INCOME TAX ACT, 1961

Section 2(22)(e)

Dividend - Deemed dividend under section 2(22)(e) - Receipt of loan/advance pleaded to be in the nature of inter corporate deposit without any corroborative evidence -

Assessee-company being beneficial owner of 50% shares in M/s. Dhariya Infrastructure Development (P) Ltd. received Rs. 2 crores from said company. AO treated said amount as loan/advance and accordingly taxable as deemed dividend under section 2(22)(e). Assessee pleaded said amount to be in the nature of inter-corporate deposit.Held: It was essential for the amount given as 'Inter Corporate Deposits', there should be voluntariness emanating from lender to give the amount to assessee and not from assessee. In the instant case, there being common Managing Director, amount was being transferred as and when there was requirement of fund by assessee from the account of M/s. Dhariya Infrastructure Development (P) Ltd. and thereafter returned back by the assessee to the lender. Hence element of voluntariness was missing in the conduct of parties. Also, assessee had not placed on record any document or agreement inviting deposit and nothing was available to infer the intention of parties to give ICD like agreement and Board resolution,etc. Merely by mentioning in the ledger account, that it was “Inter Corporate Deposit”, the nature and colour of transaction would not change to “Inter Corporate Deposit”, as it continued to be loan/advances was hence required to be taxed for the purposes of deemed dividend.

Relied:Durga Prasad Mandelia v. Registrar of Companies (1987) 61 Comp. Cas. 479 (Bom) : 1987 TaxPub(CL) 19 (Bom) and KIIC Investment Co. (2019) 101 Taxmann.com 19 (Mum-Trib.) : 2018 TaxPub(DT) 8061 (Mum-Trib).

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2012-13

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