TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 755
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....t the said Finance Company had only made 10.79% investment in loans and advances which cannot be termed as a substantial part of business of the Company. The assessee, being aggrieved, filed an appeal which was dismissed and thereafter filed an appeal before the Tribunal. 2. During the pendency of the appeal the appellant filled an application seeking permission to add an additional ground, which was rejected. Thereafter an application under Section 254 of the Act was filed which was also rejected. The appellant thereafter preferred an appeal before the High Court under Section 260A of the Act, being Income Tax Appeal No.190 of 2014, in which it was held that the Tribunal had not considered the nature of the transaction of the Company before determining as to whether the exclusionary clause (ii) of Section 2(22)(e) of the Act was attracted or not and, accordingly, remanded the matter to the Tribunal for a decision afresh. The Tribunal thereafter decided the matter and again rejected the appeal of the assessee holding that the alleged loan given by the Sarnath Finance Ltd. to the assessee was in the ordinary course of business and was not covered by the exclusionary Class (ii) of S....
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....vance or loan made to a shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a substantial part of the business of the company ; 7. The necessary ingredients as contemplated under Section 2(22)(e) of the Act are not disputed by the Department and the admitted fact is, that the appellant is a share holder of 15% in Sarnath Finance Ltd. who gave a loan. This Finance Company as per the memorandum and articles of association is engaged in the business of loans and advances. It has also come on record that the nature of transaction given by the Finance Company to the appellant is a simpliciter loan which was subsequently returned by the appellant to the Finance Company. According to the appellant he had received the loan as a share holder from the Finance Company in its ordinary course of business and that the lending of money constitutes a substantial part of the business of the Finance Company and, therefore, the said loan could not be treated as a deemed dividend in view of the provision of sub Section (ii) of Section 2(22)(e) of the Act. On the other hand, the Department has urged that lending of money was not a substant....
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.... as of real worth and importance; of considerable value; valuable; belonging to substance; actually existing; real; not seeming or imaginary; not illusive; solid; true; veritable. Something worthwhile as distinguished from something without value or merely nominal. No decision was cited before us wherein a view has been taken that in order to show that a part of the whole to be treated as "substantial part", the part must exceed 50% of the whole. In our view, the expression "substantial part" does not connote an idea of being the "major part" or the part that constitutes majority of the whole. If the legislature really intended that more than 50% of the business of the lending company must come from the business of lending, nothing prevented the legislature from using the expression "majority of business". If the legislature at all intended that a particular minimum percentage of the business of a lending company should come from the business of lending, the legislature could have specifically provided for that percentage while drafting clause (ii) of Section 2(22 ) of the Act. The legislature had deliberately used the word "substantial" instead of using the word "major" and/or spe....
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....n of the profit, would be substantial part of the business. Similarly, a portion which relatively a small as compared to the total turnover, but generates a large, say more than 50% of the total profit of the company would also be substantial part of its business. Percentage of turn over in relation to the whole as also the percentage of the profit in relation to the whole and sometimes even percentage of a manpower used for a particular part of business in relation to the total man power or working force of the company would be required to be taken into consideration. Employees of a company are now called its "human resources" and, therefore, the percentage of "human resources" used by the company for carrying on a particular division of business may also be required to be taken into consideration while considering whether a particular business forms substantial part of its business. Undisputedly, the capital employed by a company for carrying on a particular division of its business as compared to the total capital employed by it would also be relevant while considering whether the part of the business of the company constitutes "substantial part of the business" of the company."....