DCIT Vs Uniparts India Ltd (ITAT Delhi)
ITAT Delhi held that expense incurred by holding company on behalf of subsidiary company which is not in the nature of loan cannot be treated as deemed dividend u/s. 2(22)(e) of the Income Tax Act.
Facts- During assessment proceedings, Assessing Officer observed that assessee has received a loan of Rs.6,43,40,824/- from Gripwel Fasteners Pvt. Ltd. (GFPL) during the year. As per the balance sheet of the assessee under Note 12 Non-current Investment, GFPL is mentioned as a wholly owned subsidiary of the assessee. AO observed that a substantial shareholding to the extent of 70.79% are in the hands of four individuals belonging to one family and also rejected the free transfer of shares claimed by the assessee by referring to the Article of Association of the company which revealed that any allotment of shares are transferred thereof is at the discretion of the Board of Directors. Thus, AO made the addition as deemed dividend in the hands of the assessee.
CIT(A) deleted the addition. Being aggrieved, revenue has preferred the present appeal.
Conclusion- Held that GFPL is the wholly owned subsidiary company of the assessee and the Assessing Officer observed that the assessee has taken certain loan from them and considering the fact that it is a wholly owned subsidiary, he treated the transaction as deemed dividend u/s 2 (22)(e) of the Act. However, we observed from the ledger copy submitted before us which shows that assessee has taken certain advances from the company and incurs certain expenditure on behalf of them which basically relates to travelling, conveyance expenditure and certain expenditure incurred on behalf of them. As per the transactions involved between these two entities, it does not give any impression that it is a loan transaction. More or less, the details of transactions show that it is only a revenue expenditure and transactions are seemed to be current transactions. Therefore, we are inclined to agree with the findings of ld. CIT (A) and ground raised by the Revenue is dismissed.
