessee has also advanced loans to other parties. For the assessment year 1998-99 and onwards, advancing money appears to be much larger than assessee s investment and other business. The learned Representative of the assessee by relying upon the decision of the Madras High Court in the case of CIT v. R. M. Meenakshisundaram [1995] 212 ITR 220 submitted that the assessee received loan and also paid interest. He submitted that the above decision, the money lending is one of the objects of the assessee which cannot be treated as anything but a loan provided to the assessee in the normal c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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