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TMI Blog2022 (4) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... Sons Pvt. Ltd. are not in the nature of loan transactions, but rather are current account transactions and hence the Section 2(22)(e) cannot be applied - HELD THAT:- AR instead has not explained in any mode or manner by leading factual evidence as to how the classification as per the TAR is erroneous and that the transaction is actually not one of loan but relates to current account transactions. Further, the myriad of case laws cited by the Id. AR do not prove as to how the peculiar and solitary facts of the case of the appellant would absolve the matter to be taken out of the ambit of the rigours of Section 2(22)(e). Citation of case laws without cogently explaining their pinpointed relevance to the case at hand will be of little assistance in furthering the case of the appellant on this issue. As tin the case of Sh. Sahir Sami Khatib [ 2018 (10) TMI 250 - BOMBAY HIGH COURT] recently held that where assessee was holding more than 10 per cent of equity shares of lending company and also having substantial interest in borrowing company, amount of loan given by lender company to borrower company was rightly added to assessee's taxable income as deemed dividend. Going by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmission agent of yarn and derives income from business. The assessee received interest bearing loan of ₹ 3,35,23,178/- which was used to advance interest free loan to two other parties. The assessee paid the interest in sum of ₹ 80,92,036/- on the total loan of ₹ 12,19,54,635/-. Since the loan to the tune of ₹ 3,35,23,178/- was not exclusively used for business purpose, therefore proportionate interest in sum of ₹ 22,24,357/- was disallowed and added to the income of the assessee. The assessee also shown the exempt dividend income in sum of ₹ 37,500/- under section 10(34) of the Act. The assessee received the dividend of ₹ 37,500/- on investment in share of Surat People Co-operative Ltd. and inadvertently claimed as exempt. Therefore, the sum of ₹ 37,500/- was added to the income of the assessee. The assessee received the unexplained loan from M/s. K.C. Kapadia and Sons (P) Ltd. to the tune of ₹ 39,34,639/-. The assessee was asked to confirm the loan with statutory audit report of company for the year under consideration. The assessee is a firm and consists of four partners namely; Mr. Parthiv K. Kapadia, Mr. Shaunak K. Kapadia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the total loan funds of ₹ 12.19 crore (approx.), the funds of ₹ 3.35 crores (approx.) have not been utilized in furtherance of the exclusive use for business purpose. Therefore, it is seen that about 27% of the total loan funds have no plausible business connection. Therefore, on similar pro-rata basis, the AO -has disallowed out of the total interest outgo of ₹ 80.92 lacs (approx.), the interest to the tune of ₹ 22.24 lacs (approx.). 5.5 I find that the appellant has not been able to lead any cogent and plausible evidence in furtherance of the contention that the above disallowance is wrong and contrary to the facts and the law. Rather, I find that the AO has indeed been most judicious and discerning when he has disallowed interest in the same proportion as he found the principal amount of loan, not used or utilized for the purpose of business of the appellant. This shows that the action of the AO is quite fair and just. Moreover, as aforementioned the appellant has simply given a myriad of case laws and inundated the submission with the same. It has not been explained as to how these case laws are relevant to the facts of the appellant. 5.6 In an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the pertinent details and materials on record. 7.4 Appros to the above, I find and pertinently -note 'that it is an undisputed position that the Tax Audit Report (TAR) clearly states that for the year under consideration, the appellant has received unsecured loan from one M/s. K.C. Kapadia and Sons Pvt. Ltd. of ₹ 39,34,639/-. Moreover, it is also clear that both the appellant firm and the company noted above i.e. M/s. K.C. Kapadia and Sons Pvt. Ltd. have common partners and shareholders that is to say that Shri Shaunak K. Kapadia is holding 10% and Shri Parthiv K. Kapadia is hold 10% of share in the company M/s. K.C. Kapadia and Sons Pvt. Ltd and is having 50% share profit percentage (25% each) in the appellant firm. This also clearly emanates as a fact on record. It is also pertinent to note that in the schedule 3 of the balance sheet which is annexed to the Tax Audit Report (TAR) for the year under consideration. The name of M/s. K.C. Kapadia and Sons Pvt. Ltd. is clearly comprising under the head, Loans and Advances . Hence, it is clear that there is loan transaction between the appellant and the said M/s. K.C. Kapadia and Sons Pvt. Ltd. 7.5 Moreover, it is als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained in any mode or manner by leading factual evidence as to how the classification as per the TAR is erroneous and that the transaction is actually not one of loan but relates to current account transactions. Further, the myriad of case laws cited by the Id. AR do not prove as to how the peculiar and solitary facts of the case of the appellant would absolve the matter to be taken out of the ambit of the rigours of Section 2(22)(e). Citation of case laws without cogently explaining their pinpointed relevance to the case at hand will be of little assistance in furthering the case of the appellant on this issue. 7.9 Further, I note that in the case of Sh. Sahir Sami Khatib Vs. ITO [2018] 98 taxmann.com 453 (Bombay) the Hon'ble Bombay High Court recently held that where assessee was holding more than 10 per cent of equity shares of lending company and also having substantial interest in borrowing company, amount of loan given by lender company to borrower company was rightly added to assessee's taxable income as deemed dividend. Going by the above analogy, the pattern of the inter-se holding pattern of shareholding and voting rights in the company M/s. K.C. Kapadia an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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