- (1.) This appeal by the assessee arises from a decision of the Income Tax Appellate Tribunal dated 29 November 2013. The assessment year to which the appeal relates is Assessment Year 2007-08. The assessee has raised several questions of law of which the following would cover the controversy which is raised in the appeal:- "(1) Whether the Income Tax Appellate Tribunal was justified in holding that the two lending companies who have advanced interest bearing loan to the appellant have done so not in the ordinary course of its business, by completely overlooking that the lending of money has been specifically mentioned in the Memorandum of Association of both the companies in the objects which are ancillary to carry out the main objects of the company."
(2.) The assessee had taken an interest bearing loan from two companies in which the assessee holds more than 10% of the shares. The assessee received a loan of Rs.95,225/- from a company by the name of Kukki Color Photos Pvt. Ltd. and Rs.11,55,230/- from Kukki Color Prints Pvt. Ltd. The Assessing Officer made an addition of Rs.12,50,445/- under section 2(22)(e) of Income Tax Act, 1961 on the ground that the assessee holds more than 10% of the shares in both the companies and since the companies had sufficient accumulated profits, the loans and advances should be assessed as deemed dividends in the hands of the assessee. The Commissioner of Income Tax (Appeals) deleted the addition with the following findings:- "It is noticed from the respective Memorandums of the lending companies that one of the objects of this Companies is to lend money. On perusal of the balance sheet & P&L account of these lending companies, I find that Kukki Color Photos Pvt. Ltd. (one of the lender companies) had advanced interest bearing loans to the extent of 69.87% of its total assets. Likewise M/s. Kukki Colour Prints Pvt. Ltd. had deployed 38.67% of its total assets towards interest bearing loans. These facts clearly show that the advance or loans have been made by these 2 companies in the ordinary course of their businesses and lending of money constitutes substantial part of the businesses of these companies. In view of the above facts & decisions cited (Mrs. Rekha Modi vs. ITO and CIT V/s Parle Plastics Ltd.) the transaction between the appellant and the impugned companies would fall within the exception Clause (ii) of the section 2(22)(e) of the Act. Thus, there would be no occasion to term these transactions as falling within the meaning of "deemed dividend". Accordingly, the addition made is deleted."
(3.) The Tribunal has set aside the finding of the CIT(A) and has restored the addition which was made by the Assessing Officer.;