Running current account receipts not deemed dividend where dealings are not a pure loan account.

Transactions reflected a running current account with frequent receipts and payments, not a pure loan account, so the receipt was not treated as deemed dividend under section 2(22)(e) of the Income-tax Act, 1961. The same pattern of dealings had already been held outside section 2(22)(e) in the assessee's earlier year, and no distinguishing facts or contrary binding authority were shown. On that basis, the addition was held unsustainable and was deleted.

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Issues: Whether the amount of Rs. 26,60,211 received in the course of transactions between the assessee and its subsidiary/related company was liable to be taxed as deemed dividend under section 2(22)(e) of the Income-tax Act, 1961.

Analysis: The transactions were found to be part of a running account with frequent receipts and payments, and the ledger reflected a current account relationship rather than a pure loan account. The issue was identical to the assessee's own case for the earlier assessment year, where the same kind of transactions had been held not to attract section 2(22)(e). In the absence of any distinguishing facts or contrary binding authority, the same view was followed.

Conclusion: The addition under section 2(22)(e) was not sustainable and was directed to be deleted. The issue was decided in favour of the assessee.

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