Tribunal rules transactions not deemed dividend under Income-tax Act, 1961

The Tribunal overturned the addition of Rs. 40,51,045 made under section 2(22)(e) of the Income-tax Act, 1961, stating that the transactions between the assessee and the company did not constitute deemed dividend as they were mutually beneficial and mainly advantageous to the company. The Tribunal ordered the deletion of the addition, allowing the appeal. The judgment was pronounced on 5th October 2020.

---

---

Issues:
Confirmation of addition under section 2(22)(e) of the Income-tax Act, 1961.

Analysis:
The appeal was against the addition of Rs. 40,51,045 made by the Assessing Officer under section 2(22)(e) of the Income-tax Act, 1961. The Assessing Officer observed that the assessee had taken a loan from a company, where he was a Director, and made the addition based on the company's surplus funds. The assessee argued that no loan was taken but temporary accommodation loans were given when needed. The CIT(A) affirmed the addition. The Tribunal analyzed the account between the assessee and the company, noting multiple transactions where the assessee advanced money to the company, resulting in a net debit balance. Citing relevant case laws, the Tribunal concluded that the transactions did not constitute deemed dividend under section 2(22)(e) as they were for mutual benefit, mainly advantageous to the company. The Tribunal overturned the addition, stating that the transactions did not fall within the ambit of section 2(22)(e) and ordered the deletion of the addition.

Judgment:
The Tribunal allowed the appeal, pronouncing the order on 5th October, 2020.

---