Case Law Details
DCIT Vs Svarna Infrastructure & Builders Pvt. Ltd. (ITAT Kolkata)
The issue under consideration is whether the receipt of advance vis-a-vis no accumulated profit in case of lending company is considered as deemed dividend u/s 2(22)(e)?
ITAT states that when dividends are declared by a company, it is solely the shareholders who benefit from the transaction. No benefits accrue to the company by way of dividend distribution. Thus, section 2(22)(e) of the Act covers only such situations, where the shareholder alone benefits from the loan transaction, because if the company also benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. In the case of the assessee, by giving and taking financial assistance from each other. both the assessee and the company were benefited and such transactions between them were nothing but commercial transactions and dividend attributable to the shareholder is nothing to do with such business transaction. From the above discussions it can be said that sec.2(22)(e) of the Act covers only those transactions which benefit the shareholder alone and results in no benefit to the company. On the other hand, if the transaction is mutual by which both sides are benefited, it is undoubtedly outside the purview of provisions of sec. 2(22)(e) of the Act. From the above, it is clear that the loan account differs from current account and the provisions of section 2(22](e] of the Act, being a deeming section, cannot be applied to current account. In such circumstances, ITAT delete the addition and this common issue of assessee’s appeals is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The captioned appeal filed by the Revenue and the cross objection filed by the assessee, pertaining to assessment year 2012-13, are directed against the order passed by the Commissioner of Income Tax (Appeal)-4, Kolkata, in appeal no. 39/CIT(A)-4/2015-16/Kol, which in turn arises out of an assessment order passed by the Assessing Officer u/s143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 09/03/2015.
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