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TMI Blog2018 (2) TMI 2043X X X X Extracts X X X X X X X X Extracts X X X X ..... m off through a consolidated order for the sake of convenience. 2. The 1st ground raised by the appellant in this appeal is against the order of the Ld. CIT(A) confirming the disallowance of interest on secured loan of Rs. 33,53,450/- and deducting the same from capital work-in-progress by the Assessing Officer (AO). 3. Briefly stated, the facts of the case are that the appellant is a private limited company carrying on the business of real estate developers. It filed its return of income for the AY 2005-06 on 13.02.2006 declaring total income of Rs. 10,920/-. The AO, during the course of assessment proceedings, observed that the appellant had incurred bank interest of Rs. 56,79,022/- and the same was capitalized as Work- In-Progress (WIP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant had advanced Rs. 2,12,60,000/-out of interest-free unsecured loan received by it of Rs. 2,80,00,000/-. It is also stated that most of the advances were given in the financial year 2002-03 and the unsecured loan was also received in the same year. Therefore, the loans and advances were not given from the bank overdraft of the impugned assessment year. The Ld. counsel further submits that interest expense cannot be properly assessed unless it is subjected to the test of commercial expediency. Reliance was placed by him inter alia on the decision in S.A. Builders v. CIT 288 ITR 1 (SC). 6. On the other hand, the Ld. DR relies on the order of the Ld. CIT(A). 7. We have heard the rival submissions and perused the relevant mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbo Investment & Finance Pvt. Ltd. 28,034 49,46,500 Kan H Lakhani 97.5% 28,034/- Total 11,25,669/- The AO relying on the CBDT Circular No. 495 dated 22.09.1987 and the order of the ITAT 'F' Bench, Mumbai dated 11.08.2009 in the case of M/s UnisolInfraservices Pvt. Ltd. made an addition of the above amount of Rs. 11,25,669/- as deemed dividend u/s 2(22)(e) of the Act. 10. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). We find that the Ld. CIT(A) has restricted the addition to the accumulated reserve of Rs. 10,60,296/-. 11. Before us, the Ld. counsel of the assessee relies on the decision in CIT v. Ankitech (P.) Ltd. (2012) 340 ITR 14 (Del) and submits that loans or advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned is, according to us, wrongly decided. The whole object of the provision is clear from the Explanatory memorandum and the literal language of the newly inserted definition clause which is to get over the two judgments of this Court referred to hereinabove. This is why "shareholder" now, post amendment, has only to be a person who is the beneficial owner of shares. One cannot be a registered owner and beneficial owner in the sense of a beneficiary of a trust or otherwise at the same time. It is clear therefore that the moment there is a shareholder, who need not necessarily be a member of the Company on its register, who is the beneficial owner of shares, the Section gets attracted without more. To state, therefore, that two conditions ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Rs. 43,62,480/- and deducting the same from capital WIP. 16. In a nutshell, the facts are that the AO observed during the course of assessment proceedings that the interest-free loans given by the appellant are much more than the OD facility availed by it, in respect of which the interest was being paid. Hence, the AO disallowed the interest of Rs. 43,62,479/- debited to the P&L account. 17. In appeal, the Ld. CIT(A) agreed with the reasons given by the AO and dismissed the appeal filed by the assessee. 18. Before us, the Ld. counsel of the appellant submits that the AO has not properly examined the nexus between inflow and outflow of liquidity. He files an 'Annexure' before the Tribunal giving the details of its income, interest-fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirming the treatment given by the AO of unsecured loans of Rs. 62,51,154/- as deemed dividend u/s 2(22)(e) and adding the same to the total income of the assessee. 22. In a nutshell, the facts are that the AO having verified shareholding pattern of the appellant and the lenders found that Shri Kan H. Lakhani was holding 49.7% shares in the appellant-company. The shareholding of Shri Kan H. Lakhani in the companies who had given loans are as under: Name of lender Reserves (Rs.) Loan amt received during the year (Rs.) Common share holder & % of holding Amount deemed dividend (Rs.) Aniya Investment Pvt. Ltd. 1,99,60,432 50,00,000 Kan H Lakhani 92.3% 50,00,000 M.K. Infin Pvt. Ltd. 12,51,154 35,30,000 Kan H. Lakhani 90% 12 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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