PCIT Vs Apeejay Pvt Ltd (Calcutta High Court)
In the case of PCIT vs. Apeejay Pvt Ltd, the Calcutta High Court upheld the decision of the Income Tax Appellate Tribunal (ITAT) regarding the taxation of deemed dividends under Section 2(22)(e) of the Income Tax Act, 1961. The revenue appealed against the ITAT’s ruling that such deemed dividends could only be taxed in the hands of registered or beneficial shareholders. The court dismissed the appeal, aligning with previous decisions of the Supreme Court and other High Courts, which consistently held that Section 2(22)(e) does not specify who should be taxed for deemed dividends. The court found no distinguishing features in the revenue’s arguments to deviate from established legal precedent. Consequently, the court ruled in favor of the assessee, affirming that deemed dividends are taxable only in the shareholders’ hands and not at the entity level.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
This appeal filed by the revenue under Section 260A of the Income Tax Act, 1961 (the Act) is directed against the order dated 10th August, 2023 passed by the Income Tax Appellate Tribunal, `A’ Bench, Kolkata in ITA No. 116/Kol/2023, for the assessment year 2013-14.
The revenue has raised the following substantial questions of law for consideration :
“Whether the Learned Income Tax Appellate Tribunal was justified in law to hold that the addition on account of deemed dividend under Section 2(22)(e) of Income Tax Act, 1961, could only be made in the hands of the registered/beneficial shareholders, ignoring the fact that the Section 2(22)(e) does not contain any such specific provision or restriction and nowhere provides as to who is to be taxed in respect of such income ?”
We have heard learned Counsel appearing for the parties.
