The Tax Publishers2020 TaxPub(DT) 4315 (Mum-Trib)

INCOME TAX ACT, 1961

Section 2(22)(e)

Transactions in the nature of current account between group concerns, could not be subjected to tax under section 2(22)(e).

Dividend - Deemed dividend under section 2(22)(e) - Receipt of money from group companies - Business expediency

AO noticed that assessee had received loans from sister concerns under the same management having common shareholders. AO also noted that lending companies had also accumulated profit. Accordingly, AO treated amount received by assessee as deemed dividend under section 2(22)(e).Held: Funds were diverted from group companies to another group company, i.e., assessee, for importing the products for trading purposes in order to realize higher profits and the funds were received on short-term basis depending on business requirements. Money borrowed was repaid during the year itself and nothing was outstanding at the year end. Thus, it could be reasonably presumed that funds were moved from one company to another which are under the same management and the purpose was to deploy the funds more efficiently and profitably and thus, there existed a business and commercial expediency for the same. The transactions being in the nature of current account between group concerns could not be treated as deemed dividend under section 2(22)(e).

Supported by:Chandrashekhar Maruti v. Asstt. CIT ITA No. 5410/Mum/2012 : 47 CCH 0783 : 183 TTJ 459 and Ackruti City Ltd. v. DCIT [ITA No. 4869/Mum/2009]. Distinguished:Gopal and Sons (HUF) v. CIT Kolkata- XI (Civil Appeal No. 12274 of 2016].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12


INCOME TAX ACT, 1961

Section 36(1)(iii)

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