Tribunal rejects Revenue's appeal, upholds deletion of deemed dividend addition under Income Tax Act.

The Tribunal upheld the CIT(A)'s decision to delete an addition made under Section 2(22)(e) of the Income Tax Act, 1961, amounting to Rs. 53,29,843. The Tribunal found that the transactions between the assessee and the company were part of a running account involving salary payments in the ordinary course of business, not falling under the purview of deemed dividends. The appeal by the Revenue was dismissed, affirming the deletion of the addition.

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Issues Involved:
1. Deletion of addition on account of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961.

Detailed Analysis:

1. Deletion of Addition on Account of Deemed Dividend under Section 2(22)(e):

The Revenue appealed against the CIT(A)'s order which deleted an addition of Rs. 53,29,843/- made by the Assessing Officer (AO) under Section 2(22)(e) of the Income Tax Act, 1961, treating it as deemed dividend. The AO observed that the assessee, who is a director and substantial shareholder of M/s A.K.G. Industries Ltd., had received this amount from the company, and therefore, considered it as deemed dividend.

The CIT(A) deleted the addition, reasoning that the amount in question was part of a running account between the assessee and the company, primarily involving salary transactions. The CIT(A) noted that the assessee was drawing a salary of Rs. 7,50,000/- per month, which was credited to this account. The account was not a loan or advance but a salary account, and the debit balance arose due to salary adjustments. The CIT(A) emphasized that the provisions of Section 2(22)(e) do not apply to transactions in the ordinary course of business between an employer and employee.

The CIT(A) supported this view by referring to judgments from the Delhi High Court in CIT Vs. Raj Kumar and CIT Vs. Creative Dyeing and Printing Pvt. Ltd., which held that amounts received as advances against future supplies or salaries in the ordinary course of business are not deemed dividends under Section 2(22)(e).

The Revenue argued that any money received from a company where the assessee has a substantial interest should be treated as deemed dividend under Section 2(22)(e). However, the assessee's counsel contended that the transactions were in the nature of a current account involving continuous salary and advance salary payments, which were part of the ordinary course of business, and hence, not deemed dividends.

The Tribunal, after reviewing the ledger account and the continuous transactions between the assessee and the company, concluded that the account was indeed a current account. The Tribunal observed that the transactions were in the ordinary course of business, and the salary payable was credited to this account. The Tribunal relied on several judgments, including CIT Vs. Raj Kumar and CIT Vs. Creative Dyeing and Printing (P.) Ltd., which supported the view that such transactions do not fall under the purview of deemed dividend.

The Tribunal upheld the CIT(A)'s decision, stating that the reasoning adopted by the CIT(A) was consistent with the judicial precedents. Consequently, the appeal filed by the Revenue was dismissed, and the deletion of the addition of Rs. 53,29,843/- was affirmed.

Conclusion:
The appeal by the Revenue was dismissed, and the Tribunal upheld the CIT(A)'s order deleting the addition made under Section 2(22)(e) of the Income Tax Act, 1961, on the grounds that the transactions were part of a running account involving salary payments in the ordinary course of business, and hence, not deemed dividends.

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