INCOME TAX ACT, 1961

Section 2(22)(e)

Dividend - Deemed dividend under section 2(22)(e) - Loan/advance made to non-member -

Assessee's case was selected for scrutiny and a notice under section 143(2) was issued. Thereafter, a notice under section 142(1) along with a questionnaire was issued. Assessee, through their authorized representative, cooperated with the assessment proceedings. Major assessment being that loan was held to be deemed dividend under section 2(22)(e) and a disallowance was made. Held: As decided in M/s. T. Abdul Wahid & Co. [TCA.Nos.512 & 513 of 2018 dated 21-9-2020] section 2(22)(e) provision would stand attracted when a payment is made by a company, in which public were not substantially interested by way of advance or loan to a share holder, being a person who is the beneficial owner of the shares. It was clear that the payment was made to assessee, a partnership firm and it was not a shareholder in the company. The records placed before AO clearly shows the nature of transaction between the firm and the company and it was neither a loan nor an advance, but a deferred liability. These facts have been noted by AO. In such circumstances, appeal of Revenue was dismissed.

Followed:M/s. T. Abdul Wahid & Co. [TCA.Nos.512 & 513 of 2018 dated 21-9-2020]

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2013-14

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