TaxTMI 
TaxTMI 
2021 (7) TMI 316
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....(b) of the I.T. Act." 3. Ground no.1 relates to addition under s.2(22)(e) of the Act. 4. The assessee is a Limited company, in which the public are not substantially interested. In the course of assessment proceedings, the AO inter alia noticed that the assessee has availed unsecured loan from group concern, namely, Cama Motors Pvt. Ltd. (lender) to the tune of Rs. 1,71,90,000/-. It was found that common Directors of the assessee company, namely, Shri Jehangir R. Cama, Mrs. Mehroo J. Cama and Shri Rustom J. Cama hold more than 10% of the share capital. The AO accordingly, by a brief order, invoked provisions of Section 2(22)(e) of the Act and made an addition of Rs. 1,71,90,000/- in the hands of the assessee under s.2(22)(e) of the Act. 5. Aggrieved, the assessee preferred appeal before the CIT(A). 6. The CIT(A) after taking into account the factual position and the submissions of the assessee in rebuttal to the assessment order found merit in the plea of the assessee for reversal of the addition. The relevant part of the order of the CIT(A) is reproduced hereunder: "2.3. I have gone through the facts and the submission of the appellant carefully. In the assess....
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....-2012 in appeal no. CIT(A)- VI/ ACIT(OSD)/ R-1/ 184/ 11-12, my predecessor held as under: " 4.3 I have considered the facts of the case; assessment order and appellant' s written submission. Appellant took loan from two of its associated group companies which assessing officer treated as deemed dividend under section 2 (22) (e) of IT act. Appellant submitted that it was not holding any shares in these two companies and therefore there is no question of taxing deemed dividend in its hands in view of the decision of special bench of IT AT in the case of ACIT V. Bhaumik Colour Pvt. Ltd. reported in 118 ITD 1. It is not in dispute that appellant is not a shareholder in either of these companies which advanced loans to the appellant and therefore respectfully following the decision of ITAT special bench Mumbai relied upon by the appellant, addition of deemed dividend cannot be made in the hands of appellant. Accordingly the disallowance made by the assessing officer is deleted. However in the said decision of special bench it is held that the provision of section 2(22) (e) can be attracted in the hands of shareholders. Therefore assessing officer is free to take ap....
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.....1 The learned DR for the Revenue relied upon the assessment order and could not point out any specific defect in the order of the CIT(A). 7.2 The learned counsel for the assessee, on the other hand, justified the first appellate order and pointed out that Section 2(22)(e) of the Act has no applicability in the facts of the case. The case of the assessee is squarely covered by the exceptions provided in the provisions of Section 2(22)(e) of the Act itself. The learned counsel for the assessee broadly divided his contentions in two parts; (i) the unsecured loan received was in the ordinary course of business for which the interest has been charged by the lender company and such transactions have occurred in earlier and subsequent years also. The additions made in AY 2013-14 in assessee's own case was deleted by the CIT(A), which action was approved by the ITAT in ITA No.42 & CO No. 40/Ahd/2017 order dated 10.12.2018 in the similar facts; (ii) the details of shareholding of lender company and the assessee company would show that the assessee company does not hold any share in the lender company which have given loan to the assessee. Furthermore, none of the shareholders of lender ....
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....ly, R. J. Cama & Co. Pvt. Ltd. and Cama Motors Pvt. Ltd. 11. The AO invoked the provisions of Section 40A(2)(b) of the Act and considered only 12% interest as reasonable benchmark vis- à-vis 15% per annum paid by the assessee to these lender companies. The AO accordingly disallowed Rs. 5,47,950/- & Rs. 1,18,127/- aggregating to Rs. 6,66,077/- out of interest payments to these concerns under s.40A(2)(b) of the Act. 12. The CIT(A) in first appeal reversed the disallowance so made under s.40A(2)(b) of the Act in terms of the findings recorded below: "3.3. I have gone through the facts and the submission of the appellant carefully. In the assessment order A. O has observed that the appellant if any excess payment is made to the related parties, such excess payment is not allowable as an expense. The assessee failed to give any explanation for giving excessive rate of interest when the assessee is able to procure the loan @ 12% to the parties unrelated to the assessee as has been discussed above. The A. O. has further held that the facts and circumstances in this year are identical to the immediately preceding year, taking a consistent view; disallowance is made in....