TaxTMI 
TaxTMI 
2014 (4) TMI 963
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....n of Rs. 8 lacs on account of deemed dividend income by invoking the provisions of section 2(22)(e) of the IT Act in respect of alleged loans stated to have been received by the assessee company from Sarjan Financial Pvt. Ltd. The AO observed that during the year under appeal, the assessee-company was showing outstanding balance of loans from Sarjan Financial Pvt. Ltd amounting to Rs. 8 lacs. 4. Being aggrieved, the assessee filed appeal before Ld. CIT(A) and submitted as under:- "ii First and foremost requirement for invoking the provisions of Section 2 (22) (e) of the I.T. Act is that there should be a payment by a private limited company to a shareholder by way of loans and advances. As can be seen from the assessment order under appea....
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....dividend within the meaning and scope of Section 2 (22) (e) of the I.T. Act. The learned Assessing Officer grossly erred in not appreciating the fact that the advance/loan in question was received by the assessee from Sarjan Financial Pvt. Ltd. by Cheque No. 851453 dated 10/7/2006 and no further loan has been received by the assessee during the year under consideration. It is therefore prayed that the addition made by the AO may please be deleted, iv. Without prejudice to the above, it is further submitted that the appellant company had received the payment by way of advance loan in the earlier assessment year from Sarjan Financial Pvt. Ltd whose main object of the business is financing /money lending and therefore the amount in the normal....
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....areful consideration to the submissions made by the appellant and also have gone through the relevant para of the assessment order under appeal. In the course of appellate proceedings before me, the A.R. of the appellant reiterated the contents of the written submissions reproduced hereinabove and argued that in point of fact, no loan / advance was received by the appellant during the year under consideration from Sarjan Financial Pvt. Ltd. I find considerable force of merit in the appellant's submissions. As a matter of fact, the AO has not mentioned in the assessment order under appeal that the loan/advance in question was received by the appellant during the assessment year under appeal; there is no mention whatsoever in the assessme....
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.... earlier years. During the year under consideration no amount of Rs. 8 lacs was received as loans from M/s. Sarjan Financial Pvt. Ltd hence there was no question of disallowing Rs. 8 lacs by invoking the provisions of Section 2(22)(e) of the Act. 8. After considering the rival submissions and perusing the orders of the lower authorities and material available on record, we find that the AO made addition of Rs. 8 lacs to the income of the assessee by invoking the provisions of section 2(22)(e) of the Act on account of loans received from M/s. Sarjan Financial Pvt. Ltd. The Ld. CIT(A) deleted the addition for the reasons as quoted above in this order. Ld. DR merely relied on the order of the AO. He could not point out any specific error in t....
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....f the Income Tax Act. The AO has stated in the assessment order that Rule 8D was not applicable to the assessee as the major income earned by the assessee by way of dividend income hence no disallowance of expenditure could be made by the AO and therefore the disallowance made may be deleted. 13. Ld. CIT(A) directed the AO to restrict the disallowance of operating expenses to ½ % of the average investments in shares amounting to Rs. 2,56,14,875/- which works out to Rs. 1,28,074 and deleted the balance disallowance of Rs. 6,13,360/-. 14. Being aggrieved, the revenue is in appeal before us. 15. Ld. DR submitted that as the main business of the assessee was of earning dividend income, therefore the AO was fully justified in making di....