AYAJ S. DHUMAL,MUMBAI vs. ITO - 26(2)(4), MUMBAI

as advised from time to time.” any of the grounds of appeal as advised from time to time.” any of the grounds of appeal as advised from time to time.”

2. At the outset, the Ld. Counsel for the assessee submitted that At the outset, the Ld. Counsel for the assessee submitted that At the outset, the Ld. Counsel for the assessee submitted that ground No. 3 of the appeal ground No. 3 of the appeal was not arising from facts of the case not arising from facts of the case and was raised inadvertently raised inadvertently, hence same was not pressed. was not pressed. Accordingly, the ground no. 3 of the appeal the ground no. 3 of the appeal is dismissed as is dismissed as infructuous.

3. Briefly stated facts of Briefly stated facts of the case are that the assessee is an he case are that the assessee is an individual whose primary individual whose primary source of income is salary, earned in the source of income is salary, earned in the capacity of Director in various companies. For the assessment year capacity of Director in various companies. For the assessment year capacity of Director in various companies. For the assessment year under consideration, the assessee filed under consideration, the assessee filed his return of income on return of income on 22.09.2006, declaring 22.09.2006, declaring total income of Rs. 62,000/-. The return was . The return was processed under section 143(1) of the Income section 143(1) of the Income- -tax Act, 1961 (hereinafter referred to as "the Act"). (hereinafter referred to as "the Act"). Subsequently, based on Subsequently, based on information received from the ITO, Ward information received from the ITO, Ward-5(1)-3, Mumbai, it came to 3, Mumbai, it came to light that M/s Darshan Impex Pvt. Ltd. M/s Darshan Impex Pvt. Ltd. had received had received a loans/advances of Rs. 16.00 l of Rs. 16.00 lakhs from another company namely akhs from another company namely M/s KP Power Pvt. Ltd. and assessee was Ltd. and assessee was a substantial shareholder a substantial shareholder in both the companies. both the companies. As such, the amount received was liable to As such, the amount received was liable to be treated as deemed dividend deemed dividend under section 2(22)(e) of the Act under section 2(22)(e) of the Act in the hands of the assesse the hands of the assessee, but this was not disclosed in the original , but this was not disclosed in the original return of income. The Assessing Officer (AO), having recorded return of income. The Assessing Officer (AO), having recorded return of income. The Assessing Officer (AO), having recorded reasons to believe that income had escaped assessment, issued a reasons to believe that income had escaped assessment, issued a reasons to believe that income had escaped assessment, issued a notice under section 148 of the Act. notice under section 148 of the Act.

3.1 In response, the assessee filed a return of In response, the assessee filed a return of income, following income, following which statutory notices were issued and reassessment proceedings which statutory notices were issued and reassessment proceedings which statutory notices were issued and reassessment proceedings were initiated. During the reassessment, it was observed that for were initiated. During the reassessment, it was observed that for were initiated. During the reassessment, it was observed that for the Assessment Year 2006 the Assessment Year 2006–07, M/s Darshan Impex Pvt. Ltd. had 07, M/s Darshan Impex Pvt. Ltd. had received a loan/advance of Rs. 16,00,000/ received a loan/advance of Rs. 16,00,000/- from M/s KP Power Pvt. om M/s KP Power Pvt. Ltd. The AO noted that the assessee, Mr. Ajay S. Dhumal, was Ltd. The AO noted that the assessee, Mr. Ajay S. Dhumal, was Ltd. The AO noted that the assessee, Mr. Ajay S. Dhumal, was holding 50% equity in Darshan Impex Pvt. Ltd. and also had holding 50% equity in Darshan Impex Pvt. Ltd. and also had holding 50% equity in Darshan Impex Pvt. Ltd. and also had substantial interest in KP Power Pvt. Ltd. Accordingly, he concluded substantial interest in KP Power Pvt. Ltd. Accordingly, he concluded substantial interest in KP Power Pvt. Ltd. Accordingly, he concluded that the said loan was liable to be taxed as d that the said loan was liable to be taxed as deemed dividend under eemed dividend under section 2(22)(e) in the hands of Mr. Dhumal section 2(22)(e) in the hands of Mr. Dhumal. The assessee contested The assessee contested this conclusion on two grounds: this conclusion on two grounds:

Incorrect shareholding information Incorrect shareholding information:

3.2 It was submitted that the return of income of M/s Darshan It was submitted that the return of income of M/s Darshan It was submitted that the return of income of M/s Darshan Impex Pvt. Ltd. for AY 2006 Pvt. Ltd. for AY 2006–07 erroneously reflected that Mr. 07 erroneously reflected that Mr. Dhumal held 50% shareholding due to a clerical error by the Dhumal held 50% shareholding due to a clerical error by the Dhumal held 50% shareholding due to a clerical error by the Chartered Chartered Chartered Accountant's Accountant's Accountant's office. office. office. In In In reality, reality, reality, the the the assessee's assessee's assessee's shareholding was only 9% as on 31.03.2006. To support this shareholding was only 9% as on 31.03.2006. To support this shareholding was only 9% as on 31.03.2006. To support this contention, the assess contention, the assessee furnished copies of annual returns of M/s ee furnished copies of annual returns of M/s Darshan Impex Pvt. Ltd. filed under the Companies Act, 1956, for Darshan Impex Pvt. Ltd. filed under the Companies Act, 1956, for Darshan Impex Pvt. Ltd. filed under the Companies Act, 1956, for FYs 2004–05, 2005– –06, and 2006–07. These returns consistently 07. These returns consistently showed that Mr. Dhumal never held more than 9% of the equity showed that Mr. Dhumal never held more than 9% of the equity showed that Mr. Dhumal never held more than 9% of the equity during the relevant per during the relevant period. However, the AO rejected this iod. However, the AO rejected this explanation on the ground that these annual returns were filed only explanation on the ground that these annual returns were filed only explanation on the ground that these annual returns were filed only after the reopening of assessment and issuance of a show-cause after the reopening of assessment and issuance of a show after the reopening of assessment and issuance of a show notice, and hence were treated as an afterthought. notice, and hence were treated as an afterthought.

Nature of Transaction Nature of Transaction – Inter-Corporate Deposit:

3.3 It was further submitted that the alleged loan was in fact an It was further submitted that the alleged loan was in fact an It was further submitted that the alleged loan was in fact an inter-corporate deposit made in the ordinary course of business. corporate deposit made in the ordinary course of business. corporate deposit made in the ordinary course of business. The amount received by M/s Darshan Impex Pvt. Ltd. from M/s KP The amount received by M/s Darshan Impex Pvt. Ltd. from M/s KP The amount received by M/s Darshan Impex Pvt. Ltd. from M/s KP Power Power Power Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. was was was used used used to to to purchase purchase purchase fully fully fully convertible convertib convertib debentures/bonds of M/s King Prawns Ltd. from IDBI Bank. This debentures/bonds of M/s King Prawns Ltd. from IDBI Bank. This debentures/bonds of M/s King Prawns Ltd. from IDBI Bank. This contention was also rejected by the AO, who proceeded to treat the contention was also rejected by the AO, who proceeded to treat the contention was also rejected by the AO, who proceeded to treat the entire amount of Rs. 16,00,000/ entire amount of Rs. 16,00,000/- as deemed dividend under section as deemed dividend under section 2(22)(e) of the Act in the hands of Mr. Ajay S. Dhumal. 2(22)(e) of the Act in the hands of Mr. Ajay S. Dhumal. 2(22)(e) of the Act in the hands of Mr. Ajay S. Dhumal.

“5. I have considered the facts of the case. There is no do 5. I have considered the facts of the case. There is no doubt that as ubt that as per return of income filed in case r return of income filed in case of M/s Darshan Impex Private Ltd. shan Impex Private Ltd. for assessment year 2006 for assessment year 2006-07, the assessee is holding 50% share in e is holding 50% share in the equity capital of the company. Similarly, the assessee is holding the equity capital of the company. Similarly, the assessee is holding the equity capital of the company. Similarly, the assessee is holding shares in case of M shares in case of M/s K.P. Power Pvt. Ltd. The assessee claimed that ssee claimed that the figures of share holding in the return was incorrect and he was the figures of share holding in the return was incorrect and he was the figures of share holding in the return was incorrect and he was holding only 9% of the share capital. However, the facts remains that holding only 9% of the share capital. However, the facts remains that holding only 9% of the share capital. However, the facts remains that even with the ROC, the assessce did not disclosed his share holding even with the ROC, the assessce did not disclosed his share holding even with the ROC, the assessce did not disclosed his share holding pattern on 18.11.201 18.11.2011 and only on this date the assessee has filed the assessee has filed some kind of return it was ROC from assessment year 2003 some kind of return it was ROC from assessment year 2003 some kind of return it was ROC from assessment year 2003-04 onwards. Accordingly, the above returns filed with the assessee is an onwards. Accordingly, the above returns filed with the assessee is an onwards. Accordingly, the above returns filed with the assessee is an afterthought and probably done with the view to escape provisions to afterthought and probably done with the view to escape provisions to afterthought and probably done with the view to escape provisions to section 2(22)(c) of the Income Tax Act, as assessment proceedings in 22)(c) of the Income Tax Act, as assessment proceedings in 22)(c) of the Income Tax Act, as assessment proceedings in this case was already in advance stage. There is no other proof with this case was already in advance stage. There is no other proof with this case was already in advance stage. There is no other proof with the assessee to show that his share holding was only 9% during the the assessee to show that his share holding was only 9% during the the assessee to show that his share holding was only 9% during the relevant period and not 50% as disclosed by him in the return relevant period and not 50% as disclosed by him in the return relevant period and not 50% as disclosed by him in the return of income. This return has been signed and verified by the assessee and income. This return has been signed and verified by the assessee and income. This return has been signed and verified by the assessee and therefore, authenticity of the same cannot be doubted. The assessee therefore, authenticity of the same cannot be doubted. The assessee therefore, authenticity of the same cannot be doubted. The assessee cannot claim now, by fling a belated return before the ROC that his cannot claim now, by fling a belated return before the ROC that his cannot claim now, by fling a belated return before the ROC that his share holding was only 9%. Accordingly, I hold share holding was only 9%. Accordingly, I hold that by taking a loan that by taking a loan of Rs. 16,00,000/, the assesse of Rs. 16,00,000/, the assessee being majority shareholder was being majority shareholder was clearly in default of the provision of the section 2(22)(c). clearly in default of the provision of the section 2(22)(c). I accordingly, accordingly, conform the addition of Rs.16,00,000/ conform the addition of Rs.16,00,000/- made by the AO in the hands made by the AO in the hands of the assessee and reject g of the assessee and reject grounds of appeal of the assessee.” rounds of appeal of the assessee.”

5. Before us, the Ld. Counsel for the assessee filed Before us, the Ld. Counsel for the assessee filed Before us, the Ld. Counsel for the assessee filed two Paper Books containing pages 1 to 50 and 1 to 92 respectively. containing pages 1 to 50 and 1 to 92 respectively. containing pages 1 to 50 and 1 to 92 respectively.

5.1 The Learned Counsel for the assessee, in support of the The Learned Counsel for the assessee, in support of the The Learned Counsel for the assessee, in support of the grounds raised, advanced a twofold argum grounds raised, advanced a twofold argument. Firstly, it was ent. Firstly, it was contended that the assessee held only 9% of the shares in M/s contended that the assessee held only 9% of the shares in M/s contended that the assessee held only 9% of the shares in M/s Darshan Impex Pvt. Ltd., contrary to the allegation that he held a Darshan Impex Pvt. Ltd., contrary to the allegation that he held a Darshan Impex Pvt. Ltd., contrary to the allegation that he held a 50% shareholding. The Ld. Counsel reiterated the submissions 50% shareholding. The Ld. Counsel reiterated the submissions 50% shareholding. The Ld. Counsel reiterated the submissions made before the lower authorities and stated made before the lower authorities and stated that the mention of that the mention of 50% shareholding in the return of income of M/s Darshan Impex 50% shareholding in the return of income of M/s Darshan Impex 50% shareholding in the return of income of M/s Darshan Impex Pvt. Ltd. was an inadvertent clerical error committed by the staff of Pvt. Ltd. was an inadvertent clerical error committed by the staff of Pvt. Ltd. was an inadvertent clerical error committed by the staff of the Chartered Accountant who prepared the return. In support of the Chartered Accountant who prepared the return. In support of the Chartered Accountant who prepared the return. In support of this contention, the Ld. Counsel referre this contention, the Ld. Counsel referred to the annual returns filed d to the annual returns filed under the Companies Act, 1956, which reflected the number of under the Companies Act, 1956, which reflected the number of under the Companies Act, 1956, which reflected the number of shares held by the assessee. Attention was drawn to page 4 of the shares held by the assessee. Attention was drawn to page 4 of the shares held by the assessee. Attention was drawn to page 4 of the Paper Book, which contains details of the shareholding pattern of Paper Book, which contains details of the shareholding pattern of Paper Book, which contains details of the shareholding pattern of M/s Darshan Impex Pvt. Ltd. for t M/s Darshan Impex Pvt. Ltd. for the periods 1999–2000 and 2004 2000 and 2004– 2007, confirming that the assessee never held more than 9% of the 2007, confirming that the assessee never held more than 9% of the 2007, confirming that the assessee never held more than 9% of the equity shares during the relevant period. equity shares during the relevant period. For ready reference, For ready reference, details of said shareholding etails of said shareholding as reported by the assessee, as reported by the assessee, is extracted as under:

M/s Darshan Impex Pvt Ltd LIST OF SHARE HOLDERS ON INCORPORATION LIST OF SHARE HOLDERS ON INCORPORATION SrNo Name of shareholder Type of Share Amount (Rs) No of shares Nominal value Amount (Rs) %of held of shares Holding 1 Sunil D. Jaithwar Equity 100 10 1,000 50 1,000 2 Anupama Jaithwar Equity 100 10 1,000 50 1,000 Total 200 2,000 100 2,000

LIST OF SHARE HOLDERS AS ON 1999 To 2000 SrNo Name of shareholder Type of Share Amount (Rs) No of shares Nominal value Amount (Rs) % of held of shares Holding 1 Narayandas Badyani Equity 1,300 10 13,000 13 13,000 2 navinchandra Patel Equity 1,300 10 13,000 13 13,000 3 N.B.H.Kulkarni Equity 1,300 10 13,000 13 13,000 4 Satish Rao Deshmukh Equity 1800 10 18,000 18 18,000 5 Surekha Dhumal Equity 3000 10 30,000 30 30,000 6 lla Anand Rao Patel Equity 1,300 10 13,000 13 13,000 Total 10,000 10,00,000 100 10,00,000

LIST OF SHARE HOLDERS AS ON 2004 to 2007 SrNo Name of shareholder Type of Share Amount (Rs) No of shares Nominal value Amount (Rs) % of held of shares Holding 1 Surekha Dhumal Equity 8,100 10 81,000 81% 81,000 2 Satish Rao Deshmukh Equity 1,000 10 10,000 10% 10,000 3 Ajay Shankarrao Dhumal Equity 900 10 9,000 9% 9,000 10,000 Total 1,00,000 100% 1,00,000 5.2 The Ld. Counsel accordingly submitted that assessee held only The Ld. Counsel accordingly submitted that assessee held only The Ld. Counsel accordingly submitted that assessee held only 9% shareholding during the year under consideration, during the year under consideration, during the year under consideration, therefore, he was not liable for treating said loan not liable for treating said loan/advance of Rs.16,00,000/ advance of Rs.16,00,000/- as deemed dividend in his his hands.

5.3 The second and alternative argument advanced by the Learned The second and alternative argument advanced by the Learned The second and alternative argument advanced by the Learned nt of Rs. 16,00,000/- Counsel for the assessee was that the amou Counsel for the assessee was that the amount of Rs. 16,00,000/ provided by M/s KP Power Pvt. Ltd. to M/s Darshan Impex Pvt. Ltd. provided by M/s KP Power Pvt. Ltd. to M/s Darshan Impex Pvt. Ltd. provided by M/s KP Power Pvt. Ltd. to M/s Darshan Impex Pvt. Ltd. was given out of business expediency. It was submitted that M/s was given out of business expediency. It was submitted that M/s was given out of business expediency. It was submitted that M/s King Prawns Pvt. Ltd., a company in which the assessee held King Prawns Pvt. Ltd., a company in which the assessee held King Prawns Pvt. Ltd., a company in which the assessee held substantial interest, had issued debentures substantial interest, had issued debentures to IDBI Ltd. However, to IDBI Ltd. However, the company was unable to redeem the said debentures. In order to the company was unable to redeem the said debentures. In order to the company was unable to redeem the said debentures. In order to facilitate the redemption, M/s Darshan Impex Pvt. Ltd. agreed to facilitate the redemption, M/s Darshan Impex Pvt. Ltd. agreed to facilitate the redemption, M/s Darshan Impex Pvt. Ltd. agreed to purchase the debentures from IDBI but lacked the necessary funds. purchase the debentures from IDBI but lacked the necessary funds. purchase the debentures from IDBI but lacked the necessary funds. To support this transaction, M/s KP P To support this transaction, M/s KP Power Pvt. Ltd. extended a ower Pvt. Ltd. extended a sum of Rs. 16,00,000/ sum of Rs. 16,00,000/- to M/s Darshan Impex Pvt. Ltd., out of to M/s Darshan Impex Pvt. Ltd., out of which Rs. 15,00,000/ which Rs. 15,00,000/- was utilized for purchasing the debentures was utilized for purchasing the debentures from IDBI Bank. The Ld. Counsel argued that the said payment, to from IDBI Bank. The Ld. Counsel argued that the said payment, to from IDBI Bank. The Ld. Counsel argued that the said payment, to the extent of Rs. 15,00,000/ the extent of Rs. 15,00,000/-, was made for commercial/business e for commercial/business expediency. Further, the Ld. Counsel brought on record an Further, the Ld. Counsel brought on record an Further, the Ld. Counsel brought on record an additional fact to substantiate the claim of business interest. It was additional fact to substantiate the claim of business interest. It was additional fact to substantiate the claim of business interest. It was submitted that land had been allotted by the Government of submitted that land had been allotted by the Government of submitted that land had been allotted by the Government of Maharashtra to M/s King Prawns Pvt. Ltd. ( Maharashtra to M/s King Prawns Pvt. Ltd. (later converted into a later converted into a limited company) for the purpose of prawn and salt production. On limited company) for the purpose of prawn and salt production. On limited company) for the purpose of prawn and salt production. On the unused portion of the said land, M/s KP Power Pvt. Ltd. had the unused portion of the said land, M/s KP Power Pvt. Ltd. had the unused portion of the said land, M/s KP Power Pvt. Ltd. had installed windmills after obtaining requisite approvals from the installed windmills after obtaining requisite approvals from the installed windmills after obtaining requisite approvals from the Land Revenue Department and other rele Land Revenue Department and other relevant authorities of the vant authorities of the Maharashtra Government. Additionally, M/s KP Power Pvt. Ltd. had Maharashtra Government. Additionally, M/s KP Power Pvt. Ltd. had Maharashtra Government. Additionally, M/s KP Power Pvt. Ltd. had invested a sum of Rs. 1 crore in M/s King Prawns Pvt. Ltd. by way invested a sum of Rs. 1 crore in M/s King Prawns Pvt. Ltd. by way invested a sum of Rs. 1 crore in M/s King Prawns Pvt. Ltd. by way of preference shares as on 31.03.2006. of preference shares as on 31.03.2006. In this context, the Ld. In this context, the Ld. Counsel argued that M/s KP Power Pvt. Counsel argued that M/s KP Power Pvt. Ltd. had a significant Ltd. had a significant business interest in M/s King Prawns Pvt. Ltd. and, to protect that business interest in M/s King Prawns Pvt. Ltd. and, to protect that business interest in M/s King Prawns Pvt. Ltd. and, to protect that interest, it provided financial assistance to M/s Darshan Impex Pvt. interest, it provided financial assistance to M/s Darshan Impex Pvt. interest, it provided financial assistance to M/s Darshan Impex Pvt. Ltd. for the purpose of acquiring the debentures from IDBI in a one- Ltd. for the purpose of acquiring the debentures from IDBI in a one Ltd. for the purpose of acquiring the debentures from IDBI in a one time settlement (OTS) arran time settlement (OTS) arrangement to bail out M/s King Prawns gement to bail out M/s King Prawns Pvt. Ltd. The payment of Rs. 15,00,000/ Pvt. Ltd. The payment of Rs. 15,00,000/- not only served to protect not only served to protect the business interest of M/s KP Power Pvt. Ltd. but also the business interest of M/s KP Power Pvt. Ltd. but also the business interest of M/s KP Power Pvt. Ltd. but also safeguarded its substantial investment of Rs. 96,00,000/- as of safeguarded its substantial investment of Rs. 96,00,000/ safeguarded its substantial investment of Rs. 96,00,000/ 31.03.2006, especially in light 31.03.2006, especially in light of potential coercive recovery actions of potential coercive recovery actions by IDBI. The Ld. Counsel also submitted additional evidence, The Ld. Counsel also submitted additional evidence, The Ld. Counsel also submitted additional evidence, including a copy of the agreement between the State of including a copy of the agreement between the State of including a copy of the agreement between the State of Maharashtra and M/s King Prawns Pvt. Ltd., and permissions from Maharashtra and M/s King Prawns Pvt. Ltd., and permissions from Maharashtra and M/s King Prawns Pvt. Ltd., and permissions from the Land Revenue Department and other the Land Revenue Department and other concerned authorities concerned authorities allowing the use of land for installation of windmills. It was allowing the use of land for installation of windmills. It was allowing the use of land for installation of windmills. It was requested that, in the interest of justice, these documents be requested that, in the interest of justice, these documents be requested that, in the interest of justice, these documents be admitted as additional evidence and that the matter be remanded to admitted as additional evidence and that the matter be remanded to admitted as additional evidence and that the matter be remanded to the file of the Assessing Officer to con the file of the Assessing Officer to consider the assessee's claim of sider the assessee's claim of business expediency in the payment of Rs. 15,00,000/- to M/s business expediency in the payment of Rs. 15,00,000/ business expediency in the payment of Rs. 15,00,000/ Darshan Impex Pvt. Ltd. Darshan Impex Pvt. Ltd.

Accordingly, it was incumbent upon the assessee to substantiate Accordingly, it was incumbent upon the assessee to substantia Accordingly, it was incumbent upon the assessee to substantia the manner of acquisition by producing documentation showing the manner of acquisition by producing documentation showing the manner of acquisition by producing documentation showing how the shares were purchased from the previous promoters, how the shares were purchased from the previous promoters, how the shares were purchased from the previous promoters, including proof of payments made through banking channels by including proof of payments made through banking channels by including proof of payments made through banking channels by each individual purchaser. In the absence of such supporting each individual purchaser. In the absence of such supporting each individual purchaser. In the absence of such supporting evidence, the shareholding of 50% as reflected in the return of he shareholding of 50% as reflected in the return of he shareholding of 50% as reflected in the return of income of M/s Darshan Impex Pvt. Ltd. income of M/s Darshan Impex Pvt. Ltd.—a return which was a return which was verified and signed by verified and signed by the Director—should be accepted as true and should be accepted as true and correct. With regard to the assessee’s alternative plea of business With regard to the assessee’s alternative plea of business With regard to the assessee’s alternative plea of business expediency, the Ld. DR submitted that no valid justification had the Ld. DR submitted that no valid justification had the Ld. DR submitted that no valid justification had been provided for routing the transaction through M/s Darshan been provided for routing the transaction through M/s Darshan been provided for routing the transaction through M/s Darshan Impex Pvt. Ltd. He asserted that the alleged transaction between Impex Pvt. Ltd. He asserted that the alleged transaction between Impex Pvt. Ltd. He asserted that the alleged transaction between M/s KP Power Pvt. Ltd. and M/s Darshan Impex Pvt. Ltd. lacked M/s KP Power Pvt. Ltd. and M/s Darshan Impex Pvt. Ltd. lacked M/s KP Power Pvt. Ltd. and M/s Darshan Impex Pvt. Ltd. lacked any established nexus with business expediency. Therefore, the ed nexus with business expediency. Therefore, the ed nexus with business expediency. Therefore, the payment could not be regarded as an advance made for commercial payment could not be regarded as an advance made for commercial payment could not be regarded as an advance made for commercial or business purposes. Additionally, the Ld. DR emphasized that at or business purposes. Additionally, the Ld. DR emphasized that at or business purposes. Additionally, the Ld. DR emphasized that at the time of the transaction, M/s King Prawns Pvt. Ltd. was a closely the time of the transaction, M/s King Prawns Pvt. Ltd. was a closely the time of the transaction, M/s King Prawns Pvt. Ltd. was a closely held company in which the assessee held substantial interest. mpany in which the assessee held substantial interest. mpany in which the assessee held substantial interest. Hence, the entire transaction involving the loan or advance Hence, the entire transaction involving the loan or advance Hence, the entire transaction involving the loan or advance ultimately benefited the assessee in his individual capacity. ultimately benefited the assessee in his individual capacity. ultimately benefited the assessee in his individual capacity. Consequently, the amount was correctly treated as deemed Consequently, the amount was correctly treated as Consequently, the amount was correctly treated as dividend under section under section 2(22)(e) of the Act, taxable in the hands of 2(22)(e) of the Act, taxable in the hands of the assessee.

7.1. Section 2(22)(e) of Section 2(22)(e) of the Act, in essence, stipulates that any the Act, in essence, stipulates that any payment by a company, not being a company in which the public payment by a company, not being a company in which the public payment by a company, not being a company in which the public are substantially interested, made after 31st May 1987 by way of are substantially interested, made after 31st May 1987 by way of are substantially interested, made after 31st May 1987 by way of loan or advance—

(i) to a shareholder, being a person who is the beneficial owner of (i) to a shareholder, being a person who is the beneficial owner of (i) to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend, ares (not being shares entitled to a fixed rate of dividend, ares (not being shares entitled to a fixed rate of dividend, whether with or without a right to participate in profits), holding whether with or without a right to participate in profits), holding whether with or without a right to participate in profits), holding not less than ten percent of the voting power in such company; not less than ten percent of the voting power in such company; not less than ten percent of the voting power in such company;

(ii) or to any concern in which such shareholder is a member or (ii) or to any concern in which such shareholder is a member or (ii) or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest; partner and in which he has a substantial interest; partner and in which he has a substantial interest;

(iii) or any payment made by such company on behalf, or for the (iii) or any payment made by such company on behalf, or for the (iii) or any payment made by such company on behalf, or for the individual benefit, of any such shareholder— individual benefit, of any such shareholder shall be treated as ‘deemed dividend’ to the extent of the shall be treated as ‘deemed dividend’ to the extent of the shall be treated as ‘deemed dividend’ to the extent of the accumulated profits of the company accumulated profits of the company.

7.2 The second proviso The second proviso below Section 2(22)(f), carves out an ), carves out an exception to section 2(22)(e) of the Act to section 2(22)(e) of the Act. It provides that ‘dividend’ . It provides that ‘dividend’ shall not include any advance or loan made to a shareholder or to shall not include any advance or loan made to a shareholder or to shall not include any advance or loan made to a shareholder or to the said concern by a company in the ordinary course of its the said concern by a company in the ordinary course of i the said concern by a company in the ordinary course of i business, where the lending of money constitutes a substantial part business, where the lending of money constitutes a substantial part business, where the lending of money constitutes a substantial part of the business of the company. of the business of the company.

7.3 Explanation 3 to Section 2(22) further clarifies the meaning of Explanation 3 to Section 2(22) further clarifies the meaning of Explanation 3 to Section 2(22) further clarifies the meaning of the expressions ‘concern’ and ‘substantial interest’ in a concern the expressions ‘concern’ and ‘substantial interest’ in a concern the expressions ‘concern’ and ‘substantial interest’ in a concern other than a compan other than a company. It reads as under:

"(a) 'concern' means a Hindu undivided family, or a firm or an "(a) 'concern' means a Hindu undivided family, or a firm or an (a) 'concern' means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company; association of persons or a body of individuals or a company; association of persons or a body of individuals or a company; (b) A person shall be deemed to have a substantial interest in a (b) A person shall be deemed to have a substantial interest in a (b) A person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at concern, other than a company, if he is, at any time during the any time during the previous year, beneficially entitled to not less than twenty percent of previous year, beneficially entitled to not less than twenty percent of previous year, beneficially entitled to not less than twenty percent of the income of such concern. the income of such concern.”

7.4 The expression ‘substantial interest in a company’ is defined The expression ‘substantial interest in a company’ is defined The expression ‘substantial interest in a company’ is defined under Section 2(32) of the Act as follows: under Section 2(32) of the Act as follows:

"A person who has a substantial interest in the company, in "A person who has a substa ntial interest in the company, in relation to a company, means a person who is the beneficial relation to a company, means a person who is the beneficial relation to a company, means a person who is the beneficial owner of shares, not being shares entitled to a fixed rate of owner of shares, not being shares entitled to a fixed rate of owner of shares, not being shares entitled to a fixed rate of dividend whether with or without a right to participate in dividend whether with or without a right to participate in dividend whether with or without a right to participate in profits, carrying not less than twenty percent of the voting profits, carrying not less than twenty pe rcent of the voting power.”

7.5 The Hon’ble Bombay High Court in The Hon’ble Bombay High Court in Duttaprasad Kamat v. ACIT Duttaprasad Kamat v. ACIT [(2023) 153 taxmann.com 702 (Bom.)] has categorically held that, [(2023) 153 taxmann.com 702 (Bom.)] has categorically held that, [(2023) 153 taxmann.com 702 (Bom.)] has categorically held that, for the purposes of Section 2(22)(e), the shareholder must be a for the purposes of Section 2(22)(e), the shareholder must be a for the purposes of Section 2(22)(e), the shareholder must be a registered shareholder. The relevant shareholder. The relevant observations of the Court are observations of the Court are as under:

"76. The principles laid down by the Supreme Court in C.P. "76. The principles laid down by the Supreme Court in C.P. "76. The principles laid down by the Supreme Court in C.P. Sarathy Mudaliar, Howrah Trading Co. Ltd. and Shakuntala Sarathy Mudaliar, Howrah Trading Co. Ltd. and Shakuntala Sarathy Mudaliar, Howrah Trading Co. Ltd. and Shakuntala cases that under the scheme of the Companies Act, the cases that under the scheme of the Companies Act, the cases that under the scheme of the Companies Act, the expressions 'member', 'shareholder' and 'holder of a share', expressions 'member', 'shareholder' and 'hold er of a share', which are used interchangeably, should be interpreted which are used interchangeably, should be interpreted which are used interchangeably, should be interpreted consistently when applied under the Income-tax Act. Applying consistently when applied under the Income tax Act. Applying this interpretation to clause (e) of section 2(22), we are of the this interpretation to clause (e) of section 2(22), we are of the this interpretation to clause (e) of section 2(22), we are of the considered view that the 'beneficial owner of shares', considered view that the 'beneficial owner of shares', considered view that the 'beneficial owner of shares', 'shareholder' and 'member' referred to therein must be a reholder' and 'member' referred to therein must be a reholder' and 'member' referred to therein must be a registered shareholder or a registered beneficial owner whose registered shareholder or a registered beneficial owner whose registered shareholder or a registered beneficial owner whose name appears in the register of members/shareholders under name appears in the register of members/shareholders under name appears in the register of members/shareholders under Section 150 or in the register of beneficial owners under Section 150 or in the register of beneficial owners under Section 150 or in the register of beneficial owners under Section 152A of the Companies Act, 1956.” Section 152A of the Comp 7.6 In light of the statutory framework and judicial precedents In light of the statutory framework and judicial precedents In light of the statutory framework and judicial precedents referred above, the conditions precedent for invoking Section referred above, the conditions precedent for invoking Section referred above, the conditions precedent for invoking Section 2(22)(e) may be summarised thus: 2(22)(e) may be summarised thus:

The company making the payment must be a closely held (i) The company making the payment must be a The company making the payment must be a company, i.e., not on , i.e., not one in which the public are substantially e in which the public are substantially interested;

The payment must be made by way of loan or advance loan or advance during (ii) The payment must be made by way of the relevant year to any of the following: the relevant year to any of the following: o (a) A registered shareholder registered shareholder holding not less than holding not less than 10% of the voting power of the voting power in the payer company; in the payer company; o (b) A concern (other than a company) concern (other than a company) in which such concern (other than a company) shareholder has a shareholder has a substantial interest, i.e., at least , i.e., at least 20% of the income of the income of the concern; o (c) A company company in which such shareholder holds not less in which such shareholder holds not less than 20% of the voting power 20% of the voting power; (iii) The payer company must possess The payer company must possess accumulated profits accumulated profits on the date of such payment and the payment must be made on the date of such payment and the payment must be made on the date of such payment and the payment must be made out of such profits; out of such profits;

The payment must not be in the ordinary course of not be in the ordinary course of (iv) The payment must business of the company, and the of the company, and the lending of money lending of money must not be a substantial part of the company’s busin substantial part of the company’s busin substantial part of the company’s business.

7.7 The Hon’ble Bombay High Court in the case of Duttaprasas The Hon’ble Bombay High Court in the case of Duttaprasas The Hon’ble Bombay High Court in the case of Duttaprasas Kamat vs Vs ACIT(supra) has further noted provisions of Companies (supra) has further noted provisions of Companies (supra) has further noted provisions of Companies Act, 1956 specifying the term beneficial owner and requirement of Act, 1956 specifying the term beneficial owner and requirement of Act, 1956 specifying the term beneficial owner and requirement of maintaining register under the provisions of Companies Act, 1956, ing register under the provisions of Companies Act, 1956, ing register under the provisions of Companies Act, 1956, the register of members is the authoritative and observed that t is the authoritative source for determining membership and rights under the source for determining membership and rights under the source for determining membership and rights under the Companies Act, 1956. Companies Act, 1956.

7.8 In back ground of above legal position, we examine the In back ground of above legal position, we examine the In back ground of above legal position, we examine the facts of the instant case. In the case before us, In the case before us, during the year under during the year under consideration, a loan or advance of Rs. 16.00 lakhs has been given consideration, a loan or advance of Rs. 16.00 lakhs has been given consideration, a loan or advance of Rs. 16.00 lakhs has been given by M/s KP Power pvt Ltd, which is by M/s KP Power pvt Ltd, which is a closely held company closely held company, to another concern namely another concern namely M/s Darshan Impex Pvt. Ltd. The AO has Pvt. Ltd. The AO has held that Mr Ajay S Dhumal i.e. the assessee is held that Mr Ajay S Dhumal i.e. the assessee is a beneficial owner beneficial owner of more than 10% shares % shares having voting right in M/s KP Power pvt M/s KP Power pvt Ltd and also having substantial interest in M/s Darshan Impex Pvt. and also having substantial interest in M/s Darshan Impex Pvt. and also having substantial interest in M/s Darshan Impex Pvt. Ltd as he was holding 50% shares of as he was holding 50% shares of M/s Darshan Impex Pvt. Ltd M/s Darshan Impex Pvt. Ltd during relevant period of receipt of loan/advance, therefore, the during relevant period of receipt of loan/advance during relevant period of receipt of loan/advance assessee was liable liable for treating said loan/advance as treating said loan/advance as deemed dividend in his hand, whereas according the assessee, during dividend in his hand, whereas according the assessee, dividend in his hand, whereas according the assessee, relevant period he was he was not having substantial interest in M/s tial interest in M/s Darshan Impex Pvt. Ltd i.e. Darshan Impex Pvt. Ltd i.e. he was holding only 9% shares in holding only 9% shares in M/s Darshan Impex Pvt. Ltd Darshan Impex Pvt. Ltd. The existence of accumulated profits in he existence of accumulated profits in the books of M/s KP Power Pvt. Ltd. is not in dispute. The holding the books of M/s KP Power Pvt. Ltd. is not in dispute. the books of M/s KP Power Pvt. Ltd. is not in dispute. more than 10% voting rights in M/s KP Powers p ltd by the more than 10% voting rights in M/s KP Powers p ltd by the more than 10% voting rights in M/s KP Powers p ltd by the assessee is also in not in dispute. assessee is also in not in dispute. The limited controversy relates to The limited controversy relates to the two conditions envisaged under Section 2(22)(e) of the Act. the two conditions envisaged under Section 2(22)(e) the two conditions envisaged under Section 2(22)(e) Firstly, whether the , whether the assessee, Shri Ajay S. Dhumal, assessee, Shri Ajay S. Dhumal, held substantial interest in M/s Darshan Impex Pvt. Ltd. ( i.e. substantial interest in M/s Darshan Impex Pvt substantial interest in M/s Darshan Impex Pvt beneficial owner of shares, not being shares entitled to fixed rate of beneficial owner of shares, not being shares entitled to fixed rate of beneficial owner of shares, not being shares entitled to fixed rate of dividend, whether with or without a right to participate in profit , dividend, whether with or without a right to participate in profit , dividend, whether with or without a right to participate in profit , carrying not less than 20% of voting power) , and secondly econdly, whether carrying not less than 20% of voting power the payment of Rs. 16,00,000/ the payment of Rs. 16,00,000/- by M/s KP Power Pvt. Ltd. to M/s by M/s KP Power Pvt. Ltd. to M/s Darshan Impex Pvt. Ltd. was in the nature of a loan or advance in the nature of a loan or advance Darshan Impex Pvt. Ltd. was in ordinary course of business of money lending of M/s KP in ordinary course of business of money lending of M/s KP in ordinary course of business of money lending of M/s KP Powers P ltd.

7.9 Regarding the first condition of the first condition of substantial interest interest of assessee in M/s Darshan Impex Pvt. Ltd in M/s Darshan Impex Pvt. Ltd, the Assessing Officer had relied on Assessing Officer had relied on the return of income filed by M/s Darshan Impex Pvt. Ltd., wherein the return of income filed by M/s Darshan Impex Pvt. Ltd., wherein the return of income filed by M/s Darshan Impex Pvt. Ltd., wherein the assessee has been has been shown holding 50% of the shareholding 50% of the shareholding having voting right and having voting right and the remaining 50% has been has been held by his wife, Smt. Sulekha S. Dhumal. The said return wife, Smt. Sulekha S. Dhumal. The said return of income of income was duly verified and signed by the Director of the company. In the opinion of verified and signed by the Director of the company. In the opinion of verified and signed by the Director of the company. In the opinion of the Assessing Officer, such disclosure is binding and reliable. The the Assessing Officer, such disclosure is binding and reliable. the Assessing Officer, such disclosure is binding and reliable. assessee, on the other hand, contended the other hand, contended that the disclosure of 50% that the disclosure of 50% shareholding in the income in the income-tax return was an inadvertent clerical was an inadvertent clerical error committed by the staff of the Chartered Accountant who error committed by the staff of the Chartered Accountant who error committed by the staff of the Chartered Accountant who prepared the return. It was argued that the actual shareholding of prepared the return. It was argued that the actual shareholding prepared the return. It was argued that the actual shareholding the assessee was only 900 shares out of 10,000, constituting 9% was only 900 shares out of 10,000, constituting 9% was only 900 shares out of 10,000, constituting 9% beneficial ownership o beneficial ownership of shares carrying voting power f shares carrying voting power, and thus below the threshold of below the threshold of 20% shareholding prescribed for 20% shareholding prescribed for substantial interest in a company in a company. To support this assertion, the assessee . To support this assertion, the assessee placed reliance on the annual returns filed with the Registrar of eliance on the annual returns filed with the Registrar of eliance on the annual returns filed with the Registrar of Companies for the financial years 2004 Companies for the financial years 2004–05 to 2006 05 to 2006–07, where his shareholding was recorded at 9%. shareholding was recorded at 9%.

7.10 We find, however, that the annual returns relied upon by the We find, however, that the annual returns relied upon by the We find, however, that the annual returns relied upon by the assessee were filed only subsequent assessee were filed only subsequent to the issuance of the show to the issuance of the show- cause notice under the reassessment proceedings. The timing of cause notice under the reassessment proceedings. The timing of cause notice under the reassessment proceedings. The timing of such filings, coupled with their self such filings, coupled with their self-serving character serving character—particularly in view of the fact that control of the company was at the relevant in view of the fact that control of the company was at the relevant in view of the fact that control of the company was at the relevant time vested in the assessee time vested in the assessee and his family—casts a serious doubt casts a serious doubt on their evidentiary probity. The core issue, therefore, is to on their evidentiary probity. The core issue, therefore, is to on their evidentiary probity. The core issue, therefore, is to ascertain which of the returns filed by M/s Darshan Impex Private ascertain which of the returns filed by M/s Darshan Impex Private ascertain which of the returns filed by M/s Darshan Impex Private Limited truly reflects the correct factual matrix. Returns under both Limited truly reflects the correct factual matrix. Returns under both Limited truly reflects the correct factual matrix. Returns under both the Income Tax Act the Income Tax Act and the Companies Act have admittedly been and the Companies Act have admittedly been filed after due verification by authorised officers of the company. In filed after due verification by authorised officers of the company. In filed after due verification by authorised officers of the company. In such circumstances, where the returns stand formally attested and such circumstances, where the returns stand formally attested and such circumstances, where the returns stand formally attested and are ostensibly in compliance with the statutory regime, it becomes are ostensibly in compliance with the statutory regime, it becomes are ostensibly in compliance with the statutory regime, it becomes necessary to go beyond their mere form and examine the to go beyond their mere form and examine the to go beyond their mere form and examine the foundational documents that informed the declarations made foundational documents that informed the declarations made foundational documents that informed the declarations made therein—especially with regard to the shareholding structure of the especially with regard to the shareholding structure of the especially with regard to the shareholding structure of the company.

7.11 From the material placed before us, covering the period from From the material placed before us, covering the period from From the material placed before us, covering the period from 1990 to 2007, it emerges that prior to the acquisition of the 2007, it emerges that prior to the acquisition of the 2007, it emerges that prior to the acquisition of the company by the assessee's family members, the controlling interest company by the assessee's family members, the controlling interest company by the assessee's family members, the controlling interest lay with a separate and distinct group. It is only from the financial lay with a separate and distinct group. It is only from the financial lay with a separate and distinct group. It is only from the financial year 2004 onwards that the assessee group is seen to have acquired year 2004 onwards that the assessee group is seen to have acquire year 2004 onwards that the assessee group is seen to have acquire a majority stake in the company. This factual assertion remains a majority stake in the company. This factual assertion remains a majority stake in the company. This factual assertion remains undisputed. It follows, therefore, that such acquisition must have undisputed. It follows, therefore, that such acquisition must have undisputed. It follows, therefore, that such acquisition must have been accompanied by consideration, presumably routed through been accompanied by consideration, presumably routed through been accompanied by consideration, presumably routed through banking channels, to the outgoing shareholders. The truthfulness of banking channels, to the outgoing shareholders. The truthfulne banking channels, to the outgoing shareholders. The truthfulne these transactions— —and the legal consequences arising there and the legal consequences arising there from—must necessarily be evaluated against the touchstone of must necessarily be evaluated against the touchstone of must necessarily be evaluated against the touchstone of contemporaneous documentary evidence. During the course of contemporaneous documentary evidence. During the course of contemporaneous documentary evidence. During the course of hearing, we specifically called upon the learned counsel for the hearing, we specifically called upon the learned counsel for the hearing, we specifically called upon the learned counsel for the assessee to furnish evidence of payments made through banking assessee to furnish evidence of payments made through banking assessee to furnish evidence of payments made through banking channels for the acquisition of equity shares by the assessee group, channels for the acquisition of equity shares by the assessee group, channels for the acquisition of equity shares by the assessee group, as reflected in the chart at page 4 of the Paper Book. The learned as reflected in the chart at page 4 of the Paper Book. The learned as reflected in the chart at page 4 of the Paper Book. The learned counsel, however, expressed his inability to produce such evidence, counsel, however, expressed his inability to produce such counsel, however, expressed his inability to produce such attributing the same to the passage of time. Furthermore, neither attributing the same to the passage of time. Furthermore, neither attributing the same to the passage of time. Furthermore, neither the original share certificates nor the statutory share transfer the original share certificates nor the statutory share transfer the original share certificates nor the statutory share transfer registers, as required to be maintained under the Companies Act, registers, as required to be maintained under the Companies Act, registers, as required to be maintained under the Companies Act, 1956—documents which would have constituted contem documents which would have constituted contemporaneous documents which would have constituted contem and cogent proof—have been brought on record. have been brought on record.

7.12 In the absence of such material documentary evidence, and In the absence of such material documentary evidence, and In the absence of such material documentary evidence, and having regard to the declaration in the income tax return—duly having regard to the declaration in the income tax return having regard to the declaration in the income tax return signed and verified— —reflecting a 50% shareholding, we are unable reflecting a 50% shareholding, we are unable to accept the assessee’s contention that his interest in M/s the assessee’s contention that his interest in M/s the assessee’s contention that his interest in M/s Darshan Impex Private Limited was below the statutory threshold of Darshan Impex Private Limited was below the statutory threshold of Darshan Impex Private Limited was below the statutory threshold of 20% voting power so as to fall outside the ambit of "substantial 20% voting power so as to fall outside the ambit of "substantial 20% voting power so as to fall outside the ambit of "substantial interest" under the relevant provisions of the Income Tax Act. interest" under the relevant provisions of the Income Tax Act. interest" under the relevant provisions of the Income Tax Act.

Ordinarily, this matter could have been remanded to the file of the y, this matter could have been remanded to the file of the y, this matter could have been remanded to the file of the Assessing Officer for further verification. However, in view of the Assessing Officer for further verification. However, in view of the Assessing Officer for further verification. However, in view of the assessee’s unequivocal denial of the ability to furnish the requisite assessee’s unequivocal denial of the ability to furnish the requisite assessee’s unequivocal denial of the ability to furnish the requisite information, we are of the considered opinion that such a remand information, we are of the considered opinion that such a r information, we are of the considered opinion that such a r would be an exercise in futility and would not serve any meaningful would be an exercise in futility and would not serve any meaningful would be an exercise in futility and would not serve any meaningful purpose.

8.1 It is explained by the assessee by the assessee that M/s King Prawns Ltd. that M/s King Prawns Ltd.—a company in which M/s KP Power Pvt. Ltd. had invested company in which M/s KP Power Pvt. Ltd. had invested company in which M/s KP Power Pvt. Ltd. had invested substantially—was unable to redeem certain debentures issued to was unable to redeem certain debentures issued to was unable to redeem certain debentures issued to IDBI Bank. M/s Darshan Impex Pvt. Ltd. agreed to acquire the arshan Impex Pvt. Ltd. agreed to acquire the arshan Impex Pvt. Ltd. agreed to acquire the debentures from IDBI, and M/s KP Power Pvt. Ltd. extended the debentures from IDBI, and M/s KP Power Pvt. Ltd. extended the debentures from IDBI, and M/s KP Power Pvt. Ltd. extended the said amount to facilitate this acquisition, in order to protect its said amount to facilitate this acquisition, in order to protect its said amount to facilitate this acquisition, in order to protect its existing investment. existing investment. To substantiate To substantiate the plea of business the plea of business expediency, the assesse expediency, the assessee filed additional documentary evidence e filed additional documentary evidence before us, including a copy of the agreement between M/s King before us, including a copy of the agreement between M/s King before us, including a copy of the agreement between M/s King Prawns Ltd. and the State of Maharashtra, as well as approvals Prawns Ltd. and the State of Maharashtra, as well as approvals Prawns Ltd. and the State of Maharashtra, as well as approvals from the Land Revenue Department for installation of windmills. from the Land Revenue Department for installation of windmills. from the Land Revenue Department for installation of windmills. Although these documents ar Although these documents are filed for the first time before this e filed for the first time before this Tribunal, having regard to the interest of justice and in order to , having regard to the interest of justice and in order to , having regard to the interest of justice and in order to adjudicate the matter comprehensively, we admit adjudicate the matter comprehensively, we admitted ted the same as additional evidence.

8.2 We note that the assessee has himself accepted that out of Rs We note that the assessee has himself accepted that out of Rs We note that the assessee has himself accepted that out of Rs. 16,00,000/-, only Rs. 15,00,000/ , only Rs. 15,00,000/- pertains to the alleged business pertains to the alleged business transaction and the remaining Rs. 1,00,000/ transaction and the remaining Rs. 1,00,000/- constitutes a loan/advance . Thus, to the extent of Rs. 1,00,000 Thus, to the extent of Rs. 1,00,000 Thus, to the extent of Rs. 1,00,000/- the assessee has also admitted that it was a loan or advance falling in the has also admitted that it was a loan or advance falling in the has also admitted that it was a loan or advance falling in the category of deemed dividend. category of deemed dividend.

8.3 As far remaining Rs. 15.00 lakhs is concerned As far remaining Rs. 15.00 lakhs is concerned As far remaining Rs. 15.00 lakhs is concerned, first, we have to examine whether it falls under exception provided in second to examine whether it falls under exception provided in second to examine whether it falls under exception provided in second provisio below section 2(22)(e)/(f) of the Act, which has been below section 2(22)(e)/(f) of the Act, which has been below section 2(22)(e)/(f) of the Act, which has been reproduced above. That said proviso exclude That said proviso exclude any advance or loan any advance or loan made to shareholder or the said concern by a company in the made to shareholder or the said concern by a company in the made to shareholder or the said concern by a company in the ordinary course of its business, where the lending of money is a ordinary course of its business, where the lending of money is a ordinary course of its business, where the lending of money is a substantial part of business of the company. part of business of the company. Thus, this proviso Thus, this proviso exclude the loan or advance by a company, which is engaged exclude the loan or advance by a company, which is engaged exclude the loan or advance by a company, which is engaged substantially in money lending and loan or advance extended by substantially in money lending and loan or advance extended by substantially in money lending and loan or advance extended by such company to a share holder or concern in ordinary course of its such company to a share holder or concern in ordinary course of its such company to a share holder or concern in ordinary course of its business of money lending, from the definition of deemed dividend. ney lending, from the definition of deemed dividend. ney lending, from the definition of deemed dividend. In the case of CIT Vs Jayany H Modi reported in [2015] 58 CIT Vs Jayany H Modi reported in [2015] 58 CIT Vs Jayany H Modi reported in [2015] 58 taxmann.com 366 (Bombay) taxmann.com 366 (Bombay) it was observed that Company who observed that Company who advanced loan, earned interest income to the tune of Rs. 9,16,088/ earned interest income to the tune of Rs. 9,16,088/- earned interest income to the tune of Rs. 9,16,088/ , which constituted , which constituted about 70% of its total business income about 70% of its total business income amounting to Rs. 13,04,088/ amounting to Rs. 13,04,088/- and the maximum amount of loan and the maximum amount of loan advanced by the company during the year under consideration was advanced by the company during the year under consideration was advanced by the company during the year under consideration was to the tune of Rs. 95,45,000/ to the tune of Rs. 95,45,000/-, which constituted 32% of the total constituted 32% of the total funds available with the s funds available with the said company. In these circumstances, aid company. In these circumstances, the Hon’ble Bombay High Court upheld the conclusion of the Tribunal Hon’ble Bombay High Court upheld the conclusion of the T Hon’ble Bombay High Court upheld the conclusion of the T that that the lending of money that that the lending of money was a substantial part of the a substantial part of the business of M/s. JMC Securities Pvt. Ltd. business of M/s. JMC Securities Pvt. Ltd. and addition and addition made by the assessing officer and s assessing officer and sustained by the Commissioner was ustained by the Commissioner was held to not valid and legal, particularly in the background facts. not valid and legal, particularly in the background facts. not valid and legal, particularly in the background facts.

8.4 In the instant case t In the instant case the assessee has explained above that he assessee has explained above that amount of Rs. 16.00 lakhs was of Rs. 16.00 lakhs was advanced by M/s KP Powers P ltd to advanced by M/s KP Powers P ltd to M/s Darshan Impex M/s Darshan Impex Pvt. Ltd for redeeming /buying debentures of Pvt. Ltd for redeeming /buying debentures of M/s King Prawans p Ltd from IDBI M/s King Prawans p Ltd from IDBI. Evidently, neither M/s KP . Evidently, neither M/s KP Powers P ltd is engaged in business of money lending nor the Powers P ltd is engaged in business of money lending nor the Powers P ltd is engaged in business of money lending nor the loan/advance has been given in ordinary course of business. Thus, loan/advance has been given in ordinary course of business. Thus, loan/advance has been given in ordinary course of business. Thus, the assessee did not fu the assessee did not fulfill the requirement of law for get rid of the lfill the requirement of law for get rid of the definition of deemed dividend. definition of deemed dividend. The additional evidence filed by the The additional evidence filed by the assessee also nowhere indicate that the advance was in the assessee also nowhere indicate that the advance was in the assessee also nowhere indicate that the advance was in the ordinary course of business of the lender company. The granting of ordinary course of business of the lender company. The granting of ordinary course of business of the lender company. The granting of permission by the state government for installing wind mills on the the state government for installing wind mills on the the state government for installing wind mills on the land allotted to M/s King Prawns p ltd was much prior to the land allotted to M/s King Prawns p ltd was much prior to the land allotted to M/s King Prawns p ltd was much prior to the transaction of loan/advance to Darshan Impex P ltd and was not in transaction of loan/advance to Darshan Impex P ltd and was not in transaction of loan/advance to Darshan Impex P ltd and was not in the ordinary course of business of power generation, whereas it is the ordinary course of business of power generation, whereas it is the ordinary course of business of power generation, whereas it is stated to be for securing the investment in M/s King prawns p ltd. o be for securing the investment in M/s King prawns p ltd. o be for securing the investment in M/s King prawns p ltd.

The Hon’ble Kerala High Court in the case of Thomas Philip 8.5 The Hon’ble Kerala High Court in the case of The Hon’ble Kerala High Court in the case of Vs Interim Board of Settlement reorted in [2025] 174 Vs Interim Board of Settlement reorted in [2025] 174 Vs Interim Board of Settlement reorted in [2025] 174 taxmann.com 109 (Kerala taxmann.com 109 (Kerala) held that except for one year, the ) held that except for one year, the petitioner had not been able to prove that the said advances/loan een able to prove that the said advances/loan een able to prove that the said advances/loan were given in the ordinary course of business and therefore, unless were given in the ordinary course of business and therefore, unless were given in the ordinary course of business and therefore, unless the petitioner could prove by leading cogent and credible evidence the petitioner could prove by leading cogent and credible evidence the petitioner could prove by leading cogent and credible evidence before the settlement Commission that the loan he obtained was for before the settlement Commission that the loan he obtained was for before the settlement Commission that the loan he obtained was for business purposes, the said loan amount is to be treated as a purposes, the said loan amount is to be treated as a purposes, the said loan amount is to be treated as a deemed dividend in the hands of the petitioner. deemed dividend in the hands of the petitioner.

8.6 We further note the Hon’ble Delhi High Cour We further note the Hon’ble Delhi High Court in the case of in the case of Pr. CIT v. Dwarka Prasad Aggarwal [2022] 140 taxmann.com 32 CIT v. Dwarka Prasad Aggarwal [2022] 140 taxmann.com 32 CIT v. Dwarka Prasad Aggarwal [2022] 140 taxmann.com 32 (Delhi) held that trade advan held that trade advances which were in nature of ces which were in nature of commercial transactions would not fall within ambit of word commercial transactions would not fall within ambit of word commercial transactions would not fall within ambit of word 'advance' in section 2(22)(e) 'advance' in section 2(22)(e) – Further SLP filed by Further SLP filed by the Revenue against this decision has also been dismissed as reported in [2024] against this decision has also been dismissed as reported in against this decision has also been dismissed as reported in 161 taxmann.com 813 (SC 161 taxmann.com 813 (SC). But in the instant case before us the e instant case before us the assessee failed to explain that said advance was in the nature of assessee failed to explain that said advance was in the nature of assessee failed to explain that said advance was in the nature of trade advance by M/s KP Powers p Ltd to M/s Darshan Impex P ltd. trade advance by M/s KP Powers p Ltd to M/s Darshan Impex P ltd. trade advance by M/s KP Powers p Ltd to M/s Darshan Impex P ltd.

8.7 Further, the ld Counsel argued alternatively that the amount Further, the ld Counsel argued alternatively that the amount Further, the ld Counsel argued alternatively that the amount advances by M/s KP Powers p Lt advances by M/s KP Powers p Ltd to M/s Darshan Impex P ltd. was d to M/s Darshan Impex P ltd. was in the nature of inter in the nature of inter-corporate deposit (ICD) and hence it was out corporate deposit (ICD) and hence it was out of ambit of loan or advances. of ambit of loan or advances. In this regard, we may like to In this regard, we may like to gainfully refer the finding of Coordinate Bench in the case of DCIT gainfully refer the finding of Coordinate Bench in the case of gainfully refer the finding of Coordinate Bench in the case of vs Dhariya Constructions P ltd in Constructions P ltd in Constructions P ltd in ITA No. 1440/Pune/2015, where the Tribunal has distinguished the Loan/advance and the where the Tribunal has distinguished the Loan/advance and the where the Tribunal has distinguished the Loan/advance and the ICD. The Tribunal held that while providing Deposit, the company ICD. The Tribunal held that while providing Deposit, the ICD. The Tribunal held that while providing Deposit, the has to follow the provisions of Company Act, 1956 and an element to follow the provisions of Company Act, 1956 and an element to follow the provisions of Company Act, 1956 and an element of voluntariness from lender to the recipient is necessary. The s from lender to the recipient is necessary. The s from lender to the recipient is necessary. The relevant finding of the Tribunal is reproduced as under: relevant finding of the Tribunal is reproduced as under: relevant finding of the Tribunal is reproduced as under:

4.1 There are judicial pronouncements to distinguish deposit from loan. Loans There are judicial pronouncements to distinguish deposit from loan. Loans There are judicial pronouncements to distinguish deposit from loan. Loans are given at the request of borrower against interest payment. Per contra, deposits are given at the request of borrower against interest payment. Per cont are given at the request of borrower against interest payment. Per cont are given out of excess fund voluntarily on the proposal of the lender with interest. are given out of excess fund voluntarily on the proposal of the lender with interest. are given out of excess fund voluntarily on the proposal of the lender with interest.

4.2 In the present case, the assessee has not placed on record any document or 4.2 In the present case, the assessee has not placed on record any document or 4.2 In the present case, the assessee has not placed on record any document or agreement inviting the deposit. Leave alone such invitation, the assessee sister agreement inviting the deposit. Leave alone such invitation, the assessee sis agreement inviting the deposit. Leave alone such invitation, the assessee sis concern is whole depositor and the same is described as „Inter Corporate Deposit‟ concern is whole depositor and the same is described as „Inter Corporate Deposit concern is whole depositor and the same is described as „Inter Corporate Deposit in the books of the assessee. There is no document placed before us for deciphering in the books of the assessee. There is no document placed before us for deciphering in the books of the assessee. There is no document placed before us for deciphering the real intention of the depositor or to find out whether it was deposit or loan and the real intention of the depositor or to find out whether it was deposit or loan and the real intention of the depositor or to find out whether it was deposit or loan and therefore, on the facts of the present case, there is requirement of taking adverse therefore, on the facts of the present case, there is requirement of taking adverse therefore, on the facts of the present case, there is requirement of taking adverse inference against the assessee. inference against the assessee.

4.3 From perusal of the ledger account of the depositor i.e. M/s. M/s. Dhariya 4.3 From perusal of the ledger account of the depositor i.e. M/s. M/s. Dhariya 4.3 From perusal of the ledger account of the depositor i.e. M/s. M/s. Dhariya Infrastructure Development Pvt. Ltd., it is noticed that the same appears to be Infrastructure Development Pvt. Ltd., it is noticed that the same appears to be running loan account rather than ICD account. There is no deposing running loan account rather than ICD account. There is no deposing running loan account rather than ICD account. There is no deposing documentation, no terms and conditions, no details about the interest, no details of documentation, no terms and conditions, no details about the interest, no details of documentation, no terms and conditions, no details about the interest, no details of maturity periods and no board resolution of the company for accepting the deposits maturity periods and no board resolution of the company for accepting the deposits maturity periods and no board resolution of the company for accepting the deposits were placed on record. Hence, it is not possible to infer that the depositor has given ere placed on record. Hence, it is not possible to infer that the depositor has given ere placed on record. Hence, it is not possible to infer that the depositor has given the money on his volition in the form of deposit out of his excess fund normally. the money on his volition in the form of deposit out of his excess fund normally. the money on his volition in the form of deposit out of his excess fund normally.

4.4 Further, for the purpose of treating the amount as “Inter Corporate Deposit”, 4.4 Further, for the purpose of treating the amount as “Inter Corporate Deposit”, 4.4 Further, for the purpose of treating the amount as “Inter Corporate Deposit”, there has to be availability of funds with the lender which is not out of the has to be availability of funds with the lender which is not out of the has to be availability of funds with the lender which is not out of the borrowed funds. In fact, under the Companies Act, 1956, rules were framed which borrowed funds. In fact, under the Companies Act, 1956, rules were framed which borrowed funds. In fact, under the Companies Act, 1956, rules were framed which requires that before deposits are accepted, there should be advertisement for requires that before deposits are accepted, there should be advertisement for requires that before deposits are accepted, there should be advertisement for accepting the deposit. We are reproducing herewith Rule 58A of the Companies accepting the deposit. We are reproducing herewith Rule 58A of the Companies Act, 1956:

“58A Deposits not to be invited without issuing an advertisement. (1) The Central “58A Deposits not to be invited without issuing an advertisement. (1) The Central “58A Deposits not to be invited without issuing an advertisement. (1) The Central Government may, in consultation with the Reserve Bank of India, prescribe the Government may, in consultation with the Reserve Bank of India, prescribe the Government may, in consultation with the Reserve Bank of India, prescribe the limits up to which, the manner in which and the conditions subject to which limits up to which, the manner i n which and the conditions subject to which deposits may be invited or accepted by a company either from the public or from its deposits may be invited or accepted by a company either from the public or from its deposits may be invited or accepted by a company either from the public or from its members. (2) No company shall invite, or allow any other person to invite or cause members. (2) No company shall invite, or allow any other person to invite or cause members. (2) No company shall invite, or allow any other person to invite or cause to be invited on its behalf, any deposit unless- (a) such deposit is invited or is to be invited on its behalf, any deposit unle (a) such deposit is invited or is caused to be invited in accordance with the rules made under sub- section (1), and caused to be invited in accordance with the rules made under sub caused to be invited in accordance with the rules made under sub (b) an advertisement, including therein a statement showing the financial position (b) an advertisement, including therein a statement showing the financial position (b) an advertisement, including therein a statement showing the financial position of the company, has been issued by the company in such form and in such manner of the company, has been issued by the company in su ch form and in such manner as may be prescribed.” as may be prescribed.”

4.5 In our opinion, though there is distinction between “Inter Corporate Deposits” 4.5 In our opinion, though there is distinction between “Inter Corporate Deposits” 4.5 In our opinion, though there is distinction between “Inter Corporate Deposits” and loan/advances, but for that purpose, the assessee was required to and loan/advances, but for that purpose, the assessee was required to and loan/advances, but for that purpose, the assessee was required to substantiate that the amount received by the assessee was in the form of “Inter substantiate that the amount received by the assesse e was in the form of “Inter Corporate Deposits”. As mentioned herein above, the assessee was failed to bring Corporate Deposits”. As mentioned herein above, the assessee was failed to bring Corporate Deposits”. As mentioned herein above, the assessee was failed to bring on record any documentary evidences except oral submission that the amount on record any documentary evidences except oral submission that the amount on record any documentary evidences except oral submission that the amount received by it was in the form of “Inter Corporate Deposit”. No evidence towards received by it was in the form of “Inter Corporate Deposit”. No evidence received by it was in the form of “Inter Corporate Deposit”. No evidence the nature of amount received by the assessee was brought on record or laid the nature of amount received by the assessee was brought on record or laid the nature of amount received by the assessee was brought on record or laid before the Ld. CIT(Appeals) or before us. No confirmations on “Inter Corporate before the Ld. CIT(Appeals) or before us. No confirmations on “Inter Corporate before the Ld. CIT(Appeals) or before us. No confirmations on “Inter Corporate Deposit” or Balance Sheet treating the amount of “Inter Corporate Deposit” were Deposit” or Balance Sheet treating the amount of “Inter Corporate Deposit” were Deposit” or Balance Sheet treating the amount of “Inter Corporate Deposit” were filed before us. Further, no terms and conditions were brought to our notice us. Further, no terms and conditions were brought to our notice us. Further, no terms and conditions were brought to our notice disclosing the nature of the amount received by the assessee company. disclosing the nature of the amount received by the assessee company. disclosing the nature of the amount received by the assessee company.

8.8 Further, the Tribunal(supra) observed as under: Further, the Tribunal(supra) observed as under: Further, the Tribunal(supra) observed as under:

4.7 If we examine the issue from another angle, to find out whether the amount 4.7 If we examine the issue from another angle, to find out whether 4.7 If we examine the issue from another angle, to find out whether given by the assessee was in fact in the nature of loan/advances and was given by the assessee was in fact in the nature of loan/advances and was given by the assessee was in fact in the nature of loan/advances and was “Inter Corporate Deposit”. It is essential for the amount given as “Inter Corporate “Inter Corporate Deposit”. It is essential for the amount given as “Inter Corporate “Inter Corporate Deposit”. It is essential for the amount given as “Inter Corporate Deposits”, there should be voluntariness emanating from the lender to give the Deposits”, there should be voluntariness emanating from the lender to give the Deposits”, there should be voluntariness emanating from the lender to give the amount to the assessee and not from assessee. In this case, there being the assessee and not from assessee. In this case, there being the assessee and not from assessee. In this case, there being common Managing Director, amount was being transferred as and when there common Managing Director, amount was being transferred as and when there common Managing Director, amount was being transferred as and when there was requirement of fund by the assessee from the account of M/s. Dhariya was requirement of fund by the assessee from the account of M/s. Dhariya was requirement of fund by the assessee from the account of M/s. Dhariya Infrastructure Development Pvt. Ltd. and thereafter returned back by the Infrastructure Development Pvt. Ltd. and therea fter returned back by the assessee to the lender. Hence the element of voluntariness is missing in the assessee to the lender. Hence the element of voluntariness is missing in the assessee to the lender. Hence the element of voluntariness is missing in the conduct of parties.

4.8 In view of the above, we are of the opinion that the amount was in the 4.8 In view of the above, we are of the opinion that the amount was in the 4.8 In view of the above, we are of the opinion that the amount was in the nature of loan/advances only. Merely by mentioning in the ledger account, it nature of loan/advances only. Merely by mentioning in the ledger account, it was “Inter Corporate Deposit”, the nature and colour of transaction would not was “Inter Corporate Deposit”, the nature and colour of transaction would not was “Inter Corporate Deposit”, the nature and colour of transaction would not changed to “Inter Corporate Deposit” ,as it continues to be loan/advances. changed to “Inter Corporate Deposit” ,as it continues to be loan/advances. changed to “Inter Corporate Deposit” ,as it continues to be loan/advances. Hence required to be taxed for the purposes of deemed dividend. We may rely Hence required to be taxed for the purposes of deemed dividend. We may rely Hence required to be taxed for the purposes of deemed dividend. We may rely upon the Jurisdictional High Court in the Durga Prasad Mandelia v. Registrar of the Jurisdictional High Court in the Durga Prasad Mandelia v. Registrar of the Jurisdictional High Court in the Durga Prasad Mandelia v. Registrar of Companies [1987] 61 Comp. Cas. 479 (Bom., has noticed the distinction Companies [1987] 61 Comp. Cas. 479 (Bom., has noticed the distinction Companies [1987] 61 Comp. Cas. 479 (Bom., has noticed the distinction between deposits and loans in the context of section 370 of the Companies Act. between deposits and loans in the context of section 370 of the Companies Act. between deposits and loans in the context of section 370 of the Companies Act. The Court held as under : The Court held as under :

"There can be no controversy that in a transaction of a deposit of money or re can be no controversy that in a transaction of a deposit of money or re can be no controversy that in a transaction of a deposit of money or a loan, a relationship of a debtor and creditor must come into existence. a loan, a relationship of a debtor and creditor must come into existence. a loan, a relationship of a debtor and creditor must come into existence. The terms "deposit" and "loan" may not be mutually exclusive, but The terms "deposit" and "loan" may not be mutually exclusive, but The terms "deposit" and "loan" may not be mutually exclusive, but nonetheless in each case what must be consid nonetheless in each case what must be considered is the intention of the ered is the intention of the parties and the circumstances . In the present case, barring the assertion parties and the circumstances . In the present case, barring the assertion parties and the circumstances . In the present case, barring the assertion of the respondent that the moneys advanced by the company to the of the respondent that the moneys advanced by the company to the of the respondent that the moneys advanced by the company to the Associated Cement Companies Ltd. constitute a loan and offend section Associated Cement Companies Ltd. constitute a loan and offend section Associated Cement Companies Ltd. constitute a loan and offend section 370 of the Compan 370 of the Companies Act, there is nothing else to show that these moneys ies Act, there is nothing else to show that these moneys have been advanced as a "loan". In the context of the statutory provisions, have been advanced as a "loan". In the context of the statutory provisions, have been advanced as a "loan". In the context of the statutory provisions, the word "loan" may be used in the sense of a "loan" not amounting to a the word "loan" may be used in the sense of a "loan" not amounting to a the word "loan" may be used in the sense of a "loan" not amounting to a deposit. The word "loan" in section 370 must now be deposit. The word "loan" in section 370 must now be construed as dealing construed as dealing with loans not amounting to deposits, because, otherwise, if deposit of with loans not amounting to deposits, because, otherwise, if deposit of with loans not amounting to deposits, because, otherwise, if deposit of moneys with corporate bodies were to be treated as loans, then deposits moneys with corporate bodies were to be treated as loans, then deposits moneys with corporate bodies were to be treated as loans, then deposits with scheduled banks would also fall within the ambit of section 370 of the with scheduled banks would also fall within the ambit of section 370 of the with scheduled banks would also fall within the ambit of section 370 of the Companies Act. Therefore, moneys given by the company to the other Therefore, moneys given by the company to the other bodies corporate is a loan within the meaning of section 370 of the bodies corporate is a loan within the meaning of section 370 of the bodies corporate is a loan within the meaning of section 370 of the Companies Act must be negatived. Therefore, the petitioners would well be Companies Act must be negatived. Therefore, the petitioners would well be Companies Act must be negatived. Therefore, the petitioners would well be entitled to the relief." entitled to the relief."

8.9 In distinguishing between a In distinguishing between a loan and a and a deposit, it is imperative to appreciate their essential legal characteristics. While imperative to appreciate their essential legal characteristics. While imperative to appreciate their essential legal characteristics. While both transactions involve the transfer of money and create a debtor- both transactions involve the transfer of money and create a debtor both transactions involve the transfer of money and create a debtor creditor relationship, the underlying intent and legal consequences creditor relationship, the underlying intent and legal consequences creditor relationship, the underlying intent and legal consequences diverge significantly. A loan is primarily a transaction initiated by diverge significantly. A is primarily a transaction initiated by the borrower, where the lender advances money for use by the the borrower, where the lender advances money for use by the the borrower, where the lender advances money for use by the borrower, typically with the expectation of repayment along with borrower, typically with the expectation of repayment along with borrower, typically with the expectation of repayment along with interest. The liability to repay a loan interest. The liability to repay a loan arises immediately upon arises immediately upon disbursal, and such lia , and such liability does not depend on any subsequent not depend on any subsequent demand being made by the lender. In other words, once the loan is being made by the lender. In other words, once the loan is being made by the lender. In other words, once the loan is given, the obligation to repay is activated and enforceable as per the given, the obligation to repay is activated and enforceable as per the given, the obligation to repay is activated and enforceable as per the agreed terms, whether or not the lender makes a formal demand. In agreed terms, whether or not the lender makes a formal demand. agreed terms, whether or not the lender makes a formal demand. contrast, a deposit is generally initiated by the depositor, who is generally initiated by the depositor, who entrusts money with the recipient entrusts money with the recipient — often for safekeeping, often for safekeeping, investment, or as a prerequisite for availing certain services. The investment, or as a prerequisite for availing certain services. The investment, or as a prerequisite for availing certain services. The obligation to repay the deposit does not arise immediately upon obligation to repay the deposit does not arise immediately upon obligation to repay the deposit does not arise immediately upon receipt of the money. Rather, it becomes due only upon the he money. Rather, it becomes due only upon the he money. Rather, it becomes due only upon the occurrence of a specified event or the expiry of a stipulated term. occurrence of a specified event or the expiry of a stipulated term occurrence of a specified event or the expiry of a stipulated term Until such time, the depositor does not have an immediate right to Until such time, the depositor does not have an immediate right to Until such time, the depositor does not have an immediate right to demand repayment, and the recipient is not under an immediate demand repayment, and the recipient is not under an immediate demand repayment, and the recipient is not under an immediate obligation to return the amount. This distinction is crucial, as it o return the amount. This distinction is crucial, as it o return the amount. This distinction is crucial, as it underscores that while a loan implies an immediate and absolute immediate and absolute underscores that while a loan implies an obligation to repay, a deposit entails a to repay, a deposit entails a contingent obligation contingent obligation which becomes enforceable only upon the satisfaction of agreed which becomes enforceable only upon the satisfaction of agreed which becomes enforceable only upon the satisfaction of agreed conditions.

8.10 We find that in instant case before us the assessee has not We find that in instant case before us the assessee has not We find that in instant case before us the assessee has not filed any evidence to support that transaction was in the nature of filed any evidence to support that transaction was in the nature of filed any evidence to support that transaction was in the nature of ICD. The assessee has not referred to notes to the account of the ICD. The assessee has not referred to notes to the account ICD. The assessee has not referred to notes to the account lender Company or documentations between parties, which could or documentations between parties, which could or documentations between parties, which could indicate that the amount in question was ICD. If the amount was in indicate that the amount in question was ICD. If the amount was in indicate that the amount in question was ICD. If the amount was in the nature of ICD, then the assessee should the nature of ICD, then the assessee should have made have made provision of interest on the same but no such detail of interest expenses on the interest on the same but no such detail of interest expenses on the interest on the same but no such detail of interest expenses on the said amount and any tax deducted on amount and any tax deducted on source (TDS) on said interest TDS) on said interest has been provided. Also no details repayment of has been provided. Also no details repayment of said ICD said ICD along with interest has been provided. interest has been provided.

8.11 The assessee has not explained why the payment was routed he assessee has not explained why the payment was routed he assessee has not explained why the payment was routed through M/s Darshan Impex through M/s Darshan Impex Pvt. Ltd. instead of being made Pvt. Ltd. instead of being made directly to M/s King Prawns Ltd. This directly to M/s King Prawns Ltd. This raises questions about the raises questions about the bonafides and necessity of the transaction. fides and necessity of the transaction. In our opinion, the In our opinion, the advance was mainly for the purpose advance was mainly for the purpose benefitting the assessee by way benefitting the assessee by way of securing investment of securing investment of assessee in M/s King Prawans P ltd assessee in M/s King Prawans P ltd. Accordingly, the assessee is not covered by the exceptions to Accordingly, the assessee is not covered by the exceptions to Accordingly, the assessee is not covered by the exceptions to deeming provisions of deeming provisions of deemed dividend. The grounds of appeal of deemed dividend. The grounds of appeal of the assessee are dismissed. the assessee are dismissed.

Order pronounced nced by way of display of result on notice by way of display of result on notice board under Rule 34(4) of the ITAT board under Rule 34(4) of the board under Rule 34(4) of the ITAT Rules, 1963 on ITAT Rules, 1963 on Rules, 1963 on 19/05/2025.