2016 (7) TMI 1345 - HC - Income Tax

Court affirms ITAT decision on intercorporate deposit vs. deemed dividend under Income Tax Act

The High Court upheld the ITAT decision in a tax appeal concerning the interpretation of section 2(22)(e) of the Income Tax Act. The Court affirmed that a ... Deemed dividend addition u/s 2(22)(e) - percentage of share holding - ITAT deleted the addition - Held that:- The Tribunal has relied on the judgement in case of Commissioner of Income tax v. Daisy Packers (P) Ltd.[2015 (7) TMI 253 - GUJARAT HIGH COURT] wherein held held that if the assessee company does not hold a share in other company from which it had received deposit then it cannot be treated tobe a deemed dividend under Section 2(22)(e)of the Act. In view of this admitted position that assessee is not a shareholder in Amigo Brushes Pvt. Ltd. and therefore, the deposit received by the assessee of ₹ 25 lacs from Amigo Brushes Pvt Ltd. was an inter-corporate deposit and not a deemed dividend and, therefore, though this aspect has not been considered by the Tribunal but since the order of the Tribunal can be supported by another legal reason on the admitted facts, we need not send the matter back. - . Since there is no distinction on facts, we follow the said decision and dismiss this tax appeal. - Decided in favour of assessee. Issues:- Interpretation of section 2(22)(e) of the Income Tax Act- Correctness of the ITAT decision in deleting the addition made by the Assessing OfficerInterpretation of section 2(22)(e) of the Income Tax Act:The case involved an appeal against the judgment of the Income Tax Appellate Tribunal regarding the interpretation of section 2(22)(e) of the Income Tax Act. The Tribunal had relied on a previous judgment in the case of Commissioner of Income tax v. Daisy Packers (P) Ltd. In this case, it was established that if an assessee company does not hold a share in another company from which it received a deposit, then the deposit cannot be treated as a deemed dividend under section 2(22)(e) of the Act. The Tribunal concluded that the deposit received by the assessee was an intercorporate deposit and not a deemed dividend. The High Court, finding no distinction on facts, followed the previous decision and dismissed the tax appeal based on the established legal principles.Correctness of the ITAT decision in deleting the addition made by the Assessing Officer:The primary issue in the appeal was whether the ITAT was correct in law in deleting the addition made by the Assessing Officer in the hands of the assessee company under section 2(22)(e) of the Income Tax Act. The Tribunal's decision was based on the interpretation of the provisions of section 2(22)(e) and the specific facts of the case. The High Court, after considering the legal principles laid down in previous judgments and finding no distinction in the facts of the present case, upheld the ITAT decision and dismissed the tax appeal. The Court's decision was in line with established legal precedents and the specific interpretation of the provisions of section 2(22)(e) of the Income Tax Act as applied to the case at hand.