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| The Tax Publishers2020 TaxPub(DT) 0197 (Ahd-Trib) INCOME TAX ACT, 1961
Section 2(22)(e)
Where assessee received deposits from a company but it did not own any share of the said company, the said deposits was in the nature of inter-corporate deposits and the same could not be treated as deemed dividend and hence, the addition made on account of deemed dividend under section 2(22)(e) would not be sustainable.
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Dividend - Deemed dividend under section 2(22)(e) - Inter-corporate deposits received from an entity - Assessee was neither a registered shareholder nor a beneficial shareholder of such entity--Common shareholder in both the companies
AO found that assessee-company received a loan from an entity 'J', which attracted provisions of section 2(22)(e), as there was a common shareholder in both the companies having substantial interest. Accordingly, the AO made addition on account of deemed dividend under section 2(22)(e). Assessee contended that it was neither a registered shareholder nor a beneficial shareholder of the J. It further contended that the alleged amount received from J was simply in the nature of Inter corporate deposits (ICDs) and therefore, the same would not attract any provisions of section 2(22)(e). Held:The requisite condition for invoking section 2(22)(e) is that the payment must be by way of loan or advance. “Loans/Advances” carries different connotation than deposits in commercial parlance and the ICDs are ordinarily for an agreed period with an agreed interest. Hence, there is a clear distinction between ICDs vis-a-vis loans/advances and as the ICDs do not fall within the purview of section 2(22)(e). Therefore, there was no case of deemed dividend. Moreover, deemed dividend under section 2(22)(e) can be assessed only in hands of a person who is a shareholder of a lender company and not in the hands of a person other than a shareholder. Therefore, as assessee received deposits from a company but it did not own any share of the said company, the said deposits was in the nature of inter-corporate deposits and the same could not be treated as deemed dividend. Hence, the addition made on account of deemed dividend under section 2(22)(e) would not be sustainable.
REFERRED : CIT v. Impact Containers (P.) Ltd & Ors. (2014) 367 ITR 346 (Bom): 2014 TaxPub(DT) 3354 (Bom-HC), CIT v. Daisy Packers (P.) Ltd. (2013) 40 taxmann.com 480 (Guj): 2014 TaxPub(DT) 0479 (Guj-HC)
FAVOUR : In assessee's favour
A.Y. :
IN THE ITAT, AHMEDABAD BENCH
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