Anang Kunjviharibhai Shah Vs ITO (ITAT Ahmedabad)
The ITAT, Ahmedabad Bench held that repayment/withdrawal of a shareholder’s own deposit lying with the company cannot be treated as deemed dividend u/s 2(22)(e). In this case (AY 2015-16), the assessee—Managing Director holding 57% shares—had a credit balance of ₹4.04 crore in his deposit account with the company. On his instructions, the company paid ₹25 lakh towards political donation by debiting the assessee’s deposit account.
The AO and CIT(A) treated the payment as deemed dividend, alleging that the assessee derived individual benefit by claiming deduction u/s 80GGC. The Tribunal rejected this approach and held that section 2(22)(e) triggers only when the company gives a loan/advance or confers a benefit out of its own funds. Here, the transaction merely reduced the assessee’s own credit balance; at no point did the account turn debit, and no funds flowed from the company to the shareholder.
The Bench clarified that “payment on behalf of shareholder” presupposes use of company’s money, which was absent in the present case. Since the assessee was only withdrawing his own deposit, the basic condition of deemed dividend failed.
Accordingly, the addition of ₹25 lakh u/s 2(22)(e) was deleted, and the assessee’s appeal was allowed in full
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
