INCOME TAX ACT, 1961

Section 2(22)(e)

Dividend - Deemed dividend under section 2(22)(e) - Assessee received loan from company in which he was director and was holding equity shares - Assessee was paying interest on loan

Assessee during year under consideration took a loan from a company 'S', in which he was director and also holding 11.61% of equity shares. AO was of the view that such advance received by the assessee amounted to deemed dividend under provision of section 2(22)(e). Assessee contended that the provisions of section 2(22)(e) would not apply in his case as he was paying interest on the said loan. Held: It was found that assessee was paying interest on the money borrowed from the company 'S'. Such fact could be established from the details such as TDS certificate issued by the assessee to the company for deduction of TDS on payment of interest. Further, there was also ledger account of the assessee in the books of the company showing amount of interest received from the assessee. Thus, there remained no dispute that the assessee incurred interest expenses on the money borrowed from the company. Accordingly, there was no benefit derived by the assessee from such company on the money borrowed by him. Hence, the said transaction was outside of the purview of deemed dividend as envisaged under the provisions of section 2(22)(e).

Followed:Mohan Bhagwatprasad Agrawal v. Dy. CIT 2019 TaxPub(DT) 4272 (Ahd-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14

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