TMI Blog2021 (7) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... created under s.2(22)(e) - This reason also on a standalone basis is sufficient to exclude the applicability of Section 2(22)(e) of the Act on the money received by the assessee. As seen from any angle, additions are totally unjustified made by way of deemed dividend in the case of the assessee as rightly held by the CIT(A) on the factual backdrop. We thus see no error in the conclusion drawn in the first appellate order albeit for the reasons noted above. Disallowance towards the excess interest paid to the persons covered u/ s 40A(2)(b) - HELD THAT:- Identical issue has come up before the co-ordinate bench in the earlier year relevant to AY 2011-12 wherein the co-ordinate bench has approved the reversal of disallowance made by the CIT(A) in these similar facts - AO has not discharged the onus which lay upon it to show that the interest paid is excessive or unreasonable having regard to fair market value of facility so provided. We thus see no reason to interfere with the order of the CIT(A). Accordingly, Ground no.2 of the Revenue s appeal is dismissed. - I.T.A. No. 430/Ahd/2016 - - - Dated:- 6-7-2021 - Shri Rajpal Yadav, Vice President And Shri Pradip Kumar Kedia, Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.2(22)(e) ofthe I.T. Act. The A.O. has not accepted the submission of the assesses that it has no investment in shares with CMPL for reason that the common directors of the assesses company being Shri Jehangir R. Cama, Mrs. Mehroo J. Cama and Shri Rustom J. Cama hold more than 10% of the Share Capital i.e. Shri Jehangir R. Cama is holding 21.20% and Rustom J. Cama is holding 32. 60% shares. In view ofthe above, the assessee' s case squarely fell within the ambit of Section 2(2)(e) ofthe Act and ₹ 1,71,90, 000/- is treated as deemed dividend u/ s.2 (22)(e) of the I. T. Act in the hands of the assessee by the A.O. The appellant has submitted that that Appellant company has not received new loan of ₹ 1,71, 90,000/- from Cama Motors Pvt. Ltd. has repaid ₹ 2,11,90,000/-thus there is net repayment of ₹ 40,00, 000/-.The appellant has submitted that the shareholders holding more than 10% shares in the lending company are not holding more than 20% share in the recipient Appellant Company which means that they are not having substantial interest in the recipient company. The appellant has also cited that the Hon' ble Mumbai Tribunal in the direct deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.5. The view taken by the I.T.A.T, Mumbai Special Bench in the case of ACIT Mumbai vs. Bhaumik Colour (P) Ltd has been approved by the Hon'ble Bombay High Court in the case of CIT vs. Universal Medicare Private Limited (2010) 324 ITR 263 (Bom.) The Gujarat High Court in the case of CIT v/ s Daisy Packers (P) Ltd has decided the issue in favour of the assessee, relying on the decision of the Division Bench of the High Court in CIT v. Ankitech (P.) Ltd. (2012) 340 ITR 14 (Del) wherein it was held that if the assessee-company does not hold a share in other company from which it had received deposit then it cannot be treated to be a deemed dividend under Section 2(22)(e) of the Act. From the reading of the provisions of section 2 (22)(e), it is seen that the provision is intended to tax the dividend in the hands of a shareholder and the deeming provision as it applies to the case of loan or advance by a company to a concern in which is shareholder and has substantial interest, is based on the presumption that the loan or advance would ultimately be made available to the shareholder of the company giving loan or advance. Various court decisions e.g. Asstt. CIT v/ s. Bhaumik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied the law without showing fulfillment of primary conditions of deeming provisions under s.2(22)(e) of the Act. It was thus submitted that no interference with the order of the CIT(A) is called for. 8. We have carefully considered the rival submissions and perused the orders of authorities below. The applicability of s.2(22)(e) of the Act is in controversy. 8.1 A perusal of the shareholding pattern placed before us shows that none of the shareholders of the lender company holding 10% or more of the voting power holds substantial interest in the assessee company. This being so, the basic condition s.2(22)(e) of the Act is not fulfilled in the present case. We, thus, totally fail to understand the approach of the AO in applying the law for additions of this magnitude. Secondly, we also affirmatively take note of the plea raised on behalf of the assessee that the lender company has given interest bearing loan to assessee and the loan is not interest free. This being so, the said loan cannot be said to be for the individual benefit of any such shareholder . In the similar circumstances, the Hon ble Calcutta High Court in the case of Pradip Kumar Malhotra vs. CIT (2011)3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [ 547950+ 118127 ] is disallowed. The appellant has submitted that the appellant company has paid interest of ₹ 27,39, 747/-to R.J. Cama Pvt. Ltd. and also paid the interest of ₹ 5,90,6337- to Cama Motors Pvt. Ltd. That the objective of Sec. 40A(2)(b) is to avoid evasion of tax through excessive or unreasonable payment to the associate concerns. The appellant has submitted that it had filed details before the AO showing that the rate of interest being paid to the Bank are on the contrary higher than the interest paid to Associate concern. The appellant has finally submitted that that in the previous Assessment year 2010 -11, CIT(A)-6 has deleted the disallowance of interest exactly on similar grounds made by A.O. by applying provision of Sec. 40A(2)(b). 3.4. Identical issue came up in appellant' s own case for A.Y. 2010- 11 in appeal no. CIT (A)- VI/ DCIT(OSD)/ R. 1/ 2/ 13 -14 dated 04/ 07/ 2014 as under: 5.1 Identical issue came up in appellant' s own case for A.Y. 2009- 10. Vide order dtd. 25-06-2012 in appeal no. CIT(A)- VI/ ACIT(OSD)/ R-1/ 184/ 11-12, my predecessor held as under: 3.3 I have considered the facts of the case; assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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