Case Law Details
Archana Sharma Vs DCIT (ITAT Delhi)
Held that if a loan or advance is given to a shareholder as a consequence of any consideration which is beneficial to the company, in such a case, the advance or loan cannot be said to be a deemed dividend.
Facts- During the course of assessment proceedings, AO noticed that assessee had purchased a property for Rs.3,60,00,000/- for the purpose of expansion of Ganesh Hospital Pvt. Ltd. of which the assessee was a promoter. AO noted that assessee had made aggregate payment of Rs.73,70,000/- to Shri Chander Prakash Bagai for purchase of adjacent old residential house in her own name but the payment was made through the bank account of Ganesh Hospital Pvt. Ltd. Before AO, assessee submitted that the hospital wanted to purchase adjacent residential house for its own use but due to the area being residential, assessee was forced to purchase the house in her own name, but since the property was for the purpose of the company, the payment was made through Ganesh Hospital Pvt. Ltd. It was thus contended that the transaction does not attract the provisions of s. 2(22)(e) of the Act. The submissions of the assessee were not found acceptable to AO. AO noted that assessee did not furnish any proof to support the claim that they had tried to get property converted for commercial use. AO was of the view that transaction attracted the provision of Section 2(22)(e) of the Act.
Conclusion- Hon’ble Calcutta High Court in the case of Pradip Kumar Malhotra (2011) 338 ITR 538, while dealing with clause (e) of section 2(22) of the Act has held that if loan or advance is given to a shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to a deemed dividend within the meaning of the Act. It has further held that gratuitous loan or advance given by a company to those classes of shareholders would come within the purview of Section 2(22) but not cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder.
FULL TEXT OF THE ORDER OF ITAT DELHI
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