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TMI Blog2014 (4) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... any material to show that any amount was received by the assessee during the previous year relevant to the assessment year from M/s. Sarjan Financial Pvt Ltd as loan or advance – thus, there was no reason to interfere with the order of CIT(A) – Decided against Revenue. Disallowance u/s 14A of the Act – Restriction out of operating expenses – Held that:- The assessee earned dividend income - The assessee incurred operating expenses - According to the AO since the major income of the assessee was by way of dividend – thus, Rule 8D was not applicable to the assessee, he disallowed proportionate operating expenses by taking the proportionate total exempt income and total income - CIT(A) restricted the disallowance by working out the same in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii First and foremost requirement for invoking the provisions of Section 2 (22) (e) of the I.T. Act is that there should be a payment by a private limited company to a shareholder by way of loans and advances. As can be seen from the assessment order under appeal, there is no allegation whatsoever that during the year under appeal, M/s. Sarjan Financial Pvt. Ltd. has made payment to the appellant company by way of advance or loan. iii. As a matter of fact, no loan or advance was received by the appellant company from Sarjan Financial Pvt. Ltd. during the year under appeal. Advance of Rs. 8,00,000/- was received by the appellant company from M/s. Sarjan Financial Pvt. Ltd. on 10/7/2006- Copy of the ledger account of the appellant com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above, it is further submitted that the appellant company had received the payment by way of advance loan in the earlier assessment year from Sarjan Financial Pvt. Ltd whose main object of the business is financing /money lending and therefore the amount in the normal course of business of financing is not dividend. As per clause (ii) of Section 2(22)(e), dividend does include any advance or loan made to as shareholder or the said concern by a company in the ordinary course of its business where the lending of money is substantial part of the company. It is submitted that lending of money is a substantial part of the economy. It is submitted that lending of money is a substantial part of the business of Sarjan Financial Pvt. Ltd. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit in the appellant's submissions. As a matter of fact, the AO has not mentioned in the assessment order under appeal that the loan/advance in question was received by the appellant during the assessment year under appeal; there is no mention whatsoever in the assessment order as to the date of receipt of the loan / advance from Sarjan Financial Pvt. Ltd. The AO had at paragraph 3.1 of the assessment order under appeal mentioned that during the year under consideration, Medical Technologies Limited is showing outstanding balance of loan from Sarjan Financial Pvt Ltd. amounting to Rs.8,00,000/- . The appellant had stated that the advance / loan was received by the appellant company from Sarjan Financial Pvt. Ltd. by Cheque no.851 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 2(22)(e) of the Act on account of loans received from M/s. Sarjan Financial Pvt. Ltd. The Ld. CIT(A) deleted the addition for the reasons as quoted above in this order. Ld. DR merely relied on the order of the AO. He could not point out any specific error in the order of Ld. CIT(A). Ld. DR also could not controvert the finding of the Ld. CIT(A) that the amount of Rs. 8 lacs outstanding loan from M/s. Sarjan Financial Pvt. Ltd was the opening balance of the year under consideration. Ld. DR could not bring any material before us to show that any amount was received by the assessee during the previous year relevant to the assessment year under appeal from M/s. Sarjan Financial Pvt Ltd as loan or advance. In view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch works out to Rs. 1,28,074 and deleted the balance disallowance of Rs. 6,13,360/-. 14. Being aggrieved, the revenue is in appeal before us. 15. Ld. DR submitted that as the main business of the assessee was of earning dividend income, therefore the AO was fully justified in making disallowance of operating expenditure by calculating the same by the formula Total Exempt Income X Total Operating expenditure/Total Income and thereby disallowance of Rs. 7,41,434/- 16. On the other hand Ld. AR of the assessee submitted that the disallowance of expenditure incurred by the assessee for earning dividend income was to be computed in accordance with Rule 8D of the Income Tax Rule 1962 and not any other manner. Ld. CIT(A) has restricted the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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