Inter-corporate Funding for Business Needs Cannot Trigger Deemed Dividend

Addpol Chemspecialities Private Limited Vs DCIT (ITAT Ahmedabad)

ITAT Ahmedabad deleted the addition of ₹16,00,000 made by AO as deemed dividend u/s 2(22)(e). Assessee had received a short-term loan from Monachem Additives Pvt Ltd, a sister concern. Director Shri Dilip G Shah held 87.7% in the lending company & 50% in the borrower company. AO treated the inter-corporate loan as deemed dividend merely because of common shareholding & also disallowed interest expenditure.

Tribunal held that 2(22)(e)

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