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TMI Blog2014 (10) TMI 749X X X X Extracts X X X X X X X X Extracts X X X X ..... -10-2002 in ITA No.414/H/1994: "1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the amount advanced to the shareholder cannot be considered as deemed dividend within the purview of Section 2(22)(e) of the I.T. Act, 1961? 2. Whether the finding of the Income Tax Appellate Tribunal that lending of the amount to the shareholder is in the ordinary course of its business and that the activity of lending of money constitutes substantial part of the business of the company are based on material on record" 2. The facts are that the assessee is a company which is holding 100% stake in another company under the name M/s. Anam Machinery Fabricators Limited. During the financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... monies and there was no other transaction of lending money to any other entity. He would also submit that the contention of the department that this being the loan transaction, the resolution of the Board of the Directors of the subsidiary company was brought up for the purpose of assessment, was not adverted to and believed by the Tribunal. He has relied upon the judgment of the Bombay High Court in Walchand & Co. Ltd., v. C.I.T 100 ITR 598. 4. On the other hand, Ms.K. Neeraja, learned counsel for the respondent assessee supports the order of the Tribunal and has specifically drawn the attention of this Court to the findings of fact recorded by the Tribunal. She has placed reliance upon the judgment of the Supreme Court in M. Janardhan R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... du undivided family, or a firm or an association of persons or a body of individuals or a company. Hence, the technicalities of all these provisions fully favour the stand of the assessee which simply cannot be brushed aside just with a purpose to make addition on the ground of deemed dividend. In addition to all this, the logical argument of the Senior Counsel on behalf of the appellant-company further substantiate his stand on the ground that the appellant-company changed their accounting system from cash to mercantile with effect from 1.6.1988 in consonance with the provisions of Sec.209 of the Companies Act and offered to tax on mercantile basis thereafter. We also agree with his point that the term substantial interest and substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsidiary company was advancing money to the assessee company for the purpose of purchase of raw material and to make payments to M/s.Hindalco Limited to meet their business/trading liabilities. Taking all these aspects into consideration, the Tribunal recorded a finding that there is no element of deemed dividend and the amount of undistributed dividend of the subsidiary company cannot be said to be deemed dividend of the assessee company. 8. The judgment of the Bombay High Court in Walchands case (1 supra) is not applicable to the case on hand since in the said case it was not established that giving of loan or advance was in the ordinary course of business of the first company or that lending of money was a substantial part of its busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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