TMI Blog2016 (3) TMI 1202X X X X Extracts X X X X X X X X Extracts X X X X ..... . is maintained by the assessee in order to show that all the expenses incurred under these three heads are wholly and exclusively for the purpose of assessee’s business. Keeping in view this failure of the assessee and having regard to the nature of expenses claimed, we find ourselves in agreement with the authorities below that the involvement of personal element in these expenses cannot be ruled out and since the disallowance made at 10% for such personal element, in our opinion, is quite fair and reasonable, we find no justifiable reason to interfere with the same. - Decided against assessee - I.T.A. No. 1817/Kol/2009 - - - Dated:- 11-3-2016 - P.M. Jagtap (Accountant Member) And S. S. Viswanethra Ravi (Judicial Member) For the Assessee : J. M. Thard, Advocate For the Department : Debasish Lahiri, JCIT, D.R. ORDER P.M. Jagtap (Accountant Member) This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-XX, Kolkata dated 28.08.2009 for the assessment year 2006-07. 2. Grounds no. 1 2 of the assessee s appeal involve a common issue relating to the addition made by the Assessing Officer and sustained b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness Pvt. Ltd in the books of appellant, it is seen that besides opening balance of loan as on 1-4-2005, the appellant has taken loans amounting to ₹ 64,55,800/- from 26-05-2005 to 24-10-2005 and she has also repaid certain amounts of loan from 2207-2005 to 22-03-2006. There is also no dispute that the total share holding of the company M/s. Surya Business Pvt. Ltd was 1,50,000 equity shares of ₹ 100/- each, out of which, the appellant was holding 22,678 equity shares, meaning thereby that the appellant was holding more than 10% of equity shares. The provisions of section 2(22)(e) read as under:- any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing 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 percent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount of loan given Interest earned 31.03.2004 ₹ 43,51,396/- ₹ 4,86,351/- 31.03.2005 ₹ 41,74,307/- ₹ 1,88,360/- 31.03.2006 ₹ 97,85,333/- ₹ 2,65,810/- Thus, the company has advanced loan to the appellant in the ordinary course of its business and the lending of money is a substantial part of the business of the company. I have considered the submission of the appellant but I do not agree with it. On perusal of the Tax Audit Report of the company M/s Surya Business Pvt. Ltd as on 31.03.2006, it is seen that the nature of business or profession of the company has been mentioned as Trading in Watches, Electronics' Items, Cellular Phones, Home Appliances, Cameras, Calculators, Sun Glasses and Beverages, etc. Nowhere the Auditors have mentioned that the money lending is a substantial part of the business of the company. On perusal of schedule 3, 4 9 of the balance sheet of the company as on 31.3.2006, it is seen that it has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered separately and the entire amount of loan taken during the relevant previous year is covered under section 2(22)(e). However, I find force in the submission of the appellant that, under no circumstances, the addition u/s 2(22)(e) could be more than the accumulated profits of the company. On perusal of the balance sheet of the company as on 31-3-2006 it is seen that, as per schedule 2 of the balance sheet, the Reserve and Surplus was ₹ 99,01,812/-. It consists of accumulated profits on account of profit loss account amounting to ₹ 49,01,812/- and share premium account amounting to ₹ 50,00,000/-. Thus, the company was having accumulated profits of ₹ 49,01,812/- only and the share premium account cannot be considered as accumulated profits for the purposes of section 2(22)(e). The accumulated profit is the profit which has been taken to the balance sheet from the profit and loss account and available for declaration of dividend in normal course. In the case of appellant, such accumulated profit amounts to ₹ 49,01,812/- and hence the AO is directed to restrict the addition u/s. 2(22)(e) to the extent of ₹ 49,01,812/-. Ground no. 1 2 are d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was beneficial to the Company and the order of the ld. CIT(Appeals) giving relief to the assessee was upheld by the Tribunal vide its order dated 29.06.2015 passed in ITA No. 1124/KOL/2012 by relying on the decision of the Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra). Keeping in view the said decision of the Hon ble Calcutta High Court which has been followed by the Coordinate Bench of this Tribunal in the case of M/s. Zenon (India) Pvt. Limited (supra), we hold that the addition made by the Assessing Officer and sustained by the ld. CIT(Appeals) under section 2(22)(e) on account of loan received by the assessee from M/s. Surya Business Pvt. Limited on which consideration in the form of interest was paid by the assessee to the benefit of the Company is not sustainable. We, therefore, delete the same and allow Grounds No. 1 2 of the assessee s appeal. 7. As regards the issue involved in Ground No. 3 of the assessee s appeal relating to the disallowance of ₹ 28,267/-, ₹ 11,869/- and ₹ 38,353/- made by the Assessing Officer and confirmed by the ld. CIT(Appeals) out of travelling conveyance, telephone expenses and sales promotion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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