TaxTMI 
TaxTMI 
2009 (1) TMI 519
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.... facts and in the circumstances of the case, the said consideration ought not be charged to tax." 4. The basic facts required for disposal of the ground with regard to deemed dividend are as follows. During the concerned year the assessee had taken unsecured loans from various companies. The details of which are as follows : S.No. Name of Company Amount (Rs.) 1. Madhav Nandini Trading & Investment (P.) Ltd. 21,23,500 2. Anandita Arnav Trading & Investment (P.) Ltd. 42,94,000 3. Rajvi Rishabh Trading & Investment (P.) Ltd. 38,94,000 5. The Assessing Officer vide his letter dated 17-3-2004 called for assessee's objection for treating the abovesaid unsecured loans as deemed dividend under section 2(22)( e) of the Act. The assessee vide its letter dated 17-3-2004 objected to the proposal of the Assessing Officer. The assessee submitted that it had accepted inter-corporate deposits which were used for the purpose of its business. Instead of taking ICDs from unknown corporate bodies, the assessee-company had taken ICDs from known corporate bodies at prevailing competitive interest rate. It was submitted that the interest paid by the company on these ICDs are offered for tax....
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....1 it is seen that the income earned from interest was a minuscule fraction of the total income earned by the said companies. Thus, out of the gross income of Madhav Nandini at Rs. 1.18 crores, only Rs. 1.39 lakhs came from loan. The entire interest income was on loan advanced to the assessee-company. Likewise, out of gross income of Anandita Arnav at Rs. 2.14 crores, a mere Rs. 2,10,723 came from interest and that too from the assessee-company. Similarly, of the gross income of Rajvi Rishabh at Rs. 2.14 crores, interest income comprised only Rs. 3,05,352 which was entirely from the assessee-company and a director of the company. The facts as brought out above clearly show that lending of money was not a substantial part of the business of the said three companies. On facts, lending of money does not even partake of the character of business activity of these companies as lending is only to the assessee and that too from surplus funds without involving raising of borrowings for advancing loans. For these reasons, I hold that the case of the assessee is not covered by the exception contained in section 2(22)( ii). The treatment of aggregate loan of Rs. 1,03,11,500 received from the t....
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....e companies has made substantial investment in the shares of company, no business relating to investment in shares is carried out as no organized activity for investment in shares is required. It was submitted that the quantum of investment in shares is same as in the earlier year. On the other hand it was contended that all the companies have given substantial amount of loans and advances and as a result, of money lending, these companies have been able to earn income. In this connection the ld. Authorised Representative drew our attention to the decision of ITAT in the case of Harish Chandra Golcha v. ITO [1980] 9 TTJ (Jp.) 1 where the following observations were made: "I am in agreement with the decision of the ld. Accountant Member. Though the main business of the assessee is that of soap stone mining, it is clearly carrying on a money lending business also. The huge amounts of interest received and paid, the substantial amount of interest bearing loans and advances shown in the balance sheets and the facts that, except for the advance to SG, none of the other advance have been treated to be not in the course of the business for the purpose of disallowing interest on borrowed ....
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....s Ltd. constitute a loan and offend section 370 of the Companies Act, there is nothing else to show that these moneys have been advanced as a "loan". In the context of the statutory provisions, the word "loan" may be used in the sense of a "loan" not amounting to a deposit. The word "loan" in section 370 must now be construed as dealing with loans not amounting to deposits, because, otherwise, if deposit of moneys with corporate bodies were to be treated as loans, then deposits with scheduled banks would also fall within the ambit of section 370 of the Companies Act. Therefore, moneys given by the company to the other bodies corporate is a loan within the meaning of section 370 of the Companies Act must be negatived. Therefore, the petitioners would well be entitled to the relief." Section 370 of the Companies Act, 1956 was subsequently amended to include 'deposits' into its ambit thereby indicating the distinction between 'deposits' and loans/advances. The recent decision of the Tribunal in the case of Gujarat Gas Financial Service Ltd.'s case (supra) has elaborately considered the issue whether the interest on inter-corporate deposits is interest on loans or advances and whether....
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.... Ahmedabad Bench of the Tribunal after considering the decision in the case of Federation of Andhra Pradesh Chambers of Commerce & Industry v. State of AP [2001] 247 ITR 361 (SC), CIT v. Sahara India Savings & Investment Corpn. Ltd. [2003] 264 ITR 646 (All.) and following the decisions in the case of Gujarat Industrial Investment Corpn. Ltd. (sic), Oriental Insurance Co. Ltd. v. Dy. CIT [2004] 89 ITD 520 (Delhi) held that interest on inter-corporate deposits are not chargeable to interest tax, as the deposits are not in the nature of loan or advances. It held as under : 'The term 'loans and advances' should be understood conjointly and not in isolation. If so read, the advances which are in the nature of loan alone should be covered in the term. Ordinarily an advance is a payment beforehand and it does not connote the idea of repayment. It is adjusted when the action for which the money is advanced is completed and if not repaid on expiry of the loan like a deposit. The company is not bound to accept the deposit made, if proceedings on the basis of the prospectus a person interest to make a deposit. By issuing prospectus of a company invites offer for making deposit and that is no....
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....ed that ordinarily and advance does not connote any idea of repayment. It is, therefore, clear that the word "advanced" used in section 296 means an advance in the nature of a loan and not merely an advance as is understood in the common parlance in the sense of payment of money beforehand and which is likely to become due at some future time.' 72. It has also referred to section 296 of Companies Act regulating loans to directors for book debt which was in the nature of loans or advances from its inception. 73. In the case of Housing & Urban Development Corpn. Ltd. (supra), the Special Bench after considering various decisions and circulars of CBDT held that deposits in the form of securities and bonds cannot be considered as loans and advances and as such interest thereon shall be outside the scope of interest defined under section 2(7) of the Interest-tax Act. Paragraph 22 of the order reads as under :- '22. From the foregoing discussion we are of the considered view that despite similarities, the two expressions 'loans' and 'deposits' are to be taken different and the distinction can be summed up by stating that in the case of loan, the needy person approaches the lender for ....
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....n of income it did not offer net consideration on the transfer of trademark and copyright to tax since according to the assessee the said trademark and copyright did not have any cost of acquisition. However, a revised return was filed, wherein the assessee-company offered the said consideration to long-term capital gain. For this purpose it obtained a report of the valuation valuing the said brand as on 1-4-1981 and determined the long-term capital gain by reducing from the indexation cost of acquisition from the full value of the said brand. The above revised return was filed without prejudice to the assessee's contention that the said net consideration is not liable to any tax. While passing the order under section 143(3) the Assessing Officer taxed the long-term capital gain on the sale of the brands. Though the assessee had filed the appeal before the CIT(A) on other issues it did not raise the issue of taxability of consideration received on the sale of brands before the CIT(A). The CIT(A) decided the other issues vide order dated 14-2-2005, from which the present appeal has been preferred before us. 12. It is submitted by the ld. A.R. that the assessment completed was set a....