INCOME TAX ACT, 1961

Section 2(22)(e)

Dividend - Deemed dividend under section 2(22)(e) - Loan given by a private limited company to assessee -

Assessee received a sum from a company in which he was a director, which, in opinion of AO, was violation of the provisions of section 2(22)(e). AO observed, on the basis of proceedings before ADIT(Investigation) where the statement of assessee was recorded on oath that assessee borrowed a sum from a Private Limited company, where he was a director. On being called as to why he did not include such amount as his income under section 2(22)(e), assessee submitted that the money received from the company was on account of imprest or advance of salary, which was repaid subsequently. AO did not accept assessee's contention and therefore, made addition. Held: AO found accumulated profits of the company to be much in excess of being the amount of loan given by the company to assessee. The provisions of section 2(22)(e) in such circumstances, were obviously attracted. Assessee had tried to make out a case before the authorities that the said amount was received as advance or an imprest. CIT(A) had elaborately dealt with such contentions by giving dates on which small amounts of imprest were received by assessee. Salary received by assessee from the company was different from such amount as received by the assessee. Section 2(22)(e) is magnetized on a shareholder receiving loan or advance from a company even though ultimately the amount stands adjusted at the end of the year. Therefore, provisions of section 2(22)(e) were attracted.

Followed:Miss. P. Sarada v. CIT (1998) 229 ITR 444 (SC) : 1998 TaxPub(DT) 1048 (SC)

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2010-11

INCOME TAX ACT, 1961

Section 148

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