Travel Agency Transactions Cleared: Legitimate Business Dealings Not Deemed Dividend Under Section 2(22)(e)

HC affirmed Tribunal's ruling that financial transactions between a travel agency and two tourism companies did not constitute deemed dividend under section 2(22)(e) of Income-tax Act. The court found the transactions were legitimate business dealings, not loans or advances, and therefore did not trigger deemed dividend provisions. Appeal by Revenue was dismissed.

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The Delhi High Court, in affirming the Income-tax Appellate Tribunal's decision, addressed the applicability of "deemed dividend" under section 2(22)(e) of the Income-tax Act, 1961, for the assessment year 1998-99. The Assessing Officer had classified certain financial transactions between the assessee (a travel agency) and two tourism-related companies as deemed dividends, a view upheld by the Commissioner of Income-tax (Appeals). However, the Tribunal found these transactions to be "normal business transactions" rather than "advances or loans," which are distinct financial categories triggering section 2(22)(e). The High Court agreed, emphasizing that the transactions were part of routine business dealings involving booking resorts and thus "cannot in any circumstances be treated as loans or advances." The Court held that the Tribunal's order "does not suffer from any error of law" and concluded that "no substantial question of law arises," dismissing the Revenue's appeal.

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