Case Law Details
Microfinish Valves Private Limited Vs ACIT (ITAT Bengalore)
No deemed dividend u/s 2(22)(e) in case loan to borrower not being shareholder in lender company
Conclusion: Since assessee was not a shareholder in lender company, therefore, AO was unjustified in taxing loan received by assessee as deemed dividend under section 2(22)(e).
Held: Assessee was a company engaged in the business of manufacture of valves. It borrowed a certain sum from M/s. MPPL. AO noticed that there were common directors in both assessee company and MPPL and therefore the borrowed sum received as advance from MPPL was liable to be added as deemed dividend u/s. 2(22)(e) in the hands of the assessee company. It was held deemed dividend under section 2(22)(e) could be assessed only in the hands of a person who was a shareholder of lender company and not in the hands of a person other than a shareholder. As assessee in the present case was not a shareholder in lender company, therefore, AO was unjustified in taxing loan received by assessee as deemed dividend under section 2(22)(e).
FULL TEXT OF THE ITAT JUDGEMENT
Please become a Premium member. If you are already a Premium member, login here to access the full content.
