Case Law Details
Apeejay Pvt. Ltd. Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that there is no finding that interest bearing funds have been applied for purpose of making investment. Further, on account of sufficient availability of interest free funds, interest disallowance under rule 8D(2)(ii) unjustified.
Facts- The assessee is a private limited company engaged in the business of operating business centres and letting out. Case selected for scrutiny through CASS followed by issuance of notice u/s. 143(2) and 142(1) of the Act. The major issues for consideration by AO were with regard to disallowance under Section 14A of the Act as well as deemed dividend u/s. 2 (22)(e) of the Act.
AO observed that during the year the assessee company had received a sum of Rs. 21,92,55,967/- from another group concerned Apeejay Tea Limited. AO further noticed that both the companies, namely, assessee company i.e., Apeejay Pvt. Ltd and Apeejay Tea Limited, have a common shareholder, namely, Kathua Steel Works Pvt. Ltd., holding shares at 58.64% in Apeejay Tea Limited and 99.96% in the assessee company.
Since accumulated profits for distribution in the books of Apeejay Tea Limited, were to the tune of Rs. 239.33 Crores, AO invoked the provisions of Section 2(22)(e) of the Act. Though the assessee stated that addition for deemed dividend can be made only in the hands of the shareholder and assessee not being a shareholder, addition for deemed dividend is uncalled for, but AO was not satisfied and he made the addition in the hands of the assessee as deemed dividend.
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