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TMI Blog2010 (3) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... There is no dispute to the fact that the share holders and the Directors of the assessee-Company and SSPL were common. The Assessing Officer stated that the immediate source of advances were interest bearing loan from sister concerns. The Assessing Officer after considering the date of deposit disallowed interest of ₹ 30,105 on the ground that there was no business exigency or productivity in giving loan by the assessee to its sister concern SSPL. Being aggrieved, the assessee filed appeal before the first appellate authority. 3.2. The assessee contended that the amount advanced to SSPL was given out of refund of share application money and no interest bearing funds were used. The learned CIT(A) called for remand report from the Assessing Officer. The Assessing Officer, in the remand report, stated that on examination of the loan account, it is revealed that interest bearing loans from M/s.Geeta Ganesh Promoters were partly utilized to make interest free advance. It is also mentioned in the remand report that refund of interest bearing loans and share application money constituted business fund of the assessee and should have been utilized for the purpose of business. 3.3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest should be made in respect of the amount given out of interest free advance available with the assessee. Therefore, we consider it prudent to restore this issue to the file of the Assessing Officer with the direction that he should make the disallowance of the interest only in respect of the interest free advances given by the assessee to SSPL out of interest bearing fund and not in respect of advance given out of non-interest bearing fund. Subject to above, ground No.2 of the appeal is allowed in part. 4. In ground No.3 of the appeal, the assessee has disputed the order of the learned CIT(A) in confirming the addition of ₹ 50,698 on account of interest against interest free advances given to (a) Smt. Kalpana Pandey, (b) Sri Kartick Pandy and (c) M/s.Greenland Enclave (P) Ltd. 4.1. During the course of assessment proceedings, the Assessing Officer observed that the assessee had given interest free advances to the following persons. 1) Kaklpana Pandey .. ₹ 10 lakhs 2) Kartick Pandey .. ₹ 10 lakhs 3) M/s.Greenland Enclave Pvt. Ltd. .. ₹ 37,37,500 In reply to a query by the Assessing Officer to provide the reasons of having advanced the above lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 10,00,000 each given to Kalpana Pandey and Kartick Pandey, the learned AR has stated that interest free advances were given out of interest bearing funds available with the assessee. Therefore, the order of the learned CIT(A) in that regard is confirmed. 4.5. However, in regard to the loan given to M/s.Greenland Enclave P Ltd., on perusal of the chart placed at page 15 of the PB, we find substance in the submission of the learned AR of the assessee that assessee was also having interest free advances with it and therefore, no disallowance of interest should be made in respect of the amount given out of interest free advance available with the assessee. Therefore, we consider it prudent to restore this issue i.e., relating to advance given to M/s.Greenland Enclave P Ltd., to the file of the Assessing Officer with the direction that he should make the disallowance of the interest only in respect of the interest free advances given by the assessee to M/s.Greenland Enclave (P) Ltd., out of interest bearing fund and not in respect of advance given out of non-interest bearing fund. Hence, ground No.3 of the appeal is allowed in part as indicated above. 5. In ground No.4 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22)(e) of the Act. It was further contended that loans were granted by M/s. Tolly Nirman Pvt. Ltd and M/s.Prasad Group Resources Pvt. Ltd., were in the ordinary course of their business i.e., financing and granting loans and advances. The assessee in support of its contention filed certified copy of Registration issued by the Reserve Bank of India declaring M/s.Tanuj Holdings Pvt. Ltd., as an NBFC. 7.2. The learned CIT(A) called for remand report from the Assessing Officer. 7.3. The learned CIT(A) has stated that the Assessing Officer, in his remand report, accepted that M/s. Tanuj Holdings Pvt. Ltd., is a NBFC and the amount received from it of ₹ 2,36,50,000 could not be considered as deemed dividend u/s.2(22)(e) of the Act. Therefore, the learned CIT(A) has deleted the said addition of ₹ 2,36,50,000. 7.4. As regard to loan received from M/s.Tolly Nirman Pvt. Ltd., the Assessing Officer in his remand report has stated that the business of M/s.Tolly Nirman Pvt. Ltd., was real estate developing. Further the Assessing Officer has accepted that repayment of existing debits could not be considered u/s.2(22)(e) of the Act. The Assessing Officer has also admitted that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that the assessee claim that its substantial business is giving loans and advances is not borne out by facts even if the activity over the period of time is concerned. The learned CIT(A) has further stated that M/s.Prasad Group Resources Pvt. Ltd., is not registered as an NBFC. The tax audit report also states the business as investment and share trading. Considering the above facts, the learned CIT(A) has held that the addition of loan and advance received by the assessee from M/s.Prasad Group Resources Pvt. Ltd., as deemed dividend is upheld. However learned CIT(A) limited the additon to the extent of accumulated profits which stands at ₹ 89,41,505 as against the addition of ₹ 1,28,00,000 made by the Assessing Officer. 7.8. Being aggrieved, the assessee has filed further appeal before the Tribunal disputing the addition confirmed by the learned CIT(A) of ₹ 89,41,505 as deemed dividend of the loan and advanced received from M/s.Prasad Group Resources Pvt. Ltd., only. 7.9. During the course of hearing, the learned DR, in reply to a query from the Bench, confirmed that the Department has not filed any appeal against the aforesaid order of the learned CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also gone through the order of the coordinate Bench, ITAT, Kolkata dt.28.10.2009 in the case of M/s.Prasad Group Resources Pvt. Ltd. (supra) as also the decision of the ITAT, Delhi Bench, in the case of Rekha Modi v. ITO (supra) as relied on by the learned Representatives of the respective parties. 6.12. No doubt, it is a fact that as per the Bengal Money-Lenders Act,1940 read with RBI report, it is one of the requirement to obtain registration/license from the concerned State for carrying on business of money lending. We observe that M/s.Prasad Group Resources Pvt. Ltd., has not got itself registered and/or obtained license for carrying on business of money lending and accordingly, the said concern can be made liable for necessary action under the concerned Act of the State Government. However, for the purpose of Income-tax Act we have to consider the nature of business activities as per the provisions of the Income-tax Act. In order to consider whether the principal business of the said concern is of granting of loans and advances, or not, we have to consider the ratio of deployment of funds and its income in the relevant assessment year. We observe that in the case of M/s.Prasa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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