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TMI Blog2017 (1) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee’s own case for A.Y. 2006-07, we hold that the provisions of section 2(22)(e) of the Act are not applicable in the case of the assessee and accordingly uphold the finding of the learned CIT(A) in deleting the addition made by the AO under section 2(22)(e) of the Act.- Decided against revenue Disallowance of Bad Debts - Held that:- AO while relying on the provisions of section 36(2)(i) of the Act to deny the assessee’s claim for write off of bad debts has failed to observe that sub clause (i) of section 36(2) of the Act provides an exception in the case of money lending business; which in our view, the assessee is engaged in as per Article 22 of its MOA and that is evidently so as per the facts on record. In this factual and legal matrix of the case as discussed above, we agree with the finding of the learned CIT(A) that “the sum written off represents money lent to Mayura Films for financing the film ‘Ganga Jamuna’ and therefore the claim of write off of the bad debts thereof is to be allowed under section 36(i)(vii) r.w.s. 36(2) of the Act. We hold and direct accordingly. - Decided against revenue Disallowance of Interest - Held that:- We find from a perusal of the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the order of assessment dated 10.12.2010 for A.Y. 2008- 09, the assessee preferred an appeal before the CIT(A)-17, Mumbai, who disposed off the appeal vide the impugned order dated 31.10.2011 allowing the assessee partial relief. 3. Revenue and the assessee, being aggrieved by the order of the CIT(A)-17, Mumbai dated 31.10.2011, have preferred cross appeals which will be disposed off in seriatum hereunder: - 4. Assessee s appeal in ITA No. 8819/Mum/2011 for A.Y. 2008-09 4.1 In this appeal the assessee has raised the following grounds: - 1. The learned CIT has erred in confirming the disallowance of ₹ 638615/- as a business Loss. 2. The appellant craves permission to add or amend or withdraw any of the ground or grounds of appeal at the time of hearing. 4.2 The learned A.R. of the assessee was heard in support of the grounds raised and reiterated the submissions put forth before the learned CIT(A) as recorded in paras 5.1 and 5.2 of the impugned order. It is prayed that the disallowance of business loss of ₹ 6,28,615/- be deleted. 4.3 Per contra, the learned D.R. for Revenue placed strong reliance on the findings rendered in the order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g grounds: - 1. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in deleting the addition of ₹ 33,95,000/- made by the A.O. u/s 2(22)(e) of the IT Act 1961, without considering the fact that the provisions of Sec 2(22)(e) are clearly applicable in this case. 2. On the facts and circumstances of the case and in law, the Ld CIT(A) has failed to appreciate the CBDT's circular No 495 dated 22.09.1987, wherein the provisions of section 2(22)(e) have been explained as under: The new provision would, therefore, be applicable in a case where a shareholder has 10 percent or more of the equity capital. Further deemed dividend would be taxed in the hands of a concern where all the following conditions are satisfied. (i) Where the company makes the payment by way of loans or advances to a concern (ii) Where a member or a partner of the concern holds 10 per cent of the voting power in the company; and (iii) Where the member or partner of the concern is also beneficially entitled to 20 per cent of the income of such concern. With a view to avoid the hardship in cases where advances or loans have already been given, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee-company is neither share holder nor the beneficial share holder in the company namely M/s Gazebo Developers Pvt.Ltd. In ACIT vs. Bhaumik Colour P. Ltd. [2009] 118 ITD 1 (MUM.)(SB), it has been held by the Special Bench vide para -41, appearing at page 27, of the report as under: On the first question: Deemed dividend can be assessed only in the hands of a person who is a shareholder of the lender company and not in the hands of a person other than a shareholder. On the second question: The expression shareholder referred to in section 2(22)(e) refers to both a registered shareholder and beneficial shareholder. If a person is registered shareholder but not the beneficial shareholder then the provisions of section 2(22)(e) will not apply. Similarly if a person is a beneficial shareholder but not a registered shareholder then also the provisions of section 2(22)(e) will not apply. 8. The Hon ble Jurisdictional High Court in CIT, Vs Universal Medicare Pvt Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h brings it within the purview of exception under section 36(2)(i) of the Act and it is in this context that moneys were advanced to M/s. Mayura Enterprises for making the Bhojpuri film Ganga Jamuna . It is submitted that even alternatively, since these amounts have been advanced in the normal course of the assessee s business of film making the said loss is to be allowed under section 28/37 of the Act. 8.3 We have heard the rival contentions and perused and carefully considered the material on record. From an appreciation of the material on record, it is not disputed that the assessee company is admittedly engaged in the business of film making and financing of films. In the year under consideration, the AO noticed that the assessee had written off bad debts amounting to ₹ 12,56,666/- in respect of amounts advanced to Mayura Films for making the film Ganga Jamuna . It is seen that the AO inspite of observing that the assessee was, inter alia, in the business of film financing held that the above claim for write off of bad debts was not allowable under section 36(i)(vii) r.w.s. 36(2)(i) of the Act for the reason that the same was not offered for taxation in the earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X
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