Case Law Details
section 2(22)(e) of the Act was inserted to bring within the purview of taxation those amounts which are actually a distribution of profits but are disbursed as a loan so that tax thereon can be avoided. It is pertinent to note here 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. In the instant case the company benefits from the said transaction, it will take the character of a commercial transaction and hence will not qualify to be dividend. Now 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.
Amount advanced to the assessee company by another company having common directors not being a loan but an advance for business transaction which is to be adjusted against the moneys payable by the latter to the assessee company in the subsequent years, same did not fall within the definition of deemed dividend under s. 2(22)(e).
RELEVANT EXTRACT OF THE JUDGMENT
5. We have heard the submission of Ld. AR and have carefully perused the material available on record. We find that as rightly pointed out by the Ld. AR that this Tribunal had quashed the revision order u/s. 263 of the Act in ITA No.547/Kol/2011 dated 07.20 16 wherein additions contemplated were discussed in detail. The operative portion of the said Tribunal order are reproduced hereunder:
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