ACIT 12(1)(1), MUMBAI V. ASSOCIATED HOSPITALITY LTD DEVELOPERS P. LTD, MUMBAI

ITA 1348/MUM/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4891 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 27-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: IN CIRCUMSTANCES OF CA SE
• Keywords: Business income; Business expenditure; Share purchase agreement; Earning of tax free income; Source of fund; Deemed dividend; Commercial expediency; Revenue expenditure; Set aside
• Section: 271(1)(c); 143(3); 10(14); 2(22)(e); 37(1); 2

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A , MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER, AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.1348/MUM/2017 ASSESSMENT YEAR 2013-14 DCIT-12(1)(1), ROOM NO.223, 02 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020 / VS. M/S ASSOCIATED HOSPITALITY & DEVELOPERS PVT. LTD. 4 TH FLOOR, TECHNIPLEX-1, OFF. VEER SAVARKAR FLYOVER, GOREGAON (W), MUMBAI-400062 ( / REVENUE) ( /ASSESSEE) P.A. NO. AAFCA7847P / DATE OF HEARING : 20/02/2019 / DATE OF ORDER: 17/05/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF THE LD. CIT(A)-20, MUMBAI, DATED 28/11/2016 AND IT PERTAINS TO AY 2013 -14. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL.:- 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF INTEREST C OST OF RS. 1,06,09,9067- MADE U/S 36(1)(III)AND37(1)OF THE ACT' 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND OF RS. 15,00,00,000/- U/S 2(22)(E) OF THE ACT.' ! / REVENUE BY SHRI ANADI VARMA CIT - DR ! / ASSESSEE BY SHRI RAJESH S. SHAH 2 ITA NO.1348/MUM/2017 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN RELYING ON THE DECISION OF M/S GHAR DA CHEMICALS LTD. IN ITA NO. 6321 & 6025/MUM/2009 AND OTHER CASE LAWS WHICH ARE NOT APPLICABLE TO THE FACTS OF THE INSTANT CASE.' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE A.O. BE RESTORE D.' 2. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF RUNNING A FIVE STAR CATEGORY HOTEL AND TO GIVE SHOP S ON LEAVE AND LICENCE BASIS, FILED ITS RETURN OF INCOME FOR AY 2013-14 ON 29/09/2013 A ND DECLARED TOTAL INCOME AT RS.2,34,80,210/-. THE CASE WAS SELECTED FOR SCRUTIN Y AND THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) OF THE ACT, ON 29/02/2016 DETE RMINING TOTAL INCOME AT RS.18,40,90,120/- INTER ALIA BY MAKING ADDITION TOW ARDS DISALLOWANCE OF INTEREST DEBITED IN TO THE PROFIT & LOSS ACCOUNT U/S 36(1)(I II) OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAS DIVERTED FUNDS BORROWED FROM BANKS TO SISTER/ASSOCIATE CONCERN WITHOUT CHARGING ANY INTEREST. SIMILARLY, THE AO HAS MADE A DDITIONS OF RS.15 CRORES U/S 2(22)(E) OF THE ACT, ON THE GROUND THAT ALTHOUGH TH E ASSESSEE HAS RECEIVED LOANS FROM A COMPANY WHERE THE COMMON SHAREHOLDERS HOLDING MOR E THAN 10% OF BENEFICIAL INTEREST BUT FAILED TO DECLARE DEEMED DIVIDEND ENVI SAGED U/S 2(22)(E) OF THE ACT. 3. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY. THE LD. CIT(A), FOR THE DETAILED REASONS RECORDED IN ITS APPELLATE ORDER DATED 28/11/2016 ALLOWED APPEAL FILED BY THE ASSESSEE AND DELETED ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF IN TEREST U/S 36(1)(III) OF THE ACT AND ALSO ADDITION TOWARDS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE RELEVANT FINDING OF THE LD. CIT(A) ARE AS UNDER:- 3 ITA NO.1348/MUM/2017 6.5 I HAVE GONE THROUGH THE ASSESSMENT ORDER AND S UBMISSIONS MADE IN THIS REGARD. IT IS SEEN THAT THE ASSESSEE HAS CL AIMED INTEREST ON BORROWED FUNDS U/S.36(L)(III) / WHICH WAS REALIZED FOR INVESTMENT IN AKBG INVESTMENTS, WHICH IS A SISTER/ASSOCIATE CONCE RN. THE INVESTMENT WAS MADE FOR PURCHASE OF LAND AND BUILDI NGS WITH A VIEW TO CONSTRUCT HOTEL ON SAID LAND, IT IS ABUNDANTLY C LEAR THAT THE AMOUNT BORROWED FROM SBI AND YES BANK LTD. WAS ADVANCED BY THE APPELLANT TO ITS SISTER CONCERN / GROUP COMPANY TO PURCHASE A PLOT OF LAND FOR CONSTRUCTION OF HOTEL AND THEREFORE THERE WAS A COM MERCIAL EXPEDIENCY WHEN THE AMOUNTS WERE PAID BY THE APPELLANT. THE AS SESSEE HAD CONTROLLING INTEREST IN THE ASSOCIATE CONCERN, THEREFORE THE AS SESSEE WAS ENTITLED FOR CLAIM OF INTEREST ON THE FUNDS ACQUIRED FOR INVESTMENT MADE IN THESE CONCERNS OUT OF COMMERCIAL EXPEDIENCY . IT IS ALSO FOUND THAT INVESTMENT WAS MADE IN THE SUBSIDIARY COMPANY WITH A SIMILAR LINE OF BUSINESS AND FOR COMMERCIAL EXPEDIENCY, THEREFORE, NO DISALLOWANCE WAS WARRANTED U/S.36(L)(III), IN VIEW OF THE DECISION O F HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS, 288 ITR 1(SC). IT IS FOUND THAT THE PURPOSE FOR WHICH ADVANCES WERE MADE IS COVERED BY THE PRIN CIPLE OF COMMERCIAL EXPEDIENCY, THEREFORE, FOLLOWING THE DECISION OF HO N'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS (SUPRA) THE DISALLOWANCE OF INTEREST OF RS. 1,06,06,9067- MADE BY THE AO CANNOT BE SUSTAINED IN APPEAL AND IS DIRECTED TO BE DELETED. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 7.4. I HAVE GONE THROUGH THE ASSESSMENT ORDER AN D SUBMISSIONS MADE IN THIS REGARD. IT IS SEEN THAT THE AO HAD MADE ADD ITION OF THE AMOUNT OF RS.15,00,00,000/- AS 'DEEMED DIVIDEND' U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961 IN THE HANDS OF THE APPELLANT. THE APPELL ANT HAS SUBMITTED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED AO HAS ERRED IN TAXING A SUM OF RS. 15.00 CR. RECEIVED BY THE APPELLANT FROM BRIPL AS DEEMED DIVIDEND BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IN THIS REGARD THE APPELLANT SUBMITTED THAT AN AMOUNT OF RS. 15.00 CR. WAS RECEIVED BY THE APPELLANT FROM BRIPL ON BEHALF OF SISTER/GROUP COMPANY/FIRM TO BE FORMED AND IT WAS N OT RECEIVED BY THE APPELLANT FROM BRIPL AS A LOAN. THE MONEY WAS RECEI VED FROM BRIPL IN THE NORMAL COURSE OF BUSINESS FOR THE PURPOSE OF PU RCHASE OF LAND ON WHICH A HOTEL BUILDING WAS TO BE CONSTRUCTED FOR TH E PURPOSE OF BUSINESS OF THE ASSESSEE. THE APPELLANT, THEREFORE, SUBMITTE D THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED AS TH ERE WAS NO LOAN TRANSACTION BETWEEN APPELLANT AND BRIPL. IT IS SEEN THAT THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR 318 ITR 462 HAS DEALT WITH SIMILAR ISSUE WHEREIN THIS ISSUE WAS ELABORATELY DI SCUSSED AS UNDER: - 'SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961, SHOW S THAT A PAYMENT WOULD ACQUIRE THE ATTRIBUTES OF A DIVIDEND WITHIN THE MEANING OF THE PROVISION IF THE FOLLOWING CONDITION S ARE FULFILLED: (I) THE COMPANY MAKING THE PAYMENT IS ONE IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED; (II) MONEY SHOULD BE PAID BY THE COMPANY TO A SHARE HOLDER HOLDING NOT LESS THAN TEN PER CENT. OF THE VOTING P OWER OF THE 4 ITA NO.1348/MUM/2017 COMPANY. IT WOULD MAKE NO DIFFERENCE IF THE PAYMENT WAS OUT OF THE ASSETS OF THE COMPANY OR OTHERWISE; (III)THE MONEY SHOULD BE PAID EITHER BY WAY OF AN A DVANCE OR LOAN OR IT MAY BE 'ANY PAYMENT' WHICH THE COMPANY M AY MAKE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY S HAREHOLDER OR ALSO TO CONCERN IN WHIHC SUCH SHAREHOLDER IS A MEMB ER OR A PARTNER AND IN WHICH HE SUBSTANTIALLY INTERESTED; A ND (IV)THE LIMITING FACTOR BEING THAT THESE PAYMENTS M UST BE TO THE EXTENT OF ACCUMULATED PROFITS, POSSESSED BY SUCH A COMPANY. THE IMMEDIATE PRECURSOR TO SECTION 2(22)(E) IS FOUN D IN SECTION 2(6A) OF THE INDIAN INCOME-TAX ACT, 1922. THE PURPOSE OF INSERTION OF SUB-CLAUSE (E) TO SECTI ON 2(6A) IN THE 1922 ACT WAS TO BRING WITHIN THE TAX NET MONIES PAID BY CLOS ELY HELD COMPANIES TO THEIR PRINCIPAL SHAREHOLDERS IN THE GUISE OF LOANS AND ADVANCES TO AVOID PAYMENT OF X. THEREFORE, SUB-CLAUSE (E) OF SECTION 2(22) OF THE 1961 ACT, WHICH IS IN PAN I ATERIA WITH SUB- CLAUSE (E) OF SE CTION 2(6A) OF THE 1922 ACT, PLAINLY SEEKS TO BRING WITHIN THE TAX NET, ACC UMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSELY HELD COMPANIES TO ITS SH AREHOLDERS IN THE FORM OF LOANS. THE PURPOSE BEING THAT PERSONS WHO MANAGE SU CH CLOSELY HELD COMPANIES SHOULD NOT ARRANGE THEIR AFFAIRS IN A MAN NER THAT THEY ASSIST THE SHAREHOLDERS IN AVOIDING THE PAYMENT OF TAXES BY HA VING THESE COMPANIES PAY OR DISTRIBUTE, WHAT WOULD LEGITIMATELY BE DIVID END IN THE HANDS OF THE SHAREHOLDERS' MONEY IN THE FORM OF AN ADVANCE OR LO AN. THE WORD 'ADVANCE' HAS TO BE READ IN CONJUNCTION WITH THE WO RD 'LOAN'. USUALLY ATTRIBUTES OF A LOAN ARE THAT IT INVOLVES THE POSIT IVE ACT OF LENDING COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE MONEY AS L OAN: IT GENERALLY CARRIES INTEREST AND THERE IS AN OBLIGATION OF REPA YMENT. ON THE OTHER HAND, IN ITS WIDEST MEANING THE TERM 'ADVANCE' MAYO R MAY NOT INCLUDE LENDING. THE WORD 'ADVANCE' IF NOT FOUND IN THE COM PANY OF OR IN CONJUNCTION WITH A WORD 'LOAN' MAYOR MAY NOT INCLUD E THE OBLIGATION OF REPAYMENT. IF IT DOES, THEN IT WOULD BE A LOAN. THU S, ARISES THE CONUNDRUM AS TO WHAT MEANING ONE WOULD ATTRIBUTE TO THE TERM 'ADVANCE'. THE RULE OF CONSTRUCTION WHICH ANSWERS THIS CONUNDRUM IS NOSCIT UR A SOCIIS. THE RULE HAS BEEN EXPLAINED BOTH BY THE PRIVY COUNCIL IN THE CASE OF ANGUS ROBERTSON V. GEORGE DAY [1879] 5 AC 63 BY OBSERVING 'IT IS LEGITIMATE RULE OF CONSTRUCTION TO CONSTRUE WORDS IN AN ACT OF PARLIAMENT WITH REFERENCE TO WORDS FOUND IN IMMEDIATE CONNECTION WI TH THEM' AND THE SUPREME COURT IN THE CASE OF ROHIT PULP AND PAPER M ILLS LTD. V. COLLECTOR OF CENTRAL EXCISE, AIR 1991 SC 754 AND STATE OF BOM BAY V. HOSPITAL MAZDOOR SABHA, AIR 1960 SC 610. THE PRINCIPLES WITH REGARD TO THE APPLICABILITY OF THE RULE OF CONSTRUCTION ARE BRIEFLY AS FOLLOWS : (I) DOES THE TERM IN ISSUE HAVE MORE THAN ONE MEANING ATTRIBUTED TO IT, I.E., BASED ON THE SETTIN G OR THE CONTEXT ONE COULD APPLY THE NARROWER OR WIDER MEANING; (II) ARE THE W ORDS OR TERMS USED FOUND IN A GROUP TOTALLY 'DISSIMILAR' OR IS THERE A 'COMMON THREAD' RUNNING THROUGH THEM; (III) THE PURPOSE BEHIND INSERTING OF THE TERM. IN THE INSTANT CASE (I) THE TERM 'ADVANCE' HAS UNDOUBTEDLY MORE TH AN ONE MEANING DEPENDING ON THE CONTEXT IN WHICH IT IS USED; (II) BOTH THE TERMS, THAT IS, 'ADVANCE' OR 'LOAN' ARE RELATED TO THE ACCUMULATED PROFITS OF THE COMPANY; AND (III) THE PURPOSE BEHIND THE INSERTION OF THE T ERM 'ADVANCE' WAS TO 5 ITA NO.1348/MUM/2017 BRING WITHIN THE TAX NET PAYMENTS MADE IN THE GUISE OF LOAN TO SHAREHOLDERS BY COMPANIES IN WHICH THEY HAVE A SUBS TANTIAL INTEREST SO AS TO AVOID PAYMENT OF TAX BY THE SHAREHOLDERS. THE WO RD 'ADVANCE' WHICH APPEARS IN THE COMPANY OF THE WORD 'LOAN' COULD ONL Y MEAN SUCH ADVANCE WHICH CARRIES WITH IT AN OBLIGATION OF REPAYMENT. T RADE ADVANCES WHICH ARE IN THE NATURE OF MONEY TRANSACTED TO GIVE EFFEC T TO A COMMERCIAL TRANSACTION WOULD NOT FALL WITHIN THE AMBIT OF THE PROVISION OF SECTION 2(22)( E) OF THE ACT. THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING CUSTOMIZED KITCHEN EQUIPMENT. THE ASSESSEE WAS ALSO THE MANAGING DIRECTOR AND HELD NEARLY 65 PER CENT. OF THE PAID-U P SHARE CAPITAL OF C. A SUBSTANTIAL PART OF THE BUSINESS OF THE ASSESSEE, W HICH WAS NEARLY 90 PER CENT WAS OBTAINED THROUGH C. FOR THIS PURPOSE, C WO ULD PASS ON THE ADVANCE RECEIVED FROM ITS CUSTOMERS TO THE ASSESSEE TO EXECUTE THE JOB WORK ENTRUSTED TO THE ASSESSEE. THE ASSESSING OFFIC ER WAS OF THE OPINION THAT THE MONEY RECEIVED BY THE ASSESSEE WAS IN THE NATURE OF A LOAN GIVEN BY C TO THE ASSESSEE WHO ADMITTEDLY HELD MORE THAN 10 PER CENT. OF THE SHARES IN C. THE ASSESSING OFFICER CONCLUDED THAT T HE MONEY RECEIVED BY THE ASSESSEE WAS DEEMED DIVIDEND WITHIN THE MEANING OF THE PROVISIONS OF SECTION 2(22)(E). THE COMMISSIONER (APPEALS) REV ERSED THE ORDER OF THE ASSESSING OFFICER. THE TRIBUNAL SUSTAINED THE DECIS ION OF THE COMMISSIONER (APPEALS). ON APPEAL: HELD, THAT THE T RADE ADVANCES GIVEN TO THE ASSESSEE BY C COULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E).' THE HON'BLE MUMBAI ITAT IN ITA NO. 6321 & 6025/MUM/ 2009 GHARDA CHEMICALS LTD. ASST. YEAR 2003-04 VIDE ORDER DT. 22 ND APRIL, 2016 HAD FOLLOWED THE PRINCIPLES ESTABLISHED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. RAJ KUMAR 318 ITR 462. THE SAME PRI NCIPLES WERE ALSO REITERATED BY THE HON'BLE DELHI COURT IN THE CASE O F CIT VS. AMBASSADOR TRAVELS P. LTD. 318 ITR 376. IT IS SEEN FROM THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE THE APPELLANT HAD RECEIVED RS.15.0 0 CRORE FROM BRIPL ON BEHALF OF SISTER/GROUP COMPANY/FIRM TO BE FORMED AND IT WAS NOT RECEIVED BY IE APPELLANT FROM BRIPL AS A LOAN. IT W AS PART OF NORMAL BUSINESS TRANSACTIONS OF ASSESSEE AND PROVISIONS OF SECTION 2(22) (E) ARE NOT ATTRACTED IN THE CASE OF NORMAL BUSINESS TRANSA CTIONS. IT IS NOTED THAT THE THAT THE AMOUNT OF RS. 15.00 CR. WAS RECEIVED B Y THE APPELLANT FROM BRIPL ON BEHALF OF SISTER/GROUP COMPANY/FIRM TO BE FORMED AND IT WAS NOT RECEIVED BY THE APPELLANT FROM BRIPL AS A LOAN. THE MONEY WAS RECEIVED FROM BRIPL IN THE NORMAL COURSE OF BUSINESS FOR THE PURPOSE OF PURCHASE OF LAND ON WHICH A HOTEL BUILDING WAS TO BE CONSTRU CTED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. IT WAS NOT A LOAN TRANSAC TION BUT A TRANSACTION IN THE NORMAL COURSE OF BUSINESS. AS PER THE LEGAL PRECEDENTS DISCUSSED ABOVE THE COMMERCIAL TRANSACTIONS BETWEEN TWO COMPA NIES CANNOT BE BROUGHT WITHIN THE PURVIEW OF THE PROVISIONS OF SEC TION 2(22)(E). IN VIEW OF THIS DISCUSSION THE ADDITION MADE BY THE LEARNED AO BY TAXING A SUM OF RS. 15.00 CR. RECEIVED BY APPELLANT FROM GROUP COMP ANY AS DEEMED DIVIDEND BY INVOKING THE PROVISIONS OF SECTION 2(22 )(E) OF THE ACT CANNOT BE SUSTAINED IN APPEAL AND IS DIRECTED TO BE DELETE D. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 4. AGGRIEVED BY THE LD. CIT(A) ORDER, THE REVENUE I S IN APPEAL BEFORE US. 6 ITA NO.1348/MUM/2017 5. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO. 1 OF REVENUES APPEAL IS DELETION OF ADDITIONS MADE TOWA RDS DISALLOWANCE OF INTEREST U/S 36(1)(III) R.W.S 37(1) OF THE ACT. THE FACTUAL MATR IX OF THE IMPUGNED DISPUTE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT ASSESSEE HAS BORROWED HUGE TERM LOANS FROM YES BANK LTD. AND ALS O ADVANCED VARIOUS LOANS TO ITS SISTER CONCERN M/S AKBG INVESTMENT, THEREFORE, CALL ED UPON TO EXPLAIN AS TO WHY INTEREST EXPENDITURE SHALL NOT BE DISALLOWED U/S 36 (1)(III) OF THE ACT. IN RESPONSE, THE ASSESSEE, VIDE ITS LETTER DATED 05/10/2015 SUBMITTE D THAT AS A MEASURE OF COMMERCIAL EXPEDIENCY, THE ASSESSEE HAS GIVEN LOANS AND ADVANC ES TO ITS SISTER CONCERNS FOR THE PURPOSE OF DEVELOPMENT OF A HOTEL. IT WAS FURTHER S TATED THAT THE SAID FIRM INVESTED THE AMOUNT IN ASSOCIATED HOSPITALITY PVT. LTD. WHICH IS ONE OF THE SISTER CONCERN, FOR THE PURPOSE OF BUYING LAND AND BUILDING WITH INTENTION TO CONSTRUCT OF A HOTEL. THEREFORE, THERE IS COMMERCIAL EXPEDIENCY IN ADVANCING IN LOAN S AND ACCORDINGLY, NO DISALLOWANCE COULD BE MADE U/S 36(1)(III) OF THE AC T. 6. THE AO AFTER CONSIDERING THE RELEVANT SUBMISSION S OF THE ASSESSEE AND ALSO TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAS DIVERT ED INTEREST BEARING FUNDS TO NON- BUSINESS PURPOSE TO GIVE LOANS AND ADVANCES TO ITS SISTER CONCERN WITHOUT ESTABLISHING THE NEXUS BETWEEN LOANS AND ADVANCES AND COMMERCIAL EXPEDIENCY, DISALLOWED INTEREST DEBITED IN TO THE PROFIT & LOSS ACCOUNT U/ S 36(1)(III) OF THE ACT. THE RELEVANT OBSERVATIONS OF THE AO ARE AS UNDER:- 3.8 THE LAND PURCHASED UNDER CONSIDERATION WAS MAD E TOWARDS THE AUCTION DONE BY KOTAK MAHINDRA BANK FOR A TOTAL AMOUNT OF 7 ITA NO.1348/MUM/2017 RS.36.50 CRORES. THE LEDGER ACCOUNTS AND THE PAYMEN T SCHEDULES OF THE ASSESSEE COMPANY SHOWS THAT FOR THE TOTAL CO NSIDERATION PAYABLE, TILL 27.06.2012, THE ASSESSEE HAS ALREADY PAID AN AMOUNT OF RS.27.37 CRORES FROM ITS OWN BOOKS OF ACCOUNTS, WHICH MEANS THE SOURCE OF INVESTMENT IS FROM THE FUNDS AVAILABL E FROM ITS OWN CASH FLOW. THE ASSESSEE VIDE ITS LETTER DATED 08.02 .2016 HAS SUBMITTED THE DETAILS OF PAYMENT MADE TOWARDS THE P URCHASE OF LAND WHEREIN THE SOURCE OF THESE PAYMENTS HAS BEEN TABULATED, WHICH INDICATES THAT THE SOURCE HAVE BEEN RECEIVED FROM THE CASH CREDIT FACILITIES AVAILED FROM SBL/LOAN FROM THE DI RECTORS/THE AMOUNT RECEIVED FROM ITS SISTER/GROUP CONCERN I.E., BALWAS REALTY & INFRASTRUCTURE PVT LTD. (BRIPL). IT IS CLEARLY EVID ENT THAT THE SOURCES OF SUCH FUNDS ARE INTEREST BEARING COST TO THE COMP ANY AND THE ASSESSEE HAS TO PAY INTEREST THEREON FOR A PRIMARY CAUSE TO ACQUIRE THE LAND. THE INVESTMENT IN LAND SHALL IN LONG TERM YIELD CAPITAL GAINS TO THE ASSESSEE COMPANY AND NOT BUSINESS PROF ITS BECAUSE THE ASSESSEE HAD SCRUPULOUSLY REGISTERED THE LAND I N THE NAME OF ITS SUBSIDIARY COMPANY I.E., ASSOCIATED HOSPITALITY PVT LTD. (AHPL). IT IS WORTHWHILE TO MENTION HERE THAT AHPL WAS INCO RPORATED ON 09.07.2012. SECONDLY, THE PARTNERSHIP FIRM IN WHICH THE ASSESSEE COMPANY INVESTED I.E., AKBG INVESTMENT WAS REGISTER ED ON 05.10.2012. INITIALLY, WHEN THE INVESTMENT WAS MA DE IN AHPL, THE PERCENTAGE OF HOLDING WAS 82% ON 09.07.2012. SUB SEQUENTLY, WITHIN A SPAN OF TWO MONTHS, THE SHAREHOLDING WAS D ECREASED AND IT CAME DOWN TO 16.40%. SIMILAR INCIDENCE TOOK PLAC E WHILE MAKING INVESTMENT IN THE FIRM'S ACCOUNT I.E., AKBG INVESTMENT. INITIALLY, IT WAS HIGHER AND ON THE BAL ANCE SHEET DATE, IT WAS HOLDING A MEAGER 10%. THE ASSESSEE HAS MISERABL Y UNDERTAKEN TRANSACTIONS TO CAMOUFLAGE THE INVESTMEN T MADE IN THE LAND. INITIALLY, THE INVESTMENT IN LAND WAS ACQUI RED FROM AUCTION FROM ' KOTAK MAHINDRA BANK IN THE NAME OF THE ASSES SEE COMPANY. THOUGH THE BID WAS SUCCESSFULLY MADE, THE ASSESSEE HAD INSUFFICIENT FUNDS AND HENCE, THE BALANCE SHEET CLE ARLY REVEALS THAT THE ASSESSEE HAS SUBSTANTIALLY BORROWED IN THE FORM OF LONG TERM BORROWINGS FROM SBI AND YES BANK IN ORDER TO MAKE P AYMENT TOWARDS THE PURCHASE OF LAND. THE SCHEDULE OF PAYME NTS AND ITS SOURCE ARE TABULATED AS UNDER: CHEQ./ PO NO.RTGS BANK AND BRANCH AMOUNT (RS.) PAID BY PAID TO SOURCE 806520 / 09.04.2012 SBI, MALAD (WEST), MUMBAI 3,00,00,000 ASSOCIATED HOSPITALITY & DEVELOPERS PVT. LTD. - ASSESSEE KOTAK MAHINDRA BANK LTD. OUT OF THE CREDIT FACILITIES OF RS.750.00TACS AVAILED FROM SBI AS INFORMED BY OUR LETTER DATED 5 TFL JANUARY, 2016 565151 / 23.04.2012 SBI, MALAD (WEST), MUMBAI 4,30,00,000 ASSOCIATED HOSPITALITY & DEVELOPERS PVT. LTD. - ASSESSEE KOTAK MAHINDRA BANK LTD. 8 ITA NO.1348/MUM/2017 5651577 24.05.2012 SBI, MALAD (WEST), MUMBAI 5,47,00,000 ASSOCIATED HOSPITALITY & DEVELOPERS PVT. LTD. - ASSESSEE KOTAK MAHINDRA BANK LTD. LOAN FROM THE DIRECTORS 331586/ 14.06.2012 SBI, MALAD (WEST), MUMBAI 7,30,00,000 ASSOCIATED HOSPITALITY & DEVELOPERS PVT. LTD. -ASSESSEE KOTAK MAHINDRA BANK LTD. AMOUNT RECEIVED FROM SISTER / GROUP CONCERN BALWAS REALITY & INFRASTRUCTURE PVT LTD AS ITS CONTRIBUTION TOWARDS CAPITAL OF THE NEW COMPANY / FIRM. 8389837 27.06.2012 SBI, MALAD (WEST), MUMBAI 7,30,00,000 ASSOCIATED HOSPITALITY & DEVELOPERS PVT, LTD. -ASSESSEE KOTAK MAHINDRA BANK LTD. AMOUNT RECEIVED FROM SISTER / GROUP CONCERN BALWAS REALITY A INFRASTRUCTURE PVT LTD AS ITS CONTRIBUTION TOWARDS CAPITAL OF THE NEW COMPANY / FIRM. RTGS/ 19.07.2012 SBI, MALAD (WEST), MUMBAI 9,13,00,000 ASSOCIATED HOSPITALITY PVT. LTD. - SUBSIDIARY OF THE ASSESSEE KOTAK MAHINDRA BANK LTD. RS.176.00 LACS FROM THE ASSESSEE - OUT OF LOAN PROCEEDS FROM YES BANK LTD AS INFORMED BY OUR LETTER DATED 5TH JANUARY, 2016. RS.40.00 LACS RECEIVED FROM SISTER / GROUP COMPANY BALWAS REALITY 6T INFRASTRUCTURE PVT. LTD. AS ITS CONTRIBUTION TOWARDS CAPITAL OF THE NEW COMPANY / FIRM RS.575.00LACS RECEIVED AS SHARE APPLICATION MONEY AND LOAN FROM SHAREHOLDERS. RS.122.00 LACS FROM INTERNAL RESOURCES OF THE ASSESSEE COMPANY AND THE LOANS FROM DIRECTORS AND THEIR RELATIVES. 3.9 IN NORMAL COURSE, THE INTEREST ON THE BORROWED FUNDS FOR ACQUISITION OF LAND DESERVES TO BE CAPITALIZED UNDER THE LAND ACCO UNT AND DISALLOWED FROM THE BUSINESS EXPENDITURE, IN ORDER TO ESCAPE F ROM THE CLUTCHES OF THE DISALLOWANCE, THE ASSESSEE HAD MADE ARRANGEMENT S AS INVESTMENTS IN ITS SUBSIDIARY COMPANY AHPL AND FIRM -AKBG INVES TMENT, AND HAS DIVERTED THE REVENUE THAT THE INVESTMENTS ARE MADE IN THEIR SUBSIDIARY 9 ITA NO.1348/MUM/2017 COMPANIES AND FIRM IN ORDER TO CAMOUFLAGE THAT THE GAINS FROM THIS ADVENTURE SHALL BE BUSINESS INCOME. BUT, IN REAL TE RMS, ANY GAIN FROM THE FIRM OR FROM ITS SUBSIDIARY COMPANY SHALL BE INCOME WHICH SHALL BE TREATED U/S 10(14) AND 10(2A) OF THE ACT IN THE FOR M OF DIVIDEND INCOME AND SHARE FROM PARTNERSHIP FIRM OR CAPITAL GAINS BY WAY OF SALE OF SHARES. IN NONE OF THE CASE, THE ASSESSEE COMPANY CAN HAVE ANY INCOME WHICH IS CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM BU SINESS OR PROFESSION'. THUS THE ASSESSEE MAY EARN EXEMPT INCO ME OR CAPITAL GAINS BUT CORRESPONDINGLY, THE INTEREST COST TOWARD S THE INVESTMENT IN THE FIRM AND THE SUBSIDIARY COMPANY HAS BEEN DEBITED TO THE P&L A/C. 3.10 THE GROUP ENTITY (ASSOCIATED HOSPITALITY PVT. LTD.) IN WHOSE NAME THE ANDHERI PLOT HAS BEEN FINALLY REGISTERED HAS CE ASED TO BE THE SUBSIDIARY OF THE ASSESSEE COMPANY WITHIN FEW MONTH S OF INCORPORATION AND THE ASSESSEE COMPANY IS HOLDING ONLY 16.40% SHA RES IN ASSOCIATED HOSPITALITY PVT. LTD., THEREFORE, HAS CEASED TO BE A SUBSIDIARY SO AS TO GET COVERED BY THE DECISION OF THE HON'BLE APEX COURT I N THE CASE OF S.A BUILDERS AND HERO MOTORS. FURTHER, THE LOGIC OF 'BU SINESS EXPEDIENCY' HIGHLIGHTED BY THE ASSESSEE COMPANY RELYING UPON TH E SAID JUDGEMENTS IS NOT ACCEPTABLE SINCE IT IS A CASE WHERE THE INTE NTION IS BUSINESS EXPANSION. THE ASSESSEE COMPANY COULD NOT MAKE OUT ANY CASE OF EXIGENCY OR EXPEDIENCY. 3.11 ACCOUNTING STANDARD-16 DEALS WITH AND PRESCRIB ES THE TREATMENT FOR BORROWING COSTS. THE OBJECTIVE OF THIS STANDARD IS TO PRESCRIBE THE ACCOUNTING TREATMENT FOR BORROWING COSTS. THE FOLLO WING TERMS ARE USED IN AS 16 WITH THE MEANINGS SPECIFIED: 'BORROWING COSTS ARE INTEREST AND OTHER COSTS INCUR RED BY AN ENTERPRISE IN CONNECTION WITH THE BORROWING OF FUND S. A QUALIFYING ASSET IS ON ASSET THAT NECESSARILY TAK ES A SUBSTANTIAL PERIOD OF TIME TO GET READY FOR ITS INT ENDED USE OR SATE. FURTHER AS PER EXPLANATION TO THE DEFINITION OF THE ASH: WHAT CONSTITUTES A SUBSTANTIAL PERIOD OF TIME PRIMARILY DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. HOWEVER, ORDINARILY, A PERIOD OF TWELVE MONTHS IS CONSIDERED AS SUBSTANTIAL PERIOD OF TIME UNLESS A SHORTER OR LONG ER PERIOD CAN BE JUSTIFIED ON THE BASIS OF FACTS AND CIRCUMST ANCES OF THE CASE. BORROWING COSTS MAY INCLUDE: AMORTIZATION OF ANCILLARY COSTS INCURRED IN CONNECTION WITH THE ARRANGEMENT OF BORROWINGS; FINANCE CHARGES IN RESPECT OF ASSETS ACQUIRED UND ER FINANCE LEASES OR UNDER OTHER SIMILAR ARRANGEMENTS; AND 10 ITA NO.1348/MUM/2017 EXCHANGE DIFFERENCES ARISING FROM FOREIGN CURRENC Y BORROWINGS TO THE EXTENT THAT THEY ARE REGARDED AS AN ADJUSTMENT TO INTEREST COSTS. ' INTEREST AND COMMITMENT CHARGES ON BANK BORROWING S AND OTHER SHORT-TERM AND LONG-TERM BORROWINGS; - AMORTIZATION OF DISCOUNTS OR PREMIUMS RELATING TO B ORROWINGS; EXAMPLES OF QUALIFYING ASSETS ARE MANUFACTURING PLA NTS, POWER GENERATION FACILITIES, INVENTORIES THAT REQUIRE A S UBSTANTIAL PERIOD OF TIME TO BRING THEM TO A SALEABLE CONDITION, AND INV ESTMENT PROPERTIES. AS PER THE AS-16, BORROWING COSTS THAT ARE DIRECT LY ATTRIBUTABLE TO THE ACQUISITION, CONSTRUCTION OR PRODUCTION OF A QUALIF YING ASSET SHOULD BE CAPITALIZED AS PART OF THE COST OF THAT ASSET. THE AMOUNT OF BORROWING COSTS ELIGIBLE FOR CAPITALIZATION SHOULD BE DETERMI NED IN ACCORDANCE WITH THIS STANDARD. BORROWING COSTS ARE CAPITALIZED AS PART OF THE COST OF A QUALIFYING ASSET WHEN IT IS PROBABLE THAT THEY WILL RESULT IN FUTURE ECONOMIC BENEFITS TO THE ENTERPRISE AND THE COSTS C AN BE MEASURED RELIABLY. BORROWING COSTS ELIGIBLE FOR CAPITALIZATI ON ARE THE BORROWING COSTS THAT ARE DIRECTLY ATTRIBUTABLE TO THE ACQUISI TION, CONSTRUCTION OR PRODUCTION OF A QUALIFYING ASSET. WHEN AN ENTERPRIS E BORROWS FUNDS SPECIFICALLY FOR THE PURPOSE OF OBTAINING A PARTICU LAR QUALIFYING ASSET, THE BORROWING COSTS THAT DIRECTLY RELATE TO THAT QU ALIFYING ASSET CAN BE READILY IDENTIFIED AND SHOULD BE CAPITALIZED. THE ASSESSEE COMPANY HAS ENTIRELY IGNORED THIS ACC OUNTING STANDARD EVEN WHEN IT IS EVIDENT THAT THERE ENTIRE BORROWING S HAVE BEEN USED FOR ACQUIRING THE 'ANDHERI PLOT' WHEN THE MAJORITY OF THE PAYMENT WERE MADE BY IT TO THE BANK. ALSO IN THE SUBSEQUENT ACT OF GETTING IT TRANSFERRED TO ITS SUBSIDIARY, THE CLAIM OF INTERES T CANNOT BE ALLOWED AS REVENUE EXPENDITURE IN THE BOOKS OF THE ASSESSEE CO MPANY. THINGS WHICH ARE NOT ALLOWED DIRECTLY, CANNOT BE ALLOWED I NDIRECTLY. HAD THE ANDHERI PLOT REMAINED WITH THE ASSESSEE COMPANY, TH EN THE INTEREST EXPENDITURE PERTAINING TO THE FUNDS UTILIZED FOR AC QUIRING THE SAME SHOULD HAVE BEEN CAPITALIZED. BY SHIFTING THE LAND TO ITS SUBSIDIARY, THE ASSESSEE COMPANY IS ATTEMPTING TO CLAIM INTEREST EX PENSE WHILE SIMULTANEOUSLY NOT CHARGING THE SAME FROM THE GROUP CONCERN. 3.12 THEREFORE, PRIMARILY, THE INTEREST COST IN ANY CASE DESERVES NOT TO BE ALLOWED BECAUSE THE INTEREST COST ENTERS THE INV ESTMENT IN LAND AND EVEN OTHERWISE, SINCE HAS BEEN FINALLY REGISTERED IN THE HANDS OF THE SUBSIDIARY COMPANY, THE INCOME FROM SUCH COMPANY SH ALL BE DIVIDEND INCOME EXEMPT TO TAX. AS AFORESAID AND ESTABLISHED FACT THAT ALL THE TERM LOANS FROM YES BANK AND SBI HAS ENTERED TOWARD S THE COST OF INVESTMENT IN LAND, THE TOTAL INTEREST ON THESE LOA NS DESERVES NOT ALLOWABLE U/S 36(1)(III) AND 37(1) OF THE ACT BECAU SE THE YIELD OF THE INTEREST COST HAVE NO BUSINESS EXIGENCY NOR IT IS A REVENUE EXPENDITURE. 3.13 THE TOTAL INTEREST COST DEBITED IN THE P&L A/C IS AS FOLLOWS: 11 ITA NO.1348/MUM/2017 INTEREST ON CASH CREDIT FACILITY - SBI RS. 26,58,52 5 INTEREST ON TERM LOAN - SBI RS. 64,22,364 INTEREST ON TERM LOAN - YES BANK RS. 15,29,017 TOTAL RS. 1106,09,906 IN VIEW OF THE ABOVE DISCUSSION, THE AGGREGATE AMOU NT OF INTEREST COST OF RS.1,06,09,906/- IS HEREBY NOT ALLOWABLE U/S. 36 (1)(III) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. WITHOUT PREJUDICE, THE AGGREGATE INTEREST COST OF R S.1,06,09,906/- IS HELD TO BE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE IN VIEW OF THE DETAILED DI SCUSSION MADE IN THE FOREGOING PARAGRAPHS. HENCE, THE SAID INTEREST IS NOT ADMISSIBLE AN EXPENDITURE U/S. 37(1) OF THE ACT. 3.14 PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCO ME-TAX ACT, 1961 ARE HEREBY INITIATED FOR FURNISHING INACCURATE PART ICULARS OF INCOME LEADING TO CONCEALMENT OF INCOME BY WAY OF CLAIMING EXPENDITURE NOT ALLOWABLE AS THE PROVISIONS OF THE ACT. 7. THE LD. DR, SUBMITTED THAT THE LD. CIT(A) DELETE D ADDITIONS MADE BY THE AO TOWARDS DISALLOWANCE OF INTEREST EXPENDITURE U/S 36 (1)(III) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE AO HAS NARRATED THE FACTS AND EVIDENCE BEFORE COMING TO THE CONCLUSION THAT THE ARGUMENTS ADVANCED BY THE A SSESSEE OF BUSINESS EXPEDIENCY IS NOT PROVED WITH NECESSARY EVIDENCES. THE LD. DR FURTHER SUBMITTED THAT THE AO HAS BROUGHT OUT CLEAR FACTS TO THE EFFECT THAT THE ASSE SSEE HAS BORROWED HUGE LOANS AND ADVANCES FROM BANK AND DIVERTED SUCH INTEREST BEARI NG FUNDS TO ITS SISTER CONCERN FOR THE PURPOSE OF ACQUISITION OF LAND AND BUILDING. TH E AO HAS DISCUSSED THE ISSUE IN HIS ASSESSMENT ORDER AT PARA 3.8 AND 3.9 BEFORE COMING TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE NEXUS BETWEEN LOANS AND ADVANCES AND BUSINESS EXPEDIENCY. THEREFORE, WITHOUT CONSIDERING THE FACT S BROUGHT OUT BY THE AO IN THE 12 ITA NO.1348/MUM/2017 ASSESSMENT ORDER, THE LD. CIT(A) SIMPLY DELETED THE ADDITIONS MADE TOWARDS INTEREST DISALLOWANCE BY FOLLOWING THE DECISION OF THE HONB LE SUPREME COURT IN THE CASE OF S. A. BUILDERS LTD. VS CIT 288 ITR 1(SC) WITHOUT SPECI FYING HOW THE FACTS OF THE PRESENT CASE ARE IDENTICAL ARE SIMILAR TO THE FACTS CONSIDE RED BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. (SUPRA). 8. THE LD. AR FOR THE ASSESSEE, ON THE OTHER HAND, STRONGLY SUPPORTING ORDER OF THE LD. CIT(A) SUBMITTED THAT THE ASSESSEE HAS FILE D COMPLETE DETAILS TO PROVE NEXUS BETWEEN LOANS AND ADVANCES AND BUSINESS EXPEDIENCY, THEREFORE, THE LD. CIT(A) HAS RIGHTLY APPRAISED THE FACTS BEFORE COMING TO THE CO NCLUSION THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS IN FORM OF SHARE CAP ITAL AND RESERVE & SURPLUS, THEREFORE, THERE IS NO REASON TO DISALLOW INTEREST EXPENDITURE U/S 36(1)(III) OF THE ACT. 9 WE HAVE HEARD BOTH PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO HAS DISCUSSED THE ISSUE THREADBARE IN ITS ASSESSMENT ORDER AT PARA 3.8 AND 3.9 BEFORE COM ING TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO MAKE OUT A CASE OF BUSINESS EXPEDIENCY IN ADVANCING LOANS TO ITS SISTER CONCERN. THE FACTS BROUGHT OUT BY THE AO INDICATE THAT THE ASSESSEE HAS GIVEN HUGE INTEREST FREE LOANS AND ADVANCES TO ITS SISTER CONCERN THROUGH A PARTNERSHIP FIRM M/S AKBG INVESTMENT. THE SAID LOAN S AND ADVANCES HAVE BEEN IN TURN GIVEN TO ASSOCIATED HOSPITALITY PVT. LTD., ANO THER SISTER CONCERN OF THE ASSESSEE FOR PURCHASED LAND AND BUILDING FOR CONSTRUCTION OF HOTEL. THE SAID LAND HAS BEEN PURCHASES FOR A CONSIDERATION OF RS.36.50 CRORES BY AN AUCTION DONE BY KOTAK 13 ITA NO.1348/MUM/2017 MAHINDRA BANK. THE LEDGER ACCOUNTS AND THE PAYMENT SCHEDULES OF THE ASSESSEE COMPANY SHOWS THAT THE ASSESSEE HAS PAID TILL 27/06 /2012 AN AMOUNT OF RS.27.37 CORES FROM ITS OWN BANK ACCOUNTS WHICH MEANS THE SO URCE OF INVESTMENT IS FROM THE FUNDS AVAILABLE FROM THE ASSESSEE. THE ASSESSEE VID E ITS LETTER DATED 08/02/2016 HAS SUBMITTED THE DETAILS OF PAYMENT MADE TOWARDS PURCH ASE OF LAND WHEREIN, THE SOURCE OF THESE PAYMENTS HAVE BEEN TABULATED, WHICH INDICA TES THAT THE SOURCE HAVE BEEN RECEIVED FROM THE CASH CREDIT FACILITIES AVAILED FR OM STATE BANK OF INDIA LOAN AND ALSO LOANS TAKEN FROM DIRECTORS. IT IS ALSO CLEARLY EVID ENT FROM THE ABOVE DETAILS THAT THE ASSESSEE HAS USED INTEREST BEARING FUNDS TO GIVE LO ANS AND ADVANCES TO ITS ASSOCIATE CONCERN WITHOUT CHARGING ANY INTEREST. THE AO HAS B ROUGHT OUT ABOVE FACTS IN ITS ASSESSMENT ORDER BY LINKING EACH PAYMENTS MADE BY T HE ASSESSEE TO ITS ASSOCIATE/SISTER CONCERN. ON PERUSAL OF FACTS BROUG HT OUT BY THE AO, IT IS ABUNDANTLY CLEAR THAT THE ASSESSEE HAD GIVEN LOANS AND ADVANCE S TO ITS SISTER CONCERNS THROUGH ANOTHER PARTNERSHIP FIRM. WE FURTHER NOTED THAT THE ASSESSEE HAS ROUTED ITS FUNDS TO SISTER CONCERNS THROUGH A PARTNERSHIP FIRM IN ORDER TO CAMOUFLAGE THAT THE GAINS FROM THIS ADVENTURE SHALL BE BUSINESS INCOME, BUT IN REA L TERMS ANY GAIN FROM THE FIRM OR FROM ITS SUBSIDIARY COMPANY SHALL BE INCOME EXEMPT U/S 10(14) AND 10(2A) OF THE ACT, IN THE FORM OF DIVIDEND INCOME AND SHARE OF PROFIT PARTNERSHIP FIRM. IN NONE OF THE CASE, THE ASSESSEE COMPANY CAN HAVE ANY INCOME WHICH IS C HARGEABLE TO TAX UNDER HEAD INCOME FROM BUSINESS OR PROFESSION. THUS, THE AS SESSEE MAY EARN EXEMPT INCOME OR CAPITAL GAINS, BUT CORRESPONDINGLY INTEREST PAID TOWARDS INVESTMENT IN THE FIRM AND THE SUBSIDIARY COMPANY HAS BEEN CLAIMED AS DEDUCTIO N UNDER THE GUISE OF BUSINESS 14 ITA NO.1348/MUM/2017 EXPENDITURE. WE FURTHER NOTED THAT THE AO HAS DISC USSED ANOTHER ASPECT OF THE ISSUE AS PER WHICH THE GROUP ENTITIES I.E. ASSOCIATED HOS PITALITY PVT. LTD. UNDER WHOSE NAME, THE ANDHERI FLAT HAS BEEN FINALLY REGISTERED HAS CE ASED TO BE THE SUBSIDIARY OF THE ASSESSEE COMPANY WITHIN FEW MONTHS OF INCORPORATION AND THE ASSESSEE COMPANY IS HOLDING ONLY 16.40 %. THEREFORE, ON THE BASIS OF AB OVE FACTS IT IS EVIDENTLY CLEAR THAT IT IS CEASED TO BE SUBSIDIARY AND HENCE, CANNOT BE TO GET COVERED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD.(SUPRA) AND HERO CYCLES PVT. LTD.(SUPRA), THEREFORE, THERE IS NO LOGIC IN THE AR GUMENT OF THE ASSESSEE THAT THERE IS BUSINESS EXPEDIENCY IN ADVANCING LOANS TO ITS SISTE R CONCERN. WE FURTHER NOTED THAT EVEN THOUGH THE AO HAS DISCUSSED APPLICABILITY OF A CCOUNTING STANDARD-16, THE LD. CIT(A) HAS FAILED TO GIVE ANY FINDING ON THIS ASPEC T AND WENT ON TO DISCUSS ISSUE IN LIGHT OF THE DECISION OF HONBLE SUPREME COURT IN T HE CASE OF S.A. BUILDERS LTD. (SUPRA), EVEN THOUGH THE FACTS BROUGHT OUT IN THE A SSESSMENT ORDER CLEARLY SAYS THAT FACTS OF THE PRESENT CASE IS NOT APPLICABLE TO THE FACTS CONSIDERED BY THE HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS (SUPRA). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE LD. CIT(A) COMPLETELY WENT WRONG IN DECIDING THE ISSUE IN THE LIGHT OF DECISION OF HONBLE SUPREME COURT WITHOUT ESTABLISHING THE FACT THAT HOW LOANS AND ADVANCES GIVEN BY THE ASSESSEE TO ITS ASSOCIATE ENTERPRISES/SISTER CONCERN IS COMES WITHIN THE AMBIT OF BUSINESS EXPEDIENCY. 10. COMING TO ANOTHER ARGUMENTS OF THE LD. COUNSEL FOR THE ASSESSEE. THE LD. AR FOR THE ASSESSEE HAS ADVANCED AN ALTERNATIVE ARGUME NTS IN THE LIGHT OF DECISION OF THE 15 ITA NO.1348/MUM/2017 HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. VS DCIT (2016) 383 ITR 529(BOM.) AS PER WHICH, IF OWN FUND ARE IN EXCESS O F LOANS AND ADVANCES OR THERE ARE MIXED FUNDS THEN A GENERAL PRESUMPTION GOES IN FAVO UR OF THE ASSESSEE THAT INVESTMENTS OR LOANS AND ADVANCES IS OUT OF OWN FUN DS, CONSEQUENTLY INTEREST EXPENDITURE CANNOT BE DISALLOWED U/S 36(1)(III) OF THE ACT. WE FIND THAT ALTHOUGH THE LD. AR HAS MADE AN ALTERNATIVE ARGUMENT IN LIGHT OF THE ABOVE JUDGMENT, BUT FAILED TO FILE NECESSARY EVIDENCES TO PROVE THAT IT HAS SUFFICIENT OWN FUNDS WHICH IS OVER AND ABOVE LOANS AND ADVANCES GIVEN TO SISTER CONCERN AND ALSO INTEREST BEARING FUNDS HAVE BEEN FULLY UTILIZED FOR THE PURPOSE FOR WHICH SUCH FUNDS HAS BEEN BORROWED, THEREFORE, THE ALTERNATIVE ARGUMENT OF THE ASSESSEE IS HELD TO BE DEVOID AT MERITS. 11. COMING TO THE CASE LAWS RELIED BY THE LD. DR. T HE LD. DR RELIED UPON THE DECISION OF UNITED BREWERIES LTD. VS ACIT (2015) 22 9 TAXMAN 113 (KAR.) WHERE THE COURT HELD THAT IF THE ARGUMENTS OF THE ASSESSEE IS ACCEPTED WHENEVER A HOLDING COMPANY LENDS MONEY TO SUBSIDIARY COMPANY, THEN THE HOLDING COMPANY WOULD BE ENTITLED TO THE BENEFIT OF DEDUCTION U/S 36(1)(III) IS INCORRECT BECAUSE I.E. NOT THE INTENTION OF THE LAW. THOUGH THERE IS NO PROVISION IN LAW FOR SUPPORTING THE SUBSIDIARY COMPANY TO GET BENEFIT OF DEDUCTION U/S 36(1)(III) OR 37(1), THE MONEY LENT SHOULD BE LAID OUT AND EXTENDED TO ONLY FOR THE PURPOSES OF B USINESS OF THE ASSESSEE. THERE SHOULD BE A DIRECT NEXUS BETWEEN THE LOAN AND ADVAN CES AND THE BUSINESS FOR WHICH THE MONEY IS LENT. IF THAT CONNECTION IS NOT THERE, MERELY BECAUSE THE MONEY WAS LENT TO A SISTER-CONCERN OR TO A SUBSIDIARY COMPANY WOUL D NOT ENABLE THE ASSESSEE TO CLAIM 16 ITA NO.1348/MUM/2017 SUCH DEDUCTION. SIMILARLY, THE HONBLE ALLAHABAD HI GH COURT IN THE CASE OF PUNJAB AUTO INDUSTRIES (P.) LTD. (2008) 306 ITR 149 (ALL.) HELD THAT WHERE BORROWED FUNDS WERE DIVERTED BY THE ASSESSEE FOR PURCHASE OF LAND AND BUILDING THEN THE DEPARTMENT WAS JUSTIFIED IN DISALLOWING INTEREST ON SAME. 12. IN THIS VIEW OF THE MATTER, AND CONSIDERING THE CASE LAWS RELIED UPON BY BOTH SIDES, WE ARE OF THE CONSIDERED VIEW THAT THE AO WA S RIGHT IN DISALLOWING INTEREST EXPENDITURE U/S 36(1)(III) R.W.S. 37(1), BECAUSE TH E ASSESSEE HAS FAILED TO MAKE OUT A CASE OF AVAILABLITY OF OWN FUNDS IN ORDER TO APPLY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HDFC BANK LTD. (SUPRA) AN D ALSO JUDGEMENT OF THE HONBLE SUPREME COURT IN THE CASE OF S. A. BUILDERS (SUPRA) TO HOLD THAT THERE IS NEXUS BETWEEN THE LOAN AND ADVANCES AND BUSINESS EXPEDIEN CY. THE LD. CIT(A) WITHOUT APPRECIATING THE FACT HAS SIMPLY DELETED ADDITIONS MADE BY THE AO, HENCE, WE REVERSE THE FINDINGS OF THE LD. CIT(A) AND UPHELD THE ADDIT IONS MADE BY THE AO TOWARDS DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. 13. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATI ON FROM GROUND NO.2 IS ADDITIONS MADE TOWARDS DEEMED DIVIDEND OF RS.15 CRORES U/S 2( 22)(E) OF THE ACT IN RESPECT OF LOANS AND ADVANCES RECEIVED FROM GROUP COMPANIES. T HE FACTUAL MATRIX OF THE IMPUGNED DISPUTES ARE THAT THE ASSESSEE HAS RECEIVE D A SUM OF RS.15 CRORES FROM M/S BALWAS REALTY & INFRASTRUCTURE PVT. LTD. ((BRIP L) IN THE FORM OF LOANS AND ADVANCES. THE AO OBSERVED THAT THERE ARE COMMON SHA REHOLDERS HOLDING MORE THAN 10% BENEFICIAL HOLDING IN BOTH COMPANIES. THE AO FU RTHER OBSERVED THAT ACCUMULATED 17 ITA NO.1348/MUM/2017 PROFITS UNDER THE HEAD RESERVE AND SURPLUS AS ON 31 /03/2012 IN THE BALANCE SHEET OF BALWAS REALTY & INFRASTRUCTURE PVT. LTD. IS RS.16,9 8,06,252/-. IN ORDER TO EXAMINE THE LOANS AND ADVANCES RECEIVED BY THE ASSESSEE FROM BA LWAS REALTY & INFRASTRUCTURE PVT. LTD. IN LIGHT OF PROVISION OF SECTION 2(22)(E) , A SHOW-CAUSE NOTICE WAS ISSUED AND CALLED UP ON THE ASSESSEE TO EXPLAIN AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) SHALL NOT BE APPLIED TO TREAT LOANS AND ADVANCES AS DEEME D DIVIDEND. IN RESPONSE, THE ASSESSEE VIDE ITS LETTER DATED 08/02/2016 SUBMITTED THAT PROVISIONS OF SECTION 2(22)(E) CAN BE APPLIED TO A CASE WHERE LOANS AND ADVANCES H AS BEEN GIVEN TO A REGISTERED OWNER, BUT NOT IN THE HANDS OF BENEFICIAL OWNERS WH O IS HOLDING MORE THAN 10% OF SHARE HOLDING IN COMPANY WHICH GIVES LOANS AND ADVA NCES. THE AO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALSO RELIED UPO N VARIOUS JUDICIAL PRECEDENCE, INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS IMPACT CONTAINERS PVT. LTD. AND ALSO THE DECISION OF THE H ONBLE BOMBAY HIGH COURT IN THE CASE OF N.S. N. JEWELLERS (P.) LTD. (2015) 57 TAXMA NN.COM 113(BOM.) HELD THAT PROVISIONS OF SECTION 2(22)(E) ARE CLEARLY APPLICAB LE WHERE BENEFICIAL INTEREST IS MORE THAN 10% IN A COMPANY WHICH GIVES LOANS AND ADVANCE S AND ALSO RESERVE AND SURPLUS AND ACCUMULATED PROFITS IS OVER AND ABOVE LOANS AND ADVANCES. THE RELEVANT FINDINGS OF THE AO ARE AS UNDER:- 4.4 GOING THROUGH THE SUBMISSIONS DATED 08.02.2016, THE ASSESSEE SUMMARILY PROJECTED THAT IN ORDER TO AVOID THE FORF EITURE OF THE AMOUNTS PAID TOWARDS THE PURCHASE OF THE LAND, THE ASSESSEE OUT OF COMMERCIAL EXPEDIENCY RECEIVED AN AMOUNT OF RS.15 CRORES FROM ITS SISTER CONCERN, BRIPL. THE ASSESSEE IN THIS REGARD HAS ALSO PLACED RELIANCE IN CASES OF COMMISSIONER OF INCOME-TAX V. UNIVERSAL MEDICARE (P .) LTD. [2010] 324 ITR 263 (SUPRA) AND CTT, CENTRAL-IV V. JIGNESH P. SHAH [2015] 372 ITR 392 (SUPRA). 18 ITA NO.1348/MUM/2017 THE FACTS DECIDED IN THESE CASE LAWS ARE DISTINGUIS HABLE FROM THE FACTS OF THE ASSESSEE'S CASE. FURTHER, TO GAIN STRENGTH IN THE S IMILAR FACTS OF THE CASE, IT IS PERTINENT TO MENTION THE CASE LAW CIT V. N.S.N. JEW ELLERS (P.) LTD. [2015] 57 TAXMANN.COM 113 (BOMBAY) [SLP ADMITTED.] IN SPECIAL LEAVE TO APPEAL (C) NO. 5558 OF 2015 DATED JULY 7, 2015. THE GIST OF TH E CASE IS AS FOLLOWS: 'SECTION 2(22) OF THE INCOME-TAX ACT, 1961-DEEMED D IVIDEND (LOANS OR ADVANCES TO SHARE-HOLDERS/SHAREHOLDER)- ASSESSMENT YEAR 2006-07 ASSESSEE COMPANY HAD RECEIVED A SUM BY WAY OF LOAN OR ADVANCE FROM S1PL - AS TWO SHAREHOLDERS OF S1PL HAD A BENEFICIAL OWNE RSHIP OF SHARES OF ASSESSEE, ASSESSING OFFICER HELD THAT PAYMENT BY WA Y OF LOAN OR ADVANCE WAS A DIVIDEND UNDER SECTION 2(22)(E) - HIGH COURT BY I MPUGNED ORDER HELD THAT SINCE RECIPIENT OF LOAN, NAMELY, ASSESSEE, WAS NOT A SHAREHOLDER OF SIPL, PROVISIONS OF SECTION 2(22)(E) WOULD NOT APPLY - WH ETHER SPECIAL LEAVE PETITION FILED AGAINST IMPUGNED ORDER WAS TO BE GRA NTED - HELD, YES [IN FAVOUR OF REVENUE]' 4.5 THE PROVISIONS OF SECTION 2(22) (E) ACT READS A S UNDER:- ' DIVIDEND INCLUDES (A) XXX XXX XXX (B) XXX XXX XXX (C) XXX XXX XXX (D) XXX XXX XXX (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER AS RE PRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 315T 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 ENTITL ED TO A FIXED ROTE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE 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 WH ICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS T HE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE I NDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPAN Y IN EITHER CASE POSSESSES ACCUMULATED PROFITS; 4.5.1 THIS PROVISION CREATES A FICTION PROVIDING CE RTAIN CIRCUMSTANCES UNDER WHICH CERTAIN KINDS OF PAYMENTS MADE TO THE PERSONS SPECIFIED THEREIN ARE TO BE TREATED AS DEEMED DIVIDEND INCOME. AS PER THI S PROVISION, THE FOLLOWING CONDITIONS ARE TO BE SATISFIED: (1) THE PAYER COMPANY MUST BE A CLOSELY HELD COMPAN Y. 19 ITA NO.1348/MUM/2017 (2) IT APPLIES TO ANY SUM PAID BY WAY OF LOAN OR AD VANCE DURING THE YEAR TO THE FOLLOWING PERSONS: (A) A SHAREHOLDER HOLDING AT LEAST 10 OF VOTING POW ER IN THE PAYER COMPANY. (B) A COMPANY IN WHICH SUCH SHAREHOLDER HAS AT LEAS T 20% OF THE VOTING POWER. (C) A CONCERN (OTHER THAN COMPANY) IN WHICH SUCH SH AREHOLDER HAS AT LEAST 20% INTEREST. (3) THE PAYER COMPANY HAS ACCUMULATED PROFITS ON TH E DATE OF ANY SUCH PAYMENT AND THE PAYMENT IS OUT OF ACCUMULATED PROFI TS. (4) THE PAYMENT OF LOAN OR ADVANCE IS NOT IN COURSE OF ORDINARY BUSINESS ACTIVITIES. 4.5.2 IN COMMISSIONER OF INCOME TAX VS. C.P. SARATH Y MUDALIAR [1972] 83 ITR 170, THE SUPREME COURT ANALYSED THE PROVISION AND P OINTED OUT THAT IN SO FAR AS PAYMENT BY A COMPANY BY WAY OF ADVANCE OR LOAN I S CONCERNED, IT CAN BE MADE TO ANY OF THE THREE PERSONS MENTIONED THEREIN I.E. IT HAD THREE LIMBS AND EXPLAINED THE SAME AS UNDER:- -ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN W HICH THE PUBLIC ARE SUBSTANTIALLY INTEREST, OF ANY SUM (WHETHER AS REPR ESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER 31.0 5.1987 BY WAY OF ADVANCE OR LOAN. FIRST LIMB A) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENE FICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVID END WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PERCENT OF THE VOTING POWER, SECOND LIMB B) OR TO ANY CONCERN IN WHICH, SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFT ER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) THIRD LIMB C) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OR ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. 4.5.3 IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED , IN NO CASE A CLOSELY HELD COMPANY RECEIVING LOANS FROM ANOTHER CLOSELY HELD C OMPANY WOULD COME 20 ITA NO.1348/MUM/2017 WITHIN THE MISCHIEF OF SECTION 2(22)(E) OF THE ACT BECAUSE OF THE REASON THAT SHARES WOULD BE PURCHASED BY THE COMMON SHAREHOLDER /SHAREHOLDERS. THIS WOULD MEAN THAT THE LOAN OR ADVANCE GIVEN BY THE CO MPANY WOULD NEVER BE TREATED AS DEEMED DIVIDEND EITHER IN THE HANDS OF T HE COMMON SHAREHOLDER OR IN THE HANDS OF RECIPIENT COMPANY. IN THIS WAY, THE VERY PURPOSE FOR WHICH THIS PROVISION WAS ENACTED WOULD GET DEFEATED. THE OBJECT BEHIND THIS PROVISION IS SUCCINCTLY STATED IN THE CIRCULAR NO. 495 OF 22ND SEPTEMBER, 1997 PARTICULARLY IN THE EXPLANATORY NOTES TO FINAN CE ACT, 1997 WHEN THIS PROVISION WAS AMENDED. IT READS AS UNDER:- 'WITH THE DELETION OF SECTION 104 TO 109 THERE WAS A LIKELIHOOD OF CLOSELY HELD COMPANIES NOT DISTRIBUTING THEIR PROFITS TO SH AREHOLDERS BY WAY OF DIVIDENDS BUT BY WAY OF LOANS OR ADVANCES TO THAT T HESE ARE NOT TAXED IN THE HANDS OF THE SHAREHOLDERS. THE FORESTALL THIS MANIP ULATION, SUB -CLAUSE (3) OF CLAUSE (22) OF SECTION 2 HAS BEEN SUITABLY AMENDED. UNDER THE EXISTING PROVISIONS, PAYMENTS BY WAY OF LOANS OR ADVANCE TO SHAREHOLDERS HAVING SUBSTANTIAL INTEREST IN A COMPANY TO THE EXTENT TO WHICH THE COMPANY POSSESSES A ACCUMULATED PROFITS IS TREATED AS DIVID END. THE SHAREHOLDERS HAVING SUBSTANTIAL INTEREST ARE THOSE WHO HAVE A SH AREHOLDING CARRYING NOT LESS THAN 20 PER CENT VOTING POWER AS PER THE PROVI SIONS OF CLAUSE (32) OF SECTION 2. THE AMENDMENT OF THE DEFINITION EXTENDS ITS APPLICATION TO PAYMENTS MADE (I) TO A SHAREHOLDER HOLDING NOT LESS THAN 10 PER CENT OF THE VOTING POWER, OR (II) TO A CONCERN IN WHICH THE SHA REHOLDER HAS SUBSTANTIAL INTEREST. CONCERN AS PER THE NEWLY INSERTED EXPLANA TION 3(A) TO SECTION 2(22) MEANS A HUF OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY. A SHAREHOLDERS HAVING A SUBSTANTIAL I NTEREST IN A CONCERN AS PER PART (B) OF EXPLANATION 3 IS DEEMED TO BE ONE W HO IS BENEFICIALLY ENTITLED TO NOT LESS THAN 20 PER CENT OF INCOME OF SUCH CONC ERN. 10.3 THE NEW PROVISIONS WOULD, THEREFORE, BE APPLIC ABLE IN A CASE WHERE A SHAREHOLDERS HAS 10 PER CENT OR MORE OF THE EQUALIT Y CAPITAL. FURTHER, DEEMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CO NCERN WHERE ALL THE FOLLOWING CONDITIONS ARE SATISFIED: (I) WHERE THE COMPANY MAKES THE PAYMENT BY WAY OF L OANS OR ADVANCES TO A CONCERN. (II) WHERE A MEMBER OR A PARTNER OF THE CONCERN HOL DS 10 PER CENT OF THE VOTING POWER IN THE COMPANY; AND (III) WHERE THE MEMBER OR PARTNER OF THE CONCERN IS ALSO BENEFICIALLY ENTITLED TO 20 PER CENT OF THE INCOME OF SUCH CONCERN. WITH A VIEW TO AVOID THE HARDSHIP IN CASES WHERE AD VANCES OR LOANS HAVE ALREADY BEEN GIVEN, THE NEW PROVISIONS HAVE BEEN MA DE APPLICABLE ONLY IN CASES WHERE LOONS OR ADVANCES ARE GIVEN AFTER 31ST MAY, 1987.' 21 ITA NO.1348/MUM/2017 4.5.4 IF THE CONTENTION OF THE ASSESSEE IS ACCEPTED THEN THE VERY OBJECT FOR WHICH SECTION 2(22)(E) OF THE ACT WAS AMENDED WOULD GET FRUSTRATED QUA THE SECOND LIMB WHEN THE RECIPIENT. IT IS A VERY WELL E STABLISHED PRINCIPLE OF CONSTRUCTION THAT WHERE THE PLAIN LITERAL INTERPRET ATION OF A STATUTORY PROVISION PRODUCES MANIFESTLY ABSURD AND UNJUST RES ULTS WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MU ST MODIFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN 'DO SOME VIOLENCE' TO IT, SO AS TO ACHIEVE OBVIOUS INTENTION OF THE LEGISLATURE. REFERENCE IS MADE TO DECISION OF THE SUPREME COURT IN THE CASE OF K.P.VARGHESE VS.ITO 13 1 ITR 597 (SC). 4.6 THE OTHER ANGLE GIVEN BY THE ASSESSEE COMPANY F OR THE SAID LOAN OF RS. 15 CRORES ADVANCED BY THE BRIPL IN FORM OF COMMERCI AL EXPEDIENCY BECAUSE THE AMOUNT PAID TO KOTAK BANK WOULD HAVE BEEN FORFE ITED, CANNOT COME TO RESCUE OF THE ASSESSEE. THE ASSESSEE COMPANY HAS BI D FOR THE ANDHERI PLOT AND AFTER BEING DECLARED SUCCESSFUL, IT WAS AWARE O F THE TOTAL CONSIDERATION OF THE SAID PLOT TO BE PAID. THERE WAS NO MAJOR DEV ELOPMENT AT THE TIME AND SUBSEQUENT TIME THAT HAD DEPLETED THE ASSESSEE COMP ANY OF THE SOURCE OF FUNDS IT HAD PLANNED FOR ACQUIRING THE SAID PLOT. A CTUALLY, IT IS THE FACT THAT PROVISIONS OF S. 2(22)(E) HAVE BEEN ATTRACTED IN TH E SAID LOAN TRANSACTIONS WHICH HAD LED TO CREATION OF A SUBSIDIARY COMPANY A ND SUBSEQUENT REDIRECTING THE LOANS IN FORM OF CAPITAL INVESTMENT OF THE PARTNERSHIP FIRM AKBG INVESTMENTS. IT IS NOTEWORTHY TO MENTION THAT THE SAID FIRM CAME INTO EXISTENCE ONLY IN THE MONTH OF SEPTEMBER, 2012 WHIL E THE PAYMENT TO KOTAK BANK WAS COMPLETED BEFORE MID OF JULY, 2012. THE AS SESSEE COMPANY HAS ALSO NOT REPORTED THE SAID LOAN TRANSACTIONS WITH B RIPL EVEN IN ITS TAX AUDIT REPORT AND HAS CAMOUFLAGED THE SAME IN FORM OF INVE STMENT MADE IN PARTNERSHIP FIRM. IN SUCH A SCENARIO, IT IS HIGHLY ILLOGICAL TO ACCEPT THAT HOW LOAN TRANSACTION ALREADY DONE BEFORE ANY ENTITY CAM E INTO EXISTENCE CAN BE ATTRIBUTED AS PARTNERS' CAPITAL CONTRIBUTION. ALSO ONE GLARING ASPECT OF THE SAID PARTNERS' CAPITAL CONTRIBUTION IS THAT THE MAJ ORITY OF FUNDING HAS BEEN SHOWN BY THE ASSESSEE COMPANY AND BRIPL, WHILE THEI R PROFIT SHARING RATIO IS ONLY 10% EACH. 4.7 IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE C ASE AND THE POSITION OF LAW ADMITTED BY THE HON'BLE APEX COURT IN THE CASE OF CIT-9, MUMBAI VS. IMPACT CONTAINERS P. LTD. AND CIT VS. N.S.N. JEWELL ERS (P.) LTD. [2015] 57 TAXMANN.COM 113 (BOMBAY) , THE PROVISIONS OF SECTIO N 2(22)(E) OF THE ACT ARE CLEARLY APPLICABLE IN THE INSTANT CASE AND HENC E, THE ADVANCES TO THE TUNE OF RS.15 CRORES RECEIVED BY THE ASSESSEE FROM BRIPL IS BROUGHT TO TAX AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE JURISDICTIONAL CIT IN THE CASE OF IMPACT CONTAINERS (P.) LTD. AND THE ASSESSEE COM PANY IS COMMON AND SINCE THE SLP HAS BEEN ADMITTED AGAINST THE SAID JU DGEMENT BEFORE THE HON'BLE SUPREME COURT, THIS ISSUE HAS NOT ATTAINED FINALITY. 22 ITA NO.1348/MUM/2017 14. THE LD. DR, SUBMITTED THAT THE LD. CIT(A) WAS E RRED IN DELETING THE ADDITIONS ON ACCOUNT OF DEEMED DIVIDEND OF RS.15 CRORES U/S 2 (22)(E) OF THE ACT, WITHOUT APPRECIATING THE FACT THAT PROVISIONS OF SECTION 2( 22)(E) ARE CLEARLY APPLICABLE WHERE LOANS AND ADVANCES GIVEN TO A COMPANY IN WHICH SHAR EHOLDERS ARE HOLDING MORE THAN 10% BENEFICIAL INTEREST. 15. THE LD. AR FOR THE ASSESSEE, ON THE OTHER HAND, SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE ITAT, MUMBAI IN THE CASE OF M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . IN ITA NO.5019/MUM/2017, WHERE THE TRIBUNAL AFTER CONSIDERING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND ALSO BY FOLLOWING LATEST DECISION OF HONBLE SUPREM E COURT IN THE CASE OF GOPAL & SONS (HUF) (2017) 77 TAXMANN.COM 71(SC) HELD THAT S INCE, THE ASSESSEE WAS NEITHER BENEFICIAL NOR REGISTERED SHAREHOLDERS OF THE COMPA NY, THE AMOUNT SO RECEIVED IS NOT LIABLE TO TAX AS DEEMED DIVIDEND U/S 2(22)(E) OF TH E ACT. 16. WE HAVE HEARD BOTH PARTIES AND CONSIDERED MATER IAL AVAILABLE ON RECORD. THE ISSUE OF TAXABILITY ON LOANS AND ADVANCES AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE BENEFICIAL OWNERS HAS BEEN CONS IDERED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. L TD. 324 ITR 263 AND HELD THAT WHEN THE RECIPIENT OF LOAN WAS NOT A SHAREHOLDERS I N ANY OF THE ENTITIES WHICH HAVE ADVANCED LOANS AND ADVANCES, THEN THE ADDITIONS MAD E IN THE HANDS OF THE RECIPIENT COMPANY OF LOAN U/S 2(22)(E) OF THE ACT IS NOT IN A CCORDANCE WITH PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE ITAT, MUMBAI C BENCH IN CA SE OF PERFECT ENGINEERING PVT. 23 ITA NO.1348/MUM/2017 LTD. (SUPRA) HAD CONSIDERED AN IDENTICAL ISSUE IN L IGHT OF THE ARGUMENTS OF THE LD. DR ON THE BASIS OF DECISION OF HONBLE SUPREME COURT I N THE CASE OF GOPAL & SONS (HUF) (SUPRA) AND AFTER CONSIDERING THE RELEVANT FACTS HE LD THAT WHEN THE ASSESSEE IS NEITHER BENEFICIAL OR REGISTERED OWNER IN THE LENDING COMPA NY THEN LOANS AND ADVANCES RECEIVED FROM SAID COMPANY CANNOT BE BROUGHT TO TAX WITHIN THE AMBIT OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN THE HANDS OF THE REC IPIENT COMPANY. THE RELEVANT FINDINGS OF THE TRIBUNAL ARE AS UNDER:- 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE O RDER OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE PROV ISIONS OF SECTION 2(22)(E) OF THE ACT, IN THE LIGHT OF VARIOU S JUDICIAL PRECEDENCE CITED BY BOTH PARTIES. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS TAKEN LOAN FROM ANOTHER COMPANY WH ERE TWO COMMON DIRECTORS HELD MORE THAN 46% EQUITY SHARES. THE AO HAS CONSIDERED LOAN TAKEN FROM M/S SHIVSMRUTI INVES TMENT & SERVICES PVT. LTD. WITHIN THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ON THE GROUND THAT AS PER PROVISIONS OF SEC TION 2(22)(E) OF THE ACT, ANY LOANS AND ADVANCES FROM A COMPANY W HERE A PERSON HELD MORE THAN 20% BENEFICIAL OWNERSHIP IN T HE SAID COMPANY, THEN THE LOANS AND ADVANCED RECEIVED FROM THAT COMPANY SHALL BE TREATED AS DEEMED DIVIDEND TO THE EXTENT OF RESERVES AND SURPLUS OF THE LENDING COMPANY. IN THI S CASE, THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT AS ON DATE OF LOAN, THE COMPANY I.E. M/S SHIVSMRUTI INVESTMENT & SERVICES PVT. LTD. IS HAVING RESERVES AND SURPLUS IN EXCESS OF LOANS AND ADVANCES GIVEN TO THE ASSESSEE COMPANY. THE ONLY DI SPUTE IS WHETHER THE SAID LOANS AND ADVANCES SHALL BE TREATE D AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22) (E) OF THE ACT, WHEN RECIPIENT COMPANY WAS NEITHER BENEFICIAL NOR REGISTERED OWNER OF SHARES IN OTHER COMPANY. ADMITT EDLY, THE ASSESSEE IS NOT THE BENEFICIAL OWNERSHIP IN THE LEN DING COMPANY, BUT TWO COMMON SHAREHOLDERS ARE OWNED MORE THAN 40% EQUITY SHARES IN THE ABOVE COMPANY. WHEN THE A SSESSEE IS NEITHER BENEFICIAL NOR REGISTERED IN LENDING COM PANY, THEN LOANS AND ADVANCES RECEIVED FROM THE SAID COMPANY C ANNOT BE BROUGHT TO TAX WITHIN THE AMBIT OF PROVISIONS OF SE CTION 2(22)(E) OF THE ACT. THIS LEGAL PROPOSITION HAS BEE N LAID DOWN BY THE HONBLE BOMBAY COURT IN THE CASE OF CIT VS IMPACT CONTAINERS PVT. LTD. (BOM.), WHERE THE HONBLE HIGH COURT BY 24 ITA NO.1348/MUM/2017 FOLLOWING ITS EARLIER DECISION IN THE CASE OF UNIVE RSAL MEDICARE 324 ITR 263 (BOM.) (324 ITR 263)(BOM) AND BHAUMIK C OLOURS (313 ITR 146)(BOM.) HELD THAT WHEN THE RECIPIENT OF THE LOAN WAS NOT A SHAREHOLDER IN ANY OF THE ENTITIES WHICH HAVE ADVANCED LOANS AND ADVANCE, THEN THE ADDITION IS RE QUIRED TO BE DELETED. THIS LEGAL PROPOSITION IS FURTHER SUPPO RTED BY THE DECISION OF THE JURISDICTIONAL ITAT, MUMBAI, B BE NCH IN THE CASE OF M/S NEHA HOME BUILDERS PVT. LTD. VS DCIT (I TA NO.3157/MUM/2018), WHERE THE CO-ORDINATE BENCH, AFT ER CONSIDERING THE VARIOUS CASE LAWS, INCLUDING THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOPAL & SO NS (HUF) (2017) 77 TAXMANN.COM 71(SC) HELD THAT SINCE ASSESS EE WAS NEITHER THE BENEFICIAL NOR THE REGISTERED SHAREHOLD ER OF THE COMPANY, THE AMOUNT SO RECEIVED IS NOT LIABLE TO BE TAXED AS DEEMED DIVIDEND. THE RELEVANT OBSERVATION OF THE TR IBUNAL IS AS UNDER:- 18. NOW WE DEAL WITH THE DECISIONS RELIED BY THE C IT(A) FOR HOLDING THAT AMOUNT RECEIVED BY THE ASSESSEE IS LIABLE TO B E TAXED AS DEEMED DIVIDEND. 19. IN THE CASE OF GOPAL AND SONS (HUF) V/S CIT [20 17] 77 TAXMANN.COM 71 SC, THE ASSESSEE IS A HINDU UNDIVIDE D FAMILY (HUF). DURING THE PREVIOUS YEAR, THE ASSESSEE HAD R ECEIVED CERTAIN ADVANCES FROM ONE M/S. G.S. FERTILIZERS (P) LTD. (H EREINAFTER REFERRED TO AS THE 'COMPANY'). THE COMPANY IS THE M ANUFACTURER AND DISTRIBUTOR OF VARIOUS GRADES OF NPK FERTILIZER S AND OTHER AGRICULTURAL INPUTS. IN THE AUDIT REPORT AND ANNUAL RETURN FOR THE RELEVANT PERIOD, WHICH WAS FILED BY IT BEFORE THE R EGISTRAR OF COMPANIES (ROC), IT WAS FOUND THAT THE SUBSCRIBED S HARE CAPITAL OF THE SAID COMPANY WAS RS. 1,05,75,000/- (LE., 10,57, 500 SHARES OF RS. 10/- EACH). OUT OF THIS, 3,92,500 NUMBER OF SHA RES WERE SUBSCRIBED BY THE ASSESSEE WHICH REPRESENTED 37.12% OF THE TOTAL SHAREHOLDING OF THE COMPANY. FROM THIS FACT, THE AO CONCLUDED THAT THE ASSESSEE WAS BOTH THE REGISTERED SHAREHOLDER OF THE COMPANY AND ALSO THE BENEFICIAL OWNER OF SHARES, AS IT WAS HOLDING MORE THAN 10% OF VOTING POWER. ON THIS BASIS, AFTER NOTICING THAT THE AUDITED ACCOUNTS OF THE COMPANY WAS SHOWING A BALANCE OF RS . 1,20,10,988/- AS 'RESERVE & SURPLUS' AS ON 31ST MAR CH, 2006, THIS AMOUNT WAS INCLUDED IN THE INCOME OF THE ASSESSEE A S DEEMED DIVIDEND. 20. IT IS ALSO FOUND AS A FACT, FROM THE AUDITED AN NUAL RETURN OF THE COMPANY FILED WITH ROC THAT THE MONEY TOWARDS SHARE HOLDING IN THE COMPANY WAS GIVEN BY THE ASSESSEE / HUF. THOUGH , THE SHARE CERTIFICATES WERE ISSUED IN THE NAME OF THE KARTA, SHRI GOPAL KUMAR SANEI, BUT IN THE ANNUAL RETURNS, IT IS THE HUF WHI CH WAS SHOWN AS REGISTERED AND BENEFICIAL SHAREHOLDER. IN ANY CASE, IT CANNOT BE DOUBTED THAT IT IS THE BENEFICIAL SHAREHOLDER. EVEN IF WE PRESUME THAT IT IS NOT A REGISTERED SHAREHOLDER, AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, ONCE THE PAYMENT IS RE CEIVED BY THE HUF AND SHAREHOLDER (MR. SANEI, KARTA, IN THIS CASE ) IS A MEMBER OF THE SAID HUF AND HE HAS SUBSTANTIAL INTEREST IN THE HUF, THE 25 ITA NO.1348/MUM/2017 PAYMENT MADE TO THE HUF SHALL CONSTITUTE DEEMED DIV IDEND WITHIN THE MEANING OF CLAUSE (E) OF SECTION 2(22) OF THE A CT. 21. IT IS CLEAR FROM THE ABOVE ORDER THAT ALL THE P ARTIES HAVE CLEARLY HELD THAT HUF WAS REAL BENEFICIAL OWNER OF THE COMP ANY, ACCORDINGLY AMOUNT SO RECEIVED WAS CORRECTLY HELD T O BE DEEMED DIVIDEND. HOWEVER, IN THE PRESENT CASE ASSESSEE NEI THER A REGISTERED NOR BENEFICIAL SHARE HOLDER OF EIPL WHIC H IS NOT DISPUTED BY THE REVENUE AUTHORITY. HENCE, DECISION OF GOPAL AND SONS HUF WILL NOT APPLY IN PRESENT CASE. BUT IT SUPPORTS THE CONTENTION OF ASSESSEE THAT .ADDITION CANNOT BE MADE IN ASSESSEE S HAND BECAUSE NHBPL IS NOT A BENEFICIAL SHAREHOLDER OF EI PL. 22. IN THE CASE OF NATIONAL TRAVEL SERVICES [2018] 89 TAXMANN.COM 332 (SC), THE ASSESSES IS A PARTNERSHIP FIRM CONSIS TING OF THREE PARTNERS, NAMELY, MR. NARESH GOYAL, MR. SURINDER GO YAL AND M/S JET ENTERPRISES PRIVATE LIMITED HAVING A PROFIT SHA RING RATIO OF 35%, 15% AND 50% RESPECTIVELY. THE ASSESSEE FIRM HAD TAK EN A LOAN OF RS.28,52,41,516/- FROM M/S JETAIR PRIVATE LIMITED, NEW DELHI. IN THIS COMPANY, THE ASSESSEE SUBSCRIBED TO THE EQUITY CAPI TAL OF THE AFORESAID COMPANY IN THE NAME OF TWO OF ITS PARTNER S, NAMELY, MR. NARESH GOYAL AND MR. SURINDER GOYAL TOTALING 48.19 PER CENT OF THE TOTAL SHAREHOLDING. THUS MR. NARESH GOYAL AND MR. S URINDER GOYAL ARE SHAREHOLDERS ON THE COMPANY'S REGISTER AS MEMBE RS OF THE COMPANY. THEY HOLD THE AFORESAID SHARES FOR AND ON BEHALF OF THE FIRM, WHICH HAPPENS TO BE THE BENEFICIAL SHAREHOLDE R. 23. HOWEVER, IN THE PRESENT CASE ASSESSEE IS NEITHE R REGISTERED SHAREHOLDER NOR BENEFICIAL SHAREHOLDER OF EIPL. 24. NATIONAL TRAVEL CASE NEITHER ANY DECISION WAS R ENDERED NOR WAS ANY STAY ON APPLICABILITY OF DECISION OF HON'BLE SU PREME COURT IN CASE OF CIT VS. ANKITECH P. LTD. IN CIVIL APPEAL NO .3961 OF 2013 GIVEN. IN THAT CASE MATTER WAS ONLY REFERRED TO LAR GER BENCH FOR RECONSIDERATION AND NOTHING HAS BEEN DECIDED YET. H ENCE, TILL DATE LARGER BENCH NOT DECIDED THE CASE, THE EARLIER LAW WILL HOLD GOOD AND BE IN OPERATION AND BINDING ON ALL COURTS AND T RIBUNAL THROUGHOUT; THE TERRITORY OF INDIA. AS PER ARTICLE 141 OF THE CONSTITUTION OF INDIA WHICH LAYS DOWN THAT THE \ LA W DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL COURTS THROUG HOUT THE TERRITORY OF INDIA. EARLIER IN CASE OF CIT VS. ANKITECH P. LT D. IN CIVIL APPEAL NO.3961 OF 2013 HON'BLE SUPREME COURT LAY DOWN THE LAW THAT FOR ATTRACTING SECTION 2(22)(E) SHAREHOLDER NEEDS TO BE REGISTERED AND BENEFICIAL SHARE HOLDER. IN THE PRESENT CASE IT IS A SETTLED FACT THAT THE ASSESSEE IS NEITHER A REGISTERED NOR A BENEFICI AL SHAREHOLDER. THUS WITH NO STRETCH OF IMAGINATION THE ASSESSEE CA N BE COVERED UNDER THE DEFINITION OF SECTION 2(22)(2) I.E., DEEM ED DIVIDEND. 25. THE SIMILAR ISSUE WAS COME BEFORE THE HONBLE KERALA HIGH COURT IN CASE OF CIT V/S SETTLEMENT COMMISSION (IT & WT) (2009) 176 TAXMAN 421 (KERALA) WHERE THE HONBLE HIGH COUR T HELD AS UNDER:- IN THIS CASE, THE SETTLEMENT COMMISSION HAS REJECT ED EXT. P2 ON THE GROUND THAT THE ISSUE RAISED IS A DEBATABLE ISSUE. BUT, I FEEL THAT WHEN THERE IS A DECISION OF THE APEX COURT, NO INFERIOR COURT OR TRIBUNAL CAN SAY 26 ITA NO.1348/MUM/2017 THAT THE ISSUE IS A DEBATABLE ISSUE FOR THE REASON THAT A BENCH OF TWO JUDGES OF THE APEX COURT HAS DOUBTED THE CORRECTNES S OF THE DECISION OF THE CONSTITUTION BENCH. EVEN ASSUMING THERE IS A FI NAL JUDGMENT OF A TWO JUDGES BENCH OF THE APEX COURT, THE SAME HAS TO BE IGNORED AND INFERIOR COURTS AND TRIBUNALS ARE BOUND TO FOLLOW THE DECISI ON OF THE CONSTITUTION BENCH IN VIEW OF THE LAW RELATING TO PRECEDENTS AND ALSO ARTICLE 741 OF THE CONSTITUTION OF INDIA. SO, THE REJECTION OF EXT. P2 APPLICATION IS UNJUSTIFIED. 26. IN VIEW OF THE ABOVE, THE DECISION OF THE HONB LE SUPREME COURT AS ON TODAY ESTABLISHED BINDING. UNDER ARTICLE 141 OF THE CONSTITUTION, RATIO OF DECISION OF THE HONBLE SUPR EME COURT AND PRINCIPLE UNDERLYING DECISION IS BINDING. IT IS MOS T CRUCIAL TO NOTE THAT IN THAT CASE MATTER WAS REFERRED TO RECONSIDER THE EARLIER DECISION WITH THEIR OBSERVATION THAT FOR APPLYING DEEMED DIV IDEND PROVISION IT IS SUFFICIENT IF THE SHAREHOLDER IS BENEFICIAL SHAR EHOLDER. IT NEED NOT BE NECESSARY THAT SHAREHOLDER MUST BE REGISTERED SH AREHOLDER. BECAUSE AS PER EARLIER DECISION FOR APPLYING DEEMED DIVIDEND SHAREHOLDER MUST SATISFY BOTH CHARACTER OF SHAREHOL DER I.E. REGISTERED AS WELL AS BENEFICIAL SHAREHOLDER. THUS, AS PER OBSERVATION OF THIS DECISION ALSO SHAREHOLDER NEEDS TO BE BENEFICIAL SHAREHOLDER. IF THE SHAREHOLDER IS NOT A BENEFICIAL SHAREHOLDER THEN AS PER THIS OBSERVATION ALSO PROVISIONS OF DEEMED D IVIDEND WILL NOT APPLY. HENCE, ALL THE DECISION SUPPORTS THE CONTENT ION OF ASSESSEE THAT DEEMED DIVIDED CANNOT BE APPLY IN ASSESSEES H AND AS IT IS NEITHER REGISTERED NOR BENEFICIAL SHAREHOLDER OF EI PL. 27. IN VIEW OF THE ABOVE DISCUSSION, WE CAN SAFELY CONCLUDE THAT SINCE ASSESSEE WAS NEITHER THE BENEFICIAL NOR THE R EGISTERED SHAREHOLDER OF THE COMPANY, THE AMOUNT SO RECEIVED IS NOT LIABLE TO BE TAXED AS DEEMED DIVIDEND. MOREOVER, THE TRANSACT ION BETWEEN TWO GROUP CONCERNS WERE IN THE NATURE OF CURRENT AC COUNT AND INTER BANKING ACCOUNT CONTAINING BOTH TYPES OF ENTRIES I. E., RECEIPTS AND PAYMENTS, THE SAME CANNOT BE BROUGHT IN THE PURVIEW OF LOANS AND ADVANCES SO AS TO ATTRACT SECTION 2(22)(E). 7. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLL OWING THE RATIOS OF THE CASE LAWS DISCUSSED HEREINABOVE, WE A RE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE REASO NS RECORDED BY THE LD. CIT(A), WHILE DELETING THE ADDITION TOWA RDS THE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. HENCE, WE ARE INCLINED TO UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISSED THE APPEAL FILED BY THE REVENUE. 17. IN THIS VIEW OF THE MATTER AND CONSISTENT WITH VIEW TAKEN BY THE CO-ORDINATE BENCH IN LIGHT OF THE DECISION OF THE HONBLE BOMBA Y HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD.(SUPRA), WE ARE OF THE CONSIDERED VIEW THAT THE AO WAS ERRED IN MAKING ADDITIONS TOWARDS LOANS AND ADVANCE S U/S 2(22)(E) OF THE ACT, IN THE HANDS OF THE ASSESSEE EVEN THOUGH THE ASSESSEE IS N EITHER BENEFICIAL NOR REGISTERED 27 ITA NO.1348/MUM/2017 OWNER HOLDING MORE THAN 10% SHARE IN THE COMPANY WH ICH GIVEN LOANS AND ADVANCES TO THE ASSESSEE COMPANY. THE LD CIT(A) AFTER CONSID ERING RELEVANT SUBMISSIONS DELETED THE ADDITIONS MADE BY THE AO. THEREFORE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LD. CIT(A), AND HENCE, WE ARE INCLINED TO UP HOLD THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUND TAKEN BY THE REVENUE. 17. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17/05/2019. SD/- SD/- ( MAHAVIR SINGH ) (G. MANJUNATHA) '!# /JUDICIAL MEMBER $!# / ACCOUNTANT MEMBER MUMBAI; DATED : 17/05/2019 F{X~{T? F{X~{T? F{X~{T? F{X~{T? P.S P.S P.S P.S / /. /./. /. '.. &''()*)+' / COPY OF THE ORDER FORWARDED TO : 1. ! / THE APPELLANT (RESPECTIVE ASSESSEE) 2. '#$ ! / THE RESPONDENT. 3. %$%$ & ( ) / THE CIT, MUMBAI. 4. %$%$ & / CIT(A)- , MUMBAI, 5. ()*$' + , %$$+ - , / DR, ITAT, MUMBAI 6. *. / / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI