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TMI Blog2014 (5) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Company and there was credit for only 55 days for which provisions of Section 2(22) (e) of the Act could not be invoked - The findings were not shown to be erroneous or perverse in any manner – thus, no substantial question of law arises for consideration – Decided against Revenue. Disallowance u/s 36(1)(iii) of the Act - Initial purpose of advancing amount could not be established – Held that:- The CIT(A) as well as the Tribunal was of the view that there was no justification for making an addition u/s 36(1)(iii) of the Act - The assessee had not charged any interest on the amount advanced to M/s Nalanda Spinners as the amount advanced to Nalanda Spinners was not returned for which a civil suit was filed and with the assistance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pediency? 2. A few facts relevant for the decision of the controversy involved, as narrated in the appeal, may be noticed. The respondent assessee is engaged in trading of vehicle and spare parts, running of vehicle workshop, insurance commission, DMA commission from banks and finance companies and C F agent. It filed its return of Income for the assessment year under consideration on 23.8.2008 declaring loss of Rs. 30,61,523/-. The case was selected for scrutiny and assessment under Section 143(3) of the Act was made by the Assessing Officer on 26.11.2010, Annexure A.1 at an income of Rs. 2,55,79,453/-. Additions/disallowances of Rs. 2,75,00,000/- under Section 2(22) (e) of the Act, Rs. 7,90,796/- under Section 14A of the Act and Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said party without any commercial expediency. From a perusal of copy of reply of the appellant reproduced as above, it reveals that the principal amount of said loan was recovered after filing suit in civil courts and with the help of some influential persons. The Hon'ble ITAT, Chandigarh Bench in appellant's own case for the preceding assessment year has also upheld the order of the CIT(A) on this issue. Considering the totality of the facts and circumstances of the case and documents filed alongwith submissions, I am in agreement with the appellant's counsel that the appellant not charged any interest on the amount advanced to M/s Nalanda Spinners, therefore, the AO's action to charge interest on notional basis is not s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nced to the Nalanda Spinners Limited was without any commercial expediency. There is no dispute that the loan was advanced by the assessee on 27.3.2006 i.e. during the assessment year 2006-07. It is also apparent from record that the principal amount of the said loan was recovered after filing recovery suit in civil court. It is also apparent from record that the assessee managed to get part payment vide cheques on different dates leaving balance to the tune of Rs.7,50,000/-. Considering the entire facts and circumstances of the present case, we are of the view that since the principal amount was at stake, there was no occasion for the assessee to charge interest on the advanced amount. At this stage, we may also observe that there is no ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order was passed:- Present: Ms. Savita Saxena, Advocate for the appellant. Notice of motion for 27.5.2013 in respect of substantial question No. iii only. sd/- (Hemant Gupta) Judge sd/- March 18, 2013 (Ritu Bahri) Judge The learned counsel for the revenue argued that no reasons have been assigned while declining question nos. (i) and (ii), which are substantial questions of law and in view of Proviso to Section 260A(4) of the Act, are required to be adjudicated by this Court. Accordingly, we proceed to decide question Nos. (i) and (ii) as well. It would be apposite to refer to the findings of CIT(A) and the Tribunal on question nos. (i) and (ii). The CIT (A) with respect to Question Nos. (i) and (ii) had notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... days cannot be treated as deemed dividend under section 2(22) (e). It is evident fact that the appellant in real sense not derived any benefit from the funds of the company and therefore by no stretch of imagination it can be said that the company has disbursed or given dividend to its shareholder/director in the guise of loan. It will be travesty of law to apply the provisions of Section 2(22) (e) of the Act to the facts of the present case whether infact the person concerned has not gained any benefit from the funds of the company and the one has to consider totality of the facts and circumstances of the case before applying provisions of this section. Hence provisions of Section 2(22) (e) could not be invoked when there is a genuine bus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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