Case Law Details
DCIT Vs Eko Diagnostic Pvt. Ltd. (ITAT Kolkata)
Introduction: The case of DCIT Vs Eko Diagnostic Pvt. Ltd. revolves around the applicability of Section 2(22)(e) of the Income Tax Act to non-beneficiary shareholders in companies receiving loans. The dispute arose from the assessment for the Assessment Year 2013-14, where the Assessing Officer invoked Section 2(22)(e) to tax a loan received by the assessee from Calcutta Medical Imaging Institute Ltd.
Detailed Analysis: The crux of the matter lies in whether the assessee, not being a shareholder in the lending company, could be subjected to the provisions of Section 2(22)(e). The Assessing Officer contended that since a common shareholder existed between the assessee company and the lending company, the provisions of deemed dividend should apply. However, the Commissioner of Income Tax (Appeals) (CIT(A)) ruled in favor of the assessee, citing precedents and the absence of beneficial shareholding.
The Tribunal examined past rulings, including the assessee’s own cases for previous assessment years, and upheld the CIT(A)’s decision. It emphasized that the essence of Section 2(22)(e) is the status of the recipient as a shareholder in the lending company. Since the assessee lacked such shareholding, the loan transaction couldn’t be deemed as a dividend.
Another contentious issue revolved around the disallowance of commission paid to doctors. The Assessing Officer treated these payments as commission for patient referrals, disallowing them under Section 37(1) of the Income Tax Act. However, the CIT(A) overturned this decision, acknowledging the genuine nature of the consultancy fees paid to expert doctors for diagnostic reports.
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