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TMI Blog2014 (9) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Himachal Pradesh because land can be purchased in the State of Himachal Pradesh for business purposes. This company is mainly earning income from dividend and interest on fixed deposits. In 2009, this company has received some interest also. The schedule of assets at page 16 clearly shows that most of the investments have been clearly made in the mutual funds. Even if it is assumed that company is mainly engaged in the business of lending money then it cannot be said that the said company has lent money to the assessee in the ordinary course of business because for that to happen the said company would have definitely charged the interest. The making of advances in the ordinary course of business of lending itself connotes charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 06.08.2013 has erred in passing that order in contravention of the provisions of Section 250(6) of the Income Tax Act, 1961. 2. That on facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in sustaining the addition on account of alleged deemed dividend of ₹ 10,99,518/- u/s 2(22)(e) of the Act on account of receipt of advance from M/s Emdis Healthcare P. Limited even when the impugned transaction is not taxable under the provisions of Sec. 2(22)(e) of the Act. . 4. After hearing both the parties we find that during assessment proceedings Assessing Officer noticed that assessee was having substantial share holding of 49.95% in M/s Emdis Healthcare (P) Ltd. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id deed did not materialize and the money was returned back and so the provisions of section 2(22)(e) do not apply is not acceptable because the exceptions for non-applicability of provisions of section 2(22)(e) are provided in clauses (i) to (v) of section 2(22)(e) of the Act and the said explanation is not covered by any of these clauses. Hence, this explanation of the appellant is not acceptable. 3.3.1 The argument of the Ld. Ld. Counsel for the assessee that the money was returned back by the appellant to the company within the same year and so provisions of section 2(22)(e) do not apply to the appellant does not hold water because such a situation like returning the money is not excluded by clause (i) to (v) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the restriction, land could not be purchased and, therefore, amount was returned, therefore, the transaction was of the business nature and the same cannot be treated as deemed dividend. In this regard he relied on the decision of Hon'ble Madhya Pradesh High Court in the case of CIT v Om Parkash Suri 359 ITR 41 (M.P.) He also submitted that main business of the company from which advance was taken was money lending and in this regard he referred to page 19 of the paper book which is copy of the profit and loss account giving details of the income and shows that main income was from interest. However, when the Bench asked a simple question whether the assessee has borrowed money on interest, he fairly admitted that advance tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reated as deemed dividend income upto the extent of accumulated reserves of the said company. It is not disputed that assessee is a substantial share holder and the company which has given the advance possessed substantial accumulated profits. The dispute has been raised on two counts. Firstly, it was a business transaction. We do not find any force in these submissions. There is no evidence to show that company where the assessee was director wanted to set up a resort in the State of Himachal Pradesh. Even if such company wanted to set up a resort, the company itself could have invested the money directly in its own name and that would have been permissible in the State of Himachal Pradesh because land can be purchased in the State of Hima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit on sale of assets 89.66 Discount 250.00 Long Term Capital Gain on investment Income from Derivates Misc Income 19.91 Total 2,948,872.63 1,215,468.57 11. The above clearly shows that the company is mainly earning income from dividend and interest on fixed deposi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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