TaxTMI 
TaxTMI 
2019 (7) TMI 287
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the said assessments came to be examined by the ld. Principal CIT. On such examination, he found that the assessee-company had received unsecured loan of Rs. 2,11,95,024/- from another Group Company namely M/s. Vijayshree Industries Pvt. Limited for the previous year relevant to A.Y. 2008-09 and Rs. 1,66,00,000/- from M/s. Govind Promoters Pvt. Limited during the previous year relevant to A.Y. 2011-12. He also found that Shri Devendra Kumar Mantri was a common shareholder in the assessee-company as well as in M/s. Vijayshree Industries Pvt. Limited and M/s. Govind Promoters Pvt. Limited having substantial shareholding. He further found that M/s. Vijayshree Industries Pvt. Limited as well as M/s. Govind Promoters Pvt. Limited were having substantial accumulated profit during the years under consideration. According to the ld. Principal CIT, the loan amounts received by the assessee-company during the years under consideration thus were liable to be assessed in the hands of the assessee-company as deemed dividend under section 2(22)(e) of the Act and there was an error in the orders of the Assessing Officer passed under section 153A/143(3) in not making any enquiries/verification i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n transactions entered into with M/s Govind Promoters Pvt. Ltd. we would like to state that M/s Govind Promoters Pvt. Ltd. being Non-Banking Financial Company is out of the purview of the above mentioned section since the company advances loan in its ordinary course of business and lending of money is substantial part of its business. A copy of NBFC Certificate in case of Govind Promoters Pvt. Ltd has been enclosed herewith. Sir, we are reproducing an extract of section 2(22)(e) below for your kind perusal- "(e) any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern)) or any payment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Pradip Kumar Malhotra v CIT [2011] 338 ITR 538 held that for gratuitous loan or advances given by a company to those classes of shareholders would come within the purview of section 2(22) (e) but not to the clauses where loan or advances is given in return to an advantage conferred upon the company by such shareholders. In our case also the interest paid by the assessee-company was a return on loan given by M/s Govind Promoters Pvt. Ltd. The amount being non-gratuitous is not covered u/s 2(22)(e)". The submissions made by the assessee were not found acceptable by the ld. Principal CIT. Having regard to the facts of the case and keeping in view certain judicial pronouncements discussed by him in his impugned order, he held that the assessments made by the Assessing Officer under section 153A/143(3) for both the years under consideration were passed without making any enquiry or verification regarding the applicability of section 2(22)(e) to the loans in question received by the assessee-company from the other Group Companies, which were necessary in the facts and circumstances of the case and such lack of enquiry or verification made the said orders erroneous insofar as prej....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act. He contended that all the relevant details thus were furnished by the assessee in the Tax Audit Reports filed along with the returns of income as well as during the course of assessment proceedings as per the requirements of the Assessing Officer. He contended that since the assessee-company had paid interest on the loan amounts in question taken from other Group Companies, the provisions of section 2(22)(e) were not applicable as held by the Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra v. CIT [20011] 15 taxmann.com 338 ITR 538 He also contended that the assessee-company was not the shareholder in such Group Companies and, therefore, the loan amounts received from the said companies could not be treated as deemed dividend in the hands of the assessee under section 2(22)(e) of the Act. He contended that proper enquiry and verification thus was made by the Assessing Officer during the course of assessment proceedings as regards the applicability of section 2(22)(e) to the loan amounts in question received by the assessee-company from the other Group Companies and after having considered all the facts of the case as well as the legal position, a conscious ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is of relevant documentary evidence placed in the paper book, the details of unsecured loans taken during the years under consideration by the assessee-company from the other Group Companies were called for by the Assessing Officer during the course of assessment proceedings and the same were duly furnished by the assessee. Even the details of shareholders holding more than 10% shares in the assessee-company were called for by the Assessing Officer and the same were duly furnished by the assessee. In the Tax Audit Reports filed by the assessee-company along with its returns of income, the unsecured loans received by the assessee-company during the years under consideration from the other Group Companies and squared off in the same years were duly reflected and even interest paid thereon was duly shown in the said Tax Audit Reports in the details of payments made to related persons as specified in section 40A(2)(b). As rightly contended by the ld. Counsel for the assessee, all the relevant details to ascertain the applicability of section 2(22)(e) to the loan amounts in question taken by the assessee-company during the years under consideration from the other Group Companies thus we....