DCIT Vs Heilgers Development & Construction Company Pvt. Ltd (ITAT Kolkata)
The loan amounts in question treated as deemed dividend u/s 2(22)(e) by the AO were taken by the assessee-company from the three concerns on interest and since the said lending companies were compensated by interest paid by the assessee-company on the loans, the assessee-company in real sense did not derive any benefit from the said loans so as to attract the provisions of section 2(22)(e). It is noted that this contention raised on behalf of the assessee-company is duly supported by the decision of Hon’ble Calcutta High Court in the case of Pradip Kumar Malhotra vs CIT reported in 338 ITR 538 (Cal) wherein it was held that the phrase “by way of advance or loan” appearing to sub-clause (e) of section 2(22) must be construed to mean those advances or loans which a shareholder enjoys for simply on account of being a beneficial owner of shares, but if such loan or advance is given to such shareholder as a consequence of any further consideration, which is beneficial to the company, received from such shareholder, in such case, such advance or loan cannot be said to be deemed dividend within the meaning of section 2(22)(e). It was held that gratuitous loan or advance given by a company to those classes of shareholder thus would come within the purview of section 2(22)(e) and not the cases where loans or advances given in return to an advantage conferred upon the company by such shareholder. In the present case, the entire amount in question was taken by the assessee-company on interest and since the interest on the said loan was duly paid by the assessee-company after deducting tax at source, we find no infirmity in the impugned orders of the Ld. CIT(A) in deleting the addition made by the AO treating the said amount as deemed dividend under section 2(22)(e) by relying on the decision of Hon’ble Jurisdictional High Court in the case of Pradip Kumar Malhotra (supra). The same are therefore upheld and both the appeals of the Revenue are dismissed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These two appeals are preferred by the Revenue against two separate orders passed by the Ld. CIT(A) – 4, Kolkata dated 15.02.20219 and 15.03.2019 for A.Y. 2015-16 & 2016-17 respectively and since a common issue is involved therein, the same have been heard together and are being disposed of by a single consolidated order.
2. The solitary common issue involved in these appeals of the Revenue relates to the deletion by the Ld. CIT(A) of the additions made by the AO on account of deemed dividend u/s 2(22)(e) of the Income Tax Act, 1961.
3. The assessee in the present case is a company which is engaged in the business of property development. The returns of income for both the years under consideration were filed by it on 28.09.2015 & 30.09.2019 declaring losses of Rs. 2,00,75,757/- & Rs. 1,57,35,156/-for A.Y. 2015-16 & 2016-17 respectively. During the course of assessment proceedings, it was noticed by the AO that the assessee company has taken the following loans during the years under consideration:
