Ashwinikumar Ramkumar Poddar Vs ACIT (ITAT Pune)
ITAT Pune: Deemed Dividend Upheld, But AO Directed to Recompute After Interest Adjustment
The assessee, being a significant shareholder (>10%) in a closely held company, had a debit balance of ₹76.73 lakh in the company’s books, which was treated as deemed dividend under section 2(22)(e) due to availability of substantial accumulated profits. The CIT(A) upheld the addition, relying on Supreme Court rulings that taxability arises at the time of withdrawal, irrespective of duration or subsequent repayment.
Before the ITAT, the assessee argued that the debit balance existed only for a short period (about 8 days) and that there were overall credit balances on most days, on which interest was earned.
The Tribunal upheld the applicability of section 2(22)(e) and confirmed the addition in principle. However, it accepted the alternate contention that net debit balance should be recomputed after considering accrued interest on daily credit balances.
Accordingly, the matter was partly allowed, with direction to the AO to recompute the taxable deemed dividend after proper adjustment of interest on a day-to-day basis.
FULL TEXT OF THE ORDER OF ITAT PUNE
Both the above captioned appeals filed by the two different assessees are directed against the separate orders dated 28.10.2024 passed by Ld. CIT(A), Pune-11 [Id. CIT(A)’] for the assessment year 2021-22 respectively.
