Raj Kumar Gupta vs Cit
2012 Latest Caselaw 2221 Del

$~29 to 31

*              IN THE HIGH COURT OF DELHI AT NEW DELHI


%                                     Date of Decision : 30th March, 2012.

+       ITA 224/2012
+       ITA 225/2012
+       ITA 226/2012

        RAJ KUMAR GUPTA                       ..... Appellant
                    Through Dr. Rakesh Gupta with Ms. Rani
                    Kiyala, Advs.

                         versus

        CIT                                          ..... Respondent
                                 Through Mr. Kamal Sawhney, sr. standing
                                 counsel


CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V. EASWAR

SANJIV KHANNA,J: (ORAL)


        These three appeals by the assessee, which pertains to

assessment years 2000-01, 2002-03 and 2004-05 impugn order

dated 16.9.2011 passed by the Income Tax Appellate Tribunal




ITA Nos.224, 225 & 226 of 2012                              Page 1 of 4
 (Tribunal, for short). The three authorities including the Tribunal

have given concurrent finding that Section 2(22)(e) of the Act were

attracted on the loans of `7,91,000/-, `7,82,100/- and `14,50,000/-

advanced in AYs 2000-01, 2002-03 and 2004-05 respectively by A

M Overseas Pvt. Ltd. to sole proprietorship of the assessee, Asha

Ram Mukand Lal and A M Exports. It is not in dispute that the

appellant-assessee had 20.56% shareholding in A M Overseas

Pvt. Ltd.


        The appellant-assessee had before the Tribunal for the first

time raised a contention relying upon Clause (ii) to Section 2(22)(e)

and had submitted that the advance or loan given to the

shareholder was in normal course of business, where lending of

money was substantial part of business of the company.              The

Tribunal has rejected the said contention in view of the factual

matrix noticed by them, which reads as under :


        "The plain reading of clause (ii) of section 2(22)(e) of
        the Act shows that any advance or loan made by a
        company to a shareholder or a concern in which the
        shareholder has a substantial interest would not be



ITA Nos.224, 225 & 226 of 2012                        Page 2 of 4
         regarded as divided (sic.) if the advance or loan was
        made by the lending company, if two conditions are
        satisfied, namely, (i) that the loan or advance was
        made by lending company in the ordinary course of
        business; (ii) lending of money is a substantial part of
        the business of the lending company. Thus, the
        conditions are that the loan and advance must be by
        the lending company in the ordinary course of its
        money lending business and this business should be
        substantial part of business. Loans to assessee are
        also interest free. In this case, most of the advances
        have been given interest free. The interest free loans
        and advances cannot be said to be made in ordinary
        course of money lending business. Net interest income
        and loan and advances at the end of relevant F.Y. were
        as under :-
        F.Y.             Loan & Advance     Net Interest Income
        2000-01          Rs.4,99,82,880/-   Rs.7,68,190/-
                         (20 parties)

        2002-03          Rs.2,09,55,291/-   Rs.1,20,000/-
                         (24 parties)

        2004-05          Rs.3,09,88,434/-   Rs.15,521/-
                         (27 parties)

        It shows that most of advances were not earning
        interest to the assessee, only few advances were
        earning interest. Although substantial portion of assets
        of company has been deployed towards the loans and
        advances however, the majority of the advances made
        by M/s. A.M. Overseas Pvt. Ltd. were interest free.
        Granting loan and advance for no interest cannot be
        regarded as a part of money lending business.
        Moreover, the documents show that M/s A.M. Overseas



ITA Nos.224, 225 & 226 of 2012                        Page 3 of 4
         Pvt. Ltd. was doing the business of import and export
        and it was a recognized export house. The interest free
        loan and advances made to the group concerns or
        sister concerns or related parties cannot be termed as
        a business of lending money. No business can be
        carried out without the intention of profit or earning. In
        cases relied upon by the assessee, cited supra, the
        loan and advances were interest bearing. In this case,
        the loan and advances made to the assessee were
        interest free. Therefore, in our considered view, these
        advances or loan received by the assessee in its
        proprietorship concerns are not made by the lending
        company in the ordinary course of money lending
        business. Since the conditions as laid down by the
        provisions of clause (ii) of section 2(22)(e) are not
        satisfied, therefore, we find no fault in the order of CIT
        (A). In view of these facts, we uphold the order of the
        authorities below and dismiss all these three appeals."


        In view of the factual findings recorded by the Tribunal, we do

not find any substantial question of law arises for our consideration.


        The appeals are dismissed. No costs.




                                            SANJIV KHANNA, J.

R.V.EASWAR, J. MARCH 30, 2012/vld