Sri Haris Kalandan Mohammed Vs DCIT (ITAT Bangalore)
Honourable Bangalore Bench of ITAT in its recent decision held that deemed dividend u/s 2(22)(e) cannot be assessed unless assessee has received any direct benefit from the loan or advance or payment made by the company. The Tribunal held that “double deeming” or “fiction on fiction” is not allowed as per the settled position of law. Legal fictions are only for a definite purpose & should not be extended beyond that legitimate field that as held, inter alia, in the Apex Court’s decision in CIT Vs. Mother India Refrigeration Industries P. Ltd. SC-155 ITR 711, CIT Vs. Amarchand N. Shroff and Bengal Immunity Co. Ltd. vs. State of Bihar. Section 2(22)(e) is a charging section and should be strictly interpreted. The deeming fiction created for a specific purpose cannot be infused for another application unless and until it is specifically provided in the Act. Double deeming is not permitted in law. It is not permissible to subjoin or track a fiction upon fiction and to impose supposition on a supposition of law. The deemed provision fictionally creates certain kinds of receipts as dividends, is to be given strict interpretation. It follows that unless all the conditions contained in the said provision are fulfilled, the receipt cannot be deemed as dividends. Further, in case of doubt or where two views are possible, benefit shall accrue in favour of the assessee. The Tribunal also held that even though any loan or advance or payment has indirectly benefited the assessee, the same will not attract the provisions of section 2(22)(e) of the Act as the provisions does not speak about such indirect benefit to the share holder. The provisions of section 2(22)(e) of the Act covers direct benefit received by the share holder from any payment made by the company and deems it as deemed dividend.
