TaxTMI 
TaxTMI 
2005 (6) TMI 214
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....f the Income-tax Act, 1961. 2. The assessee is an individual having a proprietary business in the name of M/s. Friends India, whose business was to act as producers, distributors and exporters of feature films. During the assessment year under appeal the assessee was also a substantial shareholder of M/s. Sughand Productions Pvt. Ltd. (SPPL), a company in which public are not substantially interested. M/s. Friends India has taken a loan of Rs. 3,13,50,776 from SPPL. The Assessing Officer went through the balance-sheet of SPPL and found that it had accumulated profits to the extent of Rs. 2,02,07,515. The assessee submitted that the main business of SPPL was advancing of money and the money was advanced to M/s. Friends India in the ordinary....
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.... except that the banner was M/s. Verma Creations Ltd. and the finance was from SPPL. In this case also Shri Ram Gopal Verma did not charge his professional fees for direction and SPPL also did not charge interest on the amount financed. In the return of income filed for assessment year 1998-99, the line of business of SPPL was F mentioned as producers and distributors of film. According to him the main purpose of lending money is to earn income, it does not matter whether the money earned is called interest or profit. SPPL had not carried all the projects in the similar term and conditions as mentioned above. There was no other business activity carried out by SPPL except that of financing films and earning certain return out of the same. T....
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....96 entered by the company with M/s. Bhansali Productions and also the agreement entered into by the assessee with SPPL as a part of the paper-book. The learned Departmental Representative, on the other hand, strongly supported the impugned order. According to him the SPPL does not have any money-lending licence and the very fact that it has not received any interest incomes shows that the accumulated profits of the company have been utilized for giving the so called advances. According to the learned Departmental Representative it is only a distribution of dividend and the case falls under section 2(22)(e) of the Act as has been discussed by the CIT(A) in detail. He relied upon the decision in CIT v. Taj Mahal Hotel [1971] 82 ITR 44 (SC) an....
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.... does not include 'any advance or loan made to a shareholder or the said concern by a company in the course of its business and the lending of money is a substantial part of the business of the company'. Now we have to see whether the assessee falls within the exception clause extracted above. It is, no doubt, true that the only business of SPPL is advancing of money and it is a part of the business activity of the company. We have seen the agreement entered into by SPPL with Bhansali Productions and also with the assessee. The agreement specifically provides that the consideration for such financial transaction was that they shall not charge any interest on the money advanced to the producer and their consideration for giving the f....
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....our tentatively known as "Mehbooba" in collaboration with M/s. Shabbo Arts and to be directed by Shri Afzal Khan. It is also represented that the assessee has not so far entered into any agreement or arrangement in respect of the grant of rights of distribution, exhibition and exploitation of the said picture for or in any of the territories of the world. Friends India also represented that they have right and title to the said picture and in consideration a finance of Rs. 5 crores was received from SPPL towards cost of production and completion of the said picture up to the preparation of the first positive print in such instalment as may be required from time-to-time for which it would get 5 per cent finance commission on the total covera....