Deemed dividend treatment applies to shareholder loans despite interest or repayment when section 2(22)(e) conditions are met.

A loan advanced by a closely held company to its shareholder is treated as deemed dividend under section 2(22)(e) when the statutory conditions are satisfied. Its interest-bearing character or later repayment does not, by itself, take the advance outside the provision. The decision in Pradip Kumar Malhotra was treated as fact-specific and not controlling, while Smt. Tarulata Shyam was applied for the principle that the statutory language admits no equitable exception once the conditions exist. An agreed assessment does not create estoppel in law, but the operative question remains the statutory applicability of section 2(22)(e).

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Issues: Whether the loan advanced by the closely held company to the assessee shareholder was liable to be treated as deemed dividend under section 2(22)(e) of the Income-tax Act, 1961 notwithstanding its interest-bearing nature and subsequent repayment.

Analysis: The amount advanced by a closely held company to a shareholder falls within the statutory fiction of deemed dividend when the conditions of section 2(22)(e) are satisfied. The fact that the advance carried interest or was later repaid does not, by itself, take the case outside the statutory provision. The decision in Pradip Kumar Malhotra was held to be fact-specific and inapplicable, while the principle laid down by the Supreme Court in Smt. Tarulata Shyam was applied to hold that the language of the provision admits of no equitable exception once the statutory conditions exist. The Court also noted that an agreed assessment does not create an estoppel in law, but the decisive issue remained the statutory applicability of section 2(22)(e).

Conclusion: The amount of Rs. 1,50,00,000/- was correctly treated as deemed dividend under section 2(22)(e), and the addition was upheld against the assessee.

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