ITO 9(3)2, MUMBAI V. AJAY DILKHUSH SARUPRIA, MUMBAI

ITA 3418/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92687 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 15-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Deemed dividend
• Section: 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES A, MUMBAI BEFORE SHRI I P BANSAL, JM, & SHRI RAJENDRA, AM ITA NO.3418/MUM/2012 ASSESSMENT YEAR:2006-07 ITO 9(3)(2), MUMBAI VS. AJAY DILKHUSH SARUPRIA 201 MANGAL JYOT, JUHU LANE ANDHERI (W) MUMBAI - 400 058 PAN AKMPS1636E (A PPELLANT) ( RESPONDENT) CO NO.117/MUM/2013 (ARISING OUT OF ITA NO.3418/MUM/2012 ASSESSMENT YEAR:2006-07 AJAY DILKHUSH SARUPRIA MUMBAI VS. ITO 9(3)(2) MUMBAI (CROSS - OBJECTOR ) ( RESPONDENT) APPELLANT BY : SHRI ASGHAR ZAIN CROSS OBJECTOR BY : SHRI K SHIVARAM DATE OF HEARING : 01.06.2015 DATE OF PRONOUNCEMENT 01.06.2015 O R D E R PER I P BANSAL, JUDICIAL MEMBER THE APPEAL IS FILED BY THE REVENUE AND THE CROSS-OB JECTION BY THE ASSESSEE. BOTH ARE DIRECTED AGAINST THE ORDER PASSED BY THE C IT(A) DATED 19.03.2012 FOR A.Y. 2006-07. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS.1,09,38,061/- MADE BY ASSESSING OFFICER UNDER SECTION 2(22)(E) OF THE ACT. 2 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A SSESSING OFFICER WITHOUT APPRECIATING THE FACT THAT THE M/S. SILGO FINANCE P VT. LTD. (THE LENDER COMPANY WAS NOT ENGAGED IN THE BUSINESS OF MONEY LENDING AS IT HAS NOT SHOWN ANY INTEREST INCOME, AS OBSERVED BY THE ASSESSING OFFIC ER IN HIS ORDER AND HENCE THE ASSESSEES CASE IS NOT COVERED WITHIN THE EXCEP TION IN CLAUSE (II) OF SECTION 2(22)(E) OF THE ACT. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED . THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE CROSS-OBJECTION READ AS UNDER: 1. THE LD ASSESSING OFFICER HAS ERRED IN STATING T HAT M/S. SILGO FINANCE PVT. LTD. (LENDER COMPANY) WAS NOT ENGAGED IN BUSINESS O F MONEY LENDING AS IT HAS NOT SHOWN ANY INTEREST INCOME, WHICH IS CONTRARY TO THE FACTS OF THE CASE, AS THE ASSESSEE HAD RECEIVED INTEREST INCOME WHICH WAS NET OFF AGAINST INTEREST PAID. 2. WITHOUT PREJUDICE TO ABOVE, THE LD. ASSESSING OF FICER ERRED IN MAKING THE ADDITION OF ENTIRE OUTSTANDING BALANCE OF RS.1,09,3 8,061/- WITHOUT APPRECIATING THE FAT THAT THE M/S. SILGO FINANCE PVT. LTD. HAD A DVANCED ONLY RS.79,00,000/- DURING THE YEAR, IN THE COURSE OF ITS REGULAR BUSIN ESS. HENCE, ADDITION U/S. 2(22)(E) MAY BE DELETED. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FRO M THE DETAILS FILED BY THE ASSESSEE, THE AO CAME TO KNOW THAT M/S. SILGO FINAN CE PVT. LTD. (REFERRED TO AS SILGO) HAD ADVANCED LOAN AMOUNT OF RS.1,09,23,897/- AS ON 31.03.2006 TO THE ASSESSEE. IT WAS FURTHER NOTICED THAT SILGO WAS HA VING RESERVES AND SURPLUS OF RS.2,83,43,780/- AS ON 31.03.2006 AND ASSESSEE WAS HOLDING 51.02% SHARES OF SILGO AS ON 31.03.2006. ACCORDINGLY, THE AO INVOKE D SECTION 2(22)(E) AND REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF RS. 1,09,23,897/- SHOULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE UNDER THE PROVI SIONS OF SECTION 2(22)(E) OF THE ACT. IN REPLY, IT WAS SUBMITTED THAT SILGO IS IN T HE BUSINESS OF RENDERING FINANCIAL SERVICES AND OTHER RELATED ACTIVITIES AND AMOUNT OF RS.1.09 CRORE IS NOTHING BUT LOAN ADVANCED DURING THE COURSE OF NORMAL BUSINESS ACTIV ITY AND IT WAS SUBMITTED THAT IT FALLS IN THE EXEMPTED CATEGORY. IT WAS FURTHER SUB MITTED THAT THE MAIN OBJECT OF SILGO IS TO RENDER FINANCIAL SERVICES AS PER THE CO PY OF MEMORANDUM OF ASSOCIATION. THEREFORE, IT WAS CLAIMED THAT SECTION 2(22)(E) WAS NOT APPLICABLE. HOWEVER, THE AO 3 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 DID NOT ACCEPT SUCH SUBMISSION OF THE ASSESSEE AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE FILED APP EAL BEFORE THE CIT(A). THE MAIN ARGUMENT OF THE ASSESSEE BEFORE THE CIT(A) WAS THAT ACCORDING TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION, THE MAIN OBJECT OF SIL GO WAS TO RENDER FINANCIAL SERVICES AND OTHER RELATED ACTIVITIES. SINCE, IT WAS THE MA IN OBJECT OF SILGO TO ADVANCE THE LOAN, WHICH IS NORMAL AND ORDINARY ACTIVITY, THE PA YMENT RECEIVED FROM SILGO WOULD BE EXEMPTED FROM INCLUDING THE SAME TO THE INCOME O F THE ASSESSEE U/S. 2(22)(E) OF THE ACT. IT WAS SUBMITTED THAT OUT OF THE TOTAL FU NDS AVAILABLE WITH SILGO, 75.72% WERE DEPLOYED IN THE LOANS GIVEN BY IT. RELIANCE W AS PLACED ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PA RLE PLASTICS LTD. [332 ITR 63] TO CONTEND THAT IF THE LENDING OF MONEY CONSTITUTES SU BSTANTIAL PART OF BUSINESS OF THE COMPANY, THEN THE LOAN GIVEN BY THE COMPANY TO ITS SHARE HOLDERS CANNOT BE CONSIDERED TO BE DEEMED DIVIDEND UNDER THE PROVISIO NS OF SECTION 2(22)(E) AS THE SAME FALL UNDER THE EXCEPTION MENTIONED IN SECTION 2(22)(E)(II). THE LEARNED CIT(A) BASED ON THE FACTS THAT THE SILGO HAS DEPLOYED 75.7 2% OF ITS AVAILABLE FUNDS IN THE SHAPE OF LOANS AND ADVANCES, HAS HELD THAT LENDING OF MONEY CONSTITUTE SUBSTANTIAL PART OF THE BUSINESS OF THE LENDING COMPANY AND, TH US, THE AMOUNT RECEIVED BY THE ASSESSEE FROM SILGO COULD NOT BE ASSESSED AS DEEMED DIVIDEND U/S. 2(22)(E). THE REVENUE IS AGGRIEVED BY THE SAID DECISION OF THE CI T(A) AND FILED THE AFOREMENTIONED GROUNDS OF APPEAL. 4. IN THE CROSS OBJECTION, THOUGH THE ISSUE HAS BEE N DECIDED IN FAVOUR OF THE ASSESSEE, IT IS THE CASE OF THE ASSESSEE TO THE EXT ENT OF OPENING BALANCE, THE AMOUNT COULD NOT BE ASSESSED U/S. 2(22)(E) AS PER THE AFOR EMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PARLE PLAS TICS LTD. (SUPRA). IT IS ALSO THE CASE OF THE ASSESSEE THAT THE EXPENDITURE OF RS.6,0 3,797/- WHICH IS ON ACCOUNT OF PROVISION OF INTEREST, THE AMOUNT COULD NOT BE CONS IDERED AS DEEMED DIVIDEND. 5. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY T HE LEARNED DR THAT THE AO AFTER GOING THROUGH THE PROFIT & LOSS ACCOUNT OF THE ASSE SSEE HAS ARRIVED AT A FINDING THAT THE ASSESSEES CASE DO NOT FALL WITHIN EXCEPTION LA ID DOWN IN SECTION 2(22)(E)(II) AS THE LENDING OF MONEY COULD NOT BE CONSIDERED TO BE SUBSTANTIAL PART OF THE BUSINESS OF SILGO. THE LEARNED DR IN THIS REGARD REFERRED T O THE OBSERVATIONS OF THE AO IN THE 4 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 ASSESSMENT ORDER WHEREBY AT PAGE 3, THE AO HAS EXAM INED THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE IN WHICH THE INCOME OF SILGO IS SHO WN AT RS.3,19,46,629/- WHICH COMPRISES OF THE FOLLOWING INCOME :- I) PROFIT ON SALE OF SHARES RS.3,16,11,530/- II) DIVIDEND INCOME RS. 3,35,099/- RS.3,19,46,629/- THUS, IT WAS PLEADED BY THE LEARNED DR THAT THE CIT (A) HAS COMMITTED AN ERROR IN HOLDING THAT THE SUBSTANTIAL PART OF BUSINESS OF TH E LENDING COMPANY WAS MONEY LENDING. LD. DR FURTHER PLEADED THAT THE ORDER OF T HE CIT(A) SHOULD BE SET ASIDE AND THAT OF THE AO SHOULD BE RESTORED. 6. ON THE OTHER HAND, IT WAS SUBMITTED BY THE LEARN ED AR THAT LEARNED CIT(A) DID NOT COMMIT ANY ERROR IN ARRIVING AT THE CONCLUS ION THAT SUBSTANTIAL PART OF BUSINESS OF SILGO WAS MONEY LENDING. IT WAS SUBMIT TED THAT SUBSTANTIAL PART AS MENTIONED IN CLAUSE (II) OF SECTION 2(22)(E) DOES N OT ONLY MEAN THE QUANTUM OF PROFIT EARNED BY THE LENDING COMPANY BUT THE ISSUE HAS ALSO TO BE EXAMINED ON THE BASIS OF DEPLOYMENT OF AVAILABLE FUNDS, WHICH MAY A LSO CONSTITUTE SUBSTANTIAL PART OF THE BUSINESS OF THE LENDING COMPANY. THE AR SUBMIT TED THAT SUCH CONCLUSION HAS BEEN DRAWN BY THE CIT(A) ON THE BASIS OF THE DECISI ON OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PARLE PLASTICS LTD. (S UPRA) AND THUS, THE ORDER OF THE CIT(A) IS IN ACCORDANCE WITH THE DECISION OF THE JU RISDICTIONAL HIGH COURT. IT WAS PLEADED BY THE LEARNED AR THAT ORDER PASSED BY THE CIT(A) SHOULD BE UPHELD. LD. AR FURTHER SUBMITTED THAT THE CROSS-OBJECTION OF TH E ASSESSEE IS REGARDING THE EXCLUSION OF THE OPENING BALANCE AS WELL AS THE INT EREST PORTION AND THE SAME IS ALSO IN ACCORDANCE WITH THE AFOREMENTIONED DECISION OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF PARLE PLASTICS LTD. (SUPRA) AND IN CASE THE MAIN CONTENTION OF THE ASSESSEE IS NOT ACCEPTED THAT LENDING MONEY WAS SUBSTANTIAL PAR T OF THE BUSINESS OF THE LENDING COMPANY, THEN RELIEF TO THE EXTENT CLAIMED IN CO SH OULD BE ALLOWED TO THE ASSESSEE AND IF THE ORDER OF THE CIT(A) IS UPHELD THEN THE A SSESSEES CROSS-OBJECTIONS WILL BECOME INFRUCTUOUS. 5 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 7. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. ON PAGES 2 & 3 OF PAPER-BOOK THE ASSES SEE HAS FILED MEMORANDUM OF ASSOCIATION OF SILGO, WHEREIN THE MAIN OBJECT OF TH E COMPANY HAS BEEN STATED AT SR. NO.1, WHICH READS AS UNDER: 1. TO CARRY ON THE BUSINESS OF RENDERING OF FINANC IAL SERVICES & OTHER RELATED ACTIVITIES. THE FUNDS AVAILABLE WITH THE ASSESSEE COMPANY IN TH E BALANCE SHEET ARE DESCRIBED AS UNDER: SOURCES OF FUNDS SCH SHARE CAPITAL A 500,000 RESERVES AND SURPLUS PROFIT AND LOSS ACCOUNT 28,343,780 SECURED LOANS B 538,013 UNSECURED LOANS C 37,007,676 DEFERRED TAX LIABILITY 158,842 66,548,311 THE AFOREMENTIONED FUNDS HAVE BEEN DEPLOYED AS UNDE R: APPLICATION OF FUNDS FIXED ASSET GROSS BLOCK D 2,708,192 LESS: DEPRECIATION 251,597 2,456,595 ADD: ADVANCES FOR PROPERTY 1,294,716 TOTAL 3,751,311 INVESTMENTS E 22,527,048 CURRENT ASSETS, LOANS & ADVANCES F 52,828,154 LESS: CURRENT LIABILITIES AND PROVISIONS G 12,558, 204 NET WORKING CAPITAL (F G) 40,269,950 66,548,311 6 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 SCHEDULE F, WHICH DESCRIBES CURRENT ASSETS, LOANS AND ADVANCES, IS DETAILED AS UNDER: SCHEDULE F RS. CURRENT ASSETS LOANS & ADVANCES : CASH & BANK BALANCE 2,552,096 LOAN & ADVANCES 50,271,558 DEPOSIT 4,500 SUNDRY DEBTORS 0 52,828,154 IT CAN BE SEEN FROM THE ABOVE THAT OUT OF TOTAL FUN DS WHICH ARE AVAILABLE AT RS.6.65 CRORE, THE AMOUNT DEPLOYED IN LOANS AND ADVANCES IS RS.5.02 CRORE. THUS SUBSTANTIAL DEPLOYMENT OF FUNDS BY SILGO IS ON LOANS AND ADVANC ES. IT IS TRUE THAT ASSESSEE COMPANY DID NOT EARN INTEREST INCOME, BUT IT HAS CL AIMED INTEREST EXPENSES TO THE TUNE OF RS.15.59 LACS. THAT MAY BE DUE TO THE FACT THAT THERE MAY BE DEBIT AND CREDIT OF THE INTEREST AND NET AMOUNT HAS BEEN SHOW N AS EXPENDITURE AMOUNTING TO RS.15.59 LACS. BUT THE FACT REMAINS THAT OUT OF TO TAL FUNDS AVAILABLE WITH SILGO, MORE THAN 75% ARE DEPLOYED IN LOANS AND ADVANCES. IT IS ON THIS BASIS, THE LEARNED CIT(A) HAS ARRIVED AT A CONCLUSION THAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM SILGO CANNOT BE CONSIDERED AS DEEMED DIVIDEND BECAU SE OF THE EXCLUSION BY CLAUSE (II) TO SECTION 2(22)(E). CLAUSE (II) TO SECTION 2 (22)(E) READ AS UNDER: ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER BY A COM PANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. 8. NOW THE QUESTION REMAINS THAT WHETHER ON THE BAS IS OF DEPLOYMENT OF FUNDS, CAN IT BE HELD THAT MONEY LENDING WAS SUBSTANTIAL P ART OF BUSINESS OF SILGO? THIS QUESTION HAS BEEN ANSWERED BY HONBLE BOMBAY HIGH C OURT IN THE CASE OF PARLE PLASTICS LTD. (SUPRA). THEIR LORDSHIPS INTERPRETIN G THE EXPRESSION USED IN CLAUSE (II) OF SECTION 2(22)(E) SUBSTANTIAL PART OF THE BUSINE SS REFERRING TO VARIOUS DECISIONS AS WELL AS DEFINITIONS, HAVE OBSERVED THAT STROUDS JUDICIAL DICTIONARY HAS RIGHTLY INTERPRETED THE TERM AND IT HAS RIGHTLY INTERPRETED AS IT IS NOT POSSIBLE TO GIVE ANY 7 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 FIXED DEFINITION OF THE WORD SUBSTANTIAL IN RELAT ION TO A SUBSTANTIAL BUSINESS OF A COMPANY. THEIR LORDSHIPS OBSERVED THAT ANY BUSINE SS OF A COMPANY WHICH THE COMPANY DOES NOT REGARD AS SMALL, TRIVIAL, OR INCON SEQUENTIAL AS COMPARED TO THE WHOLE OF THE BUSINESS IS SUBSTANTIAL BUSINESS. VAR IOUS FACTORS AND CIRCUMSTANCES WOULD BE REQUIRED TO BE LOOKED WHILE CONSIDERING WH ETHER A PART OF THE BUSINESS OF A COMPANY IS ITS SUBSTANTIAL BUSINESS. THEIR LORDSHI PS FURTHER OBSERVED THAT SOMETIMES A PORTION WHICH CONTRIBUTES SUBSTANTIAL P ART OF THE TURNOVER, THOUGH IT CONTRIBUTES A RELATIVELY SMALL PORTION OF THE PROFI T, WOULD BE SUBSTANTIAL PART OF THE BUSINESS. SIMILARLY, A PORTION WHICH RELATIVELY SM ALL AS COMPARED TO THE TOTAL TURNOVER, BUT GENERATES LARGE, SAY MORE THAN 50% OF THE TOTAL PROFIT, WOULD BE SUBSTANTIAL PART OF ITS BUSINESS. PERCENTAGE OF TU RNOVER IN RELATION TO THE WHOLE AS ALSO THE PERCENTAGE OF THE PROFIT IN RELATE TO THE WHOLE AND SOMETIMES EVEN PERCENTAGE OF A MANPOWER USED FOR A PARTICULAR PART OF BUSINESS IN RELATION TO THE TOTAL MANPOWER OR WORKING FORCE OF THE COMPANY WOUL D BE REQUIRED TO BE TAKEN INTO CONSIDERATION. EMPLOYEES OF A COMPANY ARE NOW CALL ED 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 RE QUIRED TO BE TAKEN INTO CONSIDERATION WHILE CONSIDERING WHETHER PARTICULAR BUSINESS FORMS SUBSTANTIAL PART OF ITS BUSINESS. CONSIDERING ALL THESE FACTS, THEIR L ORDSHIPS OBSERVED THAT 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. THESE OBSERVATIONS OF THEIR LORDSHIPS ARE REPRODUC ED BELOW FOR THE SAKE OF COMPLETENESS: THE EXPRESSION USED UNDER CLAUSE (II) OF SECTION 2 (22)(E) IS 'SUBSTANTIAL PART OF THE BUSINESS'. WE WOULD, THEREFORE, HAVE TO ASCERTA IN THE MEANING OF THE WORD 'SUBSTANTIAL', APPEARING IN THE EXPRESSION 'SUBSTAN TIAL PART OF THE BUSINESS'. STROUD'S JUDICIAL DICTIONARY, FIFTH EDITION, GIVES THE FIRST MEANING OF THE WORD 'SUBSTANTIAL' AS 'A WORD OF NO FIXED MEANING, IT IS AN UNSATISFACTORY MEDIUM FOR CARRYING THE IDEA OF SOME ASCERTAINABLE PROPORTION OF THE WHOLE'. THE DECISION OF TERRY'S MOTORS LTD. V. RINDER [1948] SASR 167 IS GIVEN IN SUPPORT OF THIS MEANING. IN THE MEANING NO. 8, WHILE CONSIDERING 'S UBSTANTIAL AMOUNT', IT IS STATED THAT OUT OF A RENT OF 80 PER ANNUM, 13 P ER ANNUM ATTRIBUTABLE TO THE 8 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 AMOUNT PAID FOR FURNITURE, WAS A SUBSTANTIAL AMOUNT , ON THE BASIS OF THE DECISION IN MACLAY V. DIXON C. A. 170 L T 49. IN ME ANING NO. 15, RELYING UPON THE DECISION OF LADBROKE (FOOTBALL) LTD. V. WILLIAM HILL (FOOTBALL) LTD. [1964] 1 WLR 273 (HL), IT IS SAID THAT IN DECIDING WHETHER T HE REPRODUCED PART OF COPYRIGHT MATERIAL IS A 'SUBSTANTIAL' PART OF THE W HOLE, IT IS THE QUALITY RATHER THAN THE QUANTITY OF THE PART THAT SHOULD BE CONSID ERED. BLACK'S LAW DICTIONARY, SIXTH EDITION DEFINES THE WORD 'SUBSTANTIAL' AS 'OF REAL WORTH AND IMPORTANCE ; OF CONSIDERABLE VALUE ; VALUABLE. BELONGING TO SUBS TANCE ; ACTUALLY EXISTING ; REAL ; NOT SEEMING OR IMAGINARY ; NOT ILLUSIVE ; SO LID ; TRUE ; VERITABLE . . . SOMETHING WORTHWHILE AS DISTINGUISHED FROM SOMETHIN G 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 TRE ATED AS 'SUBSTANTIAL PART', THE PART MUST EXCEED 50 PER CENT. OF THE WHOLE. IN OUR VIEW, THE EXPRESSION 'SUBSTANTIAL PART' DOES NOT CONNOTE AN IDEA OF BEIN G THE 'MAJOR PART' OR THE PART THAT CONSTITUTES MAJORITY OF THE WHOLE. IF THE LEGISLATURE REALLY INTENDED THAT MORE THAN 50 PER CENT. 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 LEGISLATU RE 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)(E) OF THE ACT. THE LEGISLATURE HAD DELIBERATELY USED THE WORD 'SUBSTANTIAL' INSTEAD OF USING THE WORD 'MAJOR' AND/OR SPECIFYING ANY PERCEN TAGE OF THE BUSINESS OR PROFIT TO BE COMING FROM THE LENDING BUSINESS OF TH E LENDING COMPANY FOR THE PURPOSE OF CLAUSE (II) OF SECTION 2(22)(E) OF THE A CT. WE WOULD GIVE AN ILLUSTRATION TO ASCERTAIN THE MEANING OF THE EXPRES SION 'SUBSTANTIAL BUSINESS' OR 'SUBSTANTIAL INCOME' OF A COMPANY. IN THE MODERN DA YS, A LARGE NUMBER OF COMPANIES DO NOT RESTRICT TO ONE OR TWO BUSINESSES. THEY CARRY ON NUMEROUS ACTIVITIES AND CARRY ON NUMEROUS BUSINESSES AND HAV E NUMEROUS BUSINESS DIVISIONS. LET US TAKE A CASE OF A FIRST COMPANY WH ICH HAS 3 DIVISIONS OF WORKS CONSISTING OF THREE DIFFERENT TYPES OF BUSINESS. TH E TURNOVER AS WELL AS THE PROFIT OF THE FIRST DIVISION IS 40 PER CENT. ; TURN OVER AND THE PROFIT OF THE SECOND DIVISION IS 30 PER CENT. AND THE TURNOVER AND THE P ROFIT OF THE THIRD DIVISION OF THE BUSINESS IS 30 PER CENT. IN THE CASE OF THIS CO MPANY NO PART OF THE BUSINESS HAS TURNOVER EXCEEDING 50 PER CENT. AND NO PART OF THE BUSINESS COMPANY GENERATES PROFIT OF MORE THAN 50 PER CENT. OF THE T OTAL. IN SUCH A CASE CAN IT BE SAID THAT NONE OF THE BUSINESSES OF THE SAID COMPAN Y IS A SUBSTANTIAL BUSINESS OF THE COMPANY. IN OUR VIEW NOT. THE FIRST BUSINESS WHICH CONSTITUTES 40 PER CENT. OF THE TURNOVER AND CONTRIBUTES 40 PER CENT. TO THE PROFIT WOULD BE THE SINGLE LARGEST PART OF THE BUSINESS OF THE COMPANY, THE SECOND AND THIRD DIVISIONS OF THE BUSINESS, EACH OF WHICH CONTRIBUTE S 30 PER CENT. OF THE TURNOVER AS WELL AS PROFIT OF THE COMPANY, THOUGH NOT THE MA JOR AND NOT EVEN THE SINGLE LARGEST PART OF THE BUSINESS OF THE COMPANY, WOULD STILL BE A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY, BECAUSE IF ANY PART OF THE THREE DIVISIONS OF THE BUSINESS OF THE COMPANY WAS TO BE CLOSED DOWN, THAT WOULD RESULT IN LOSS OF TURNOVER AND/OR BUSINESS OF 30 PER CENT., ORDINARIL Y NO COMPANY WOULD REGARD SUCH PART OF THE BUSINESS AS INSIGNIFICANT. AS RIGH TLY OBSERVED IN STROUD'S 9 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 JUDICIAL DICTIONARY, IT IS NOT POSSIBLE TO GIVE ANY FIXED DEFINITION OF THE WORD 'SUBSTANTIAL' IN RELATION TO 'A SUBSTANTIAL BUSINES S OF A COMPANY'. ANY BUSINESS OF A COMPANY WHICH THE COMPANY DOES NOT REGARD AS S MALL, TRIVIAL, OR INCONSEQUENTIAL AS COMPARED TO THE WHOLE OF THE BUS INESS IS SUBSTANTIAL BUSINESS. VARIOUS FACTORS AND CIRCUMSTANCES WOULD B E REQUIRED TO BE LOOKED INTO WHILE CONSIDERING WHETHER A PART OF THE BUSINE SS OF A COMPANY IS ITS SUBSTANTIAL BUSINESS. SOMETIMES A PORTION WHICH CON TRIBUTES A SUBSTANTIAL PART OF THE TURNOVER, THOUGH IT CONTRIBUTES A RELATIVELY SMALL PORTION OF THE PROFIT, WOULD BE A SUBSTANTIAL PART OF THE BUSINESS. SIMILA RLY, A PORTION WHICH RELATIVELY A SMALL AS COMPARED TO THE TOTAL TURNOVER, BUT GENE RATES A LARGE, SAY MORE THAN 50 PER CENT. OF THE TOTAL PROFIT OF THE COMPAN Y WOULD ALSO BE A SUBSTANTIAL PART OF ITS BUSINESS. PERCENTAGE OF TURNOVER IN REL ATION TO THE WHOLE AS ALSO THE PERCENTAGE OF THE PROFIT IN RELATION TO THE WHOLE A ND 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 AR E NOW CALLED ITS 'HUMAN RESOURCES' AND, THEREFORE, THE PERCENTAGE OF 'HUMAN RESOURCES' USED BY THE COMPANY FOR CARRYING ON A PARTICULAR DIVISION OF BU SINESS MAY ALSO BE REQUIRED TO BE TAKEN INTO CONSIDERATION WHILE CONSIDERING WH ETHER A PARTICULAR BUSINESS FORMS A SUBSTANTIAL PART OF ITS BUSINESS. UNDISPUTE DLY, 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 RELE VANT WHILE CONSIDERING WHETHER THE PART OF THE BUSINESS OF THE COMPANY CON STITUTES 'SUBSTANTIAL PART OF THE BUSINESS' OF THE COMPANY. IN THE SAID CASE IT WAS NOTED BY THE TRIBUNAL THAT 42% OF THE TOTAL ASSETS OF THE LENDING COMPANY AS AT THE BEGINNING OF THE YEAR AND 39% OF THE TOTAL ASSET OF THE LENDING COMPANY AT THE END OF THE YEAR WERE DEPLOYE D IN THE BUSINESS OF MONEY LENDING AND CONSIDERING THOSE FACTS THEIR LORDSHIPS HAVE UPHELD THE FINDINGS OF THE TRIBUNAL THAT IN VIEW OF SUCH DEPLOYMENT OF FUNDS T HE TRIBUNAL HAS RIGHTLY CONCLUDED THAT MONEY LENDING WAS SUBSTANTIAL PART OF BUSINESS OF THE LENDING COMPANY. THESE OBSERVATIONS OF THE LORDSHIPS ARE REPRODUCED BELOW: APPLYING THESE TESTS TO THE PRESENT CASE, WE DO NOT FIND THAT THE INCOME-TAX APPELLATE TRIBUNAL HAS COMMITTED ANY ERROR IN COMIN G TO THE CONCLUSION THAT LENDING OF MONEY WAS A SUBSTANTIAL PART OF THE BUSI NESS OF AMPL. THE INCOME- TAX APPELLATE TRIBUNAL HAS NOTED THAT 42 PER CENT. OF THE TOTAL ASSETS OF AMPL AS ON MARCH 31, 1996 AND 39 PER CENT. OF THE TOTAL ASSETS OF AMPL AS ON MARCH 31, 1997, WERE DEPLOYED BY IT BY WAY OF TOTAL LOANS AND ADVANCES. BY NO MEANS, THE DEPLOYMENT OF ABOUT 40 PER CENT. OF THE TOTAL ASSETS INTO THE BUSINESS OF LENDING COULD BE REGARDED AS AN INSIGNI FICANT PART OF THE BUSINESS OF AMPL. THE INCOME-TAX APPELLATE TRIBUNAL HAS ALSO HE LD THAT THE INCOME AMPL HAD RECEIVED BY WAY OF INTEREST OF RS. 1,08,18,036 WHILE ITS TOTAL PROFIT WAS RS. 67,56,335,. EXCLUDING THE INCOME EARNED BY AMPL BY WAY OF INTEREST, THE OTHER 10 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 BUSINESS HAD RESULTED INTO NET LOSS. IN OUR VIEW, T HE INCOME-TAX APPELLATE TRIBUNAL HAS TAKEN INTO CONSIDERATION THE RELEVANT FACTORS AND HAS APPLIED THE CORRECT TESTS TO COME TO THE CONCLUSION THAT LENDIN G OF MONEY WAS A SUBSTANTIAL PART OF THE BUSINESS OF AMPL. SINCE LENDING OF MONE Y WAS A SUBSTANTIAL PART OF THE BUSINESS OF AMPL, THE MONEY GIVEN BY IT BY WAY OF ADVANCE OR LOAN TO THE ASSESSEE COULD NOT BE REGARDED AS A DIVIDEND, AS IT HAS TO BE EXCLUDED FROM THE DEFINITION OF 'DIVIDEND' BY VIRTUE OF CLAUSE (I I) OF SECTION 2(22)(E) OF THE ACT. HENCE, QUESTION NO. 2 IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. IN THE PRESENT CASE, IT HAS ALREADY BEEN MENTIONED THAT MORE THAN 75% OF THE FUNDS AVAILABLE HAVE BEEN DEPLOYED BY SILGO, THEREF ORE, MONEY LENDING CONSTITUTED SUBSTANTIAL PART OF THE BUSINESS OF SIL GO AND THE FACT THAT NO INTEREST INCOME WAS SHOWN BY SILGO IN PROFIT & LOSS ACCOUNT CANNOT BE SAID TO BE RELEVANT TO DECIDE THE QUESTION THAT WHETHER OR NOT MONEY L ENDING WAS SUBSTANTIAL PART OF BUSINESS OF SILGO?. LEARNED CIT(A) HAS RIGHTLY AP PRECIATED THE PROVISIONS OF LAW, WHICH HAS BEEN EXPLAINED BY HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PARLE PLASTICS LTD. (SUPRA). THE ORDER OF THE CIT(A) BEI NG IN ACCORDANCE WITH THE DECISION OF JURISDICTIONAL HIGH COURT, WE DECLINE T O INTERFERE WITH THE RELIEF GRANTED BY THE CIT(A) TO THE ASSESSEE. THEREFORE, THE APPE AL FILED BY THE REVENUE IS DISMISSED. 9. IT HAS ALREADY BEEN MENTIONED THAT THE CROSS OBJ ECTION FILED BY THE ASSESSEE IS ONLY ALTERNATIVE WHICH WILL NOT SURVIVE IN VIEW OF THE DISMISSAL OF THE DEPARTMENTAL APPEAL. THEREFORE, THE CROSS-OBJECTIO NS OF THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ARE DISMISSED. 10. TO SUM UP, THE APPEAL FILED BY THE REVENUE IS D ISMISSED AND THE CROSS- OBJECTION FILED BY THE ASSESSEE IS DISMISSED ON ACC OUNT OF HAVING BECOME INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JUNE, 2015. SD/- SD/- (RAJENDRA) (I P BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DT : 1 ST JUNE, 2015 SA 11 ITA NO.3418/M/2012 & CO 117/M/2013 AY:2006-07 COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, A BENCH, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI