2026 (4) TMI 1490

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.... (i) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the advance of Rs. 8,32,31,520/- received by the assessee from its sister concern in which the Directors of the assessee company were substantially interested would not amount to deemed dividend within the meaning of Section 2(22)(e) of the Act? (ii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that such advances could not be treated as loan/advance within the meaning of section 2(22){e) on the ground that they were made in the ordinary course of business, without appreciating that there was no such exclusion from the meaning of "advance" occurr....

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....te order to the effect that the amounts in question had been advanced by CSS to the assessee towards software testing and development and had subsequently been adjusted against bills raised by the assessee. Hence, and as such mutual payments constituted normal incidents of business, the finding of fact is that the payments were towards pure business / trading transactions, and the provisions of Section 2(22)(e) of the Act would not stand attracted. 6. Aggrieved by the aforesaid order, an appeal was filed by the Revenue before the Income-Tax Appellate Tribunal (Tribunal / ITAT), which confirmed the order of the CIT (Appeals) finding support from the decision of the Bombay High Court in the case of CIT v Universal Medicare Pvt Ltd [324 ITR....

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....ned finality, and the Circular is extracted below:- Circular No.19/2017 [F.No.279/MISC./140/2015/ITJ] dated 12.06.2017 Section 2(22) clause (e) of the Income Tax Act, 1961 (the Act) provides that "dividend" includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to....