TaxTMI 
TaxTMI 
2026 (6) TMI 1403
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....ibunal has erred in law and on facts in holding that provisions of section 2(22)(e) of the Act are not attracted in this case?" [C] "Whether the Appellate Tribunal has erred in law and on facts in holding that there was no benefit extended by M/s Shreem Design Infrastructure Pvt. Ltd. to the assessee and transactions are outside the purview of the provisions of deemed dividend?" 3. Brief facts of the case are that the assessee is an individual, engaged in the business of consulting engineer in a proprietary concern. The assessee during the year under consideration had accepted loan for Rs. 2,62,31,369/- from M/s Shreem Design & Infrastructure Pvt Ltd. (for short 'SDIPL') in which he is director and also holding 11.61% of equity share. 4. The Assessing Officer was of the view that such advance for Rs. 2,62,31,369/- amounted to deemed dividend under the provision of section 2(22)(e) of the Act and proposed addition to the declared income. However, the AO observed that the total accumulated profit of the lender is amounting to Rs. 1,71,13,533/- only. Accordingly, the AO proposed the addition of Rs. 1,71,13,533/- under section 2(22)(e) of the Act. The assessee in respons....
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....wing the amount of interest received from the assessee by the company which is placed on pages 30 to 38 of the paper book. 8.2 In view of the above, there remains no dispute that the assessee has incurred interest expenses on the money borrowed from the company. Accordingly, we hold that there was no benefit derived by the assessee from such company on the money borrowed by him. 8.3 We also note that the provision of the deemed dividend under section 2(22)(e) of the Act, was brought under the statute to curb the practice of diverting the fund of the company for the benefit of the shareholders. However, in the case on hand there was no benefit extended by the company to the assessee. Thus, the impugned transaction is outside of the purview of the deemed dividend as envisaged under the provisions of section 2(22)(e) of the Act. We also note that this Tribunal in the own case of the assessee involving identical facts and circumstances for the assessment year 2015-16 in ITA No. 29/AHD/2019 vide order dated 12/04/2019 has decided the issue in favour of the assessee. The relevant extract of the order is reproduced as under: 14. We further find that the loan tak....
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.... allowed. 8.4 The facts of the case as discussed above are squarely applicable to the present facts of the case. The learned DR has not brought anything on record contrary to the arguments advanced by the learned AR for the assessee. Hence, respectfully following the ratio laid down by this tribunal in the own case of the assessee (supra), we set aside the finding of the learned CIT (A) and direct the AO to delete the addition made by him. Hence the ground of appeal of the assessee is allowed. 9. In result, the appeal of the assessee is allowed. 8. This Court in case of the very same assessee for Assessment Year 2015-2016 in Tax Appeal No. 811 of 2018 vide order dated 20.01.2020 has held as under: "7. It would be, therefore, germane to refer to the provisions of Section 2(22)(e) of the Act, 1961, which reads thus; "2(22)(e):- any payment by a company, not being a company in which the public are substantially interested, of any sum (whether as representing a part of the assets of the company or otherwise) made after the 31st day of May, 1987, by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not b....
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....r to three successive previous years immediately preceding the previous year in which such acquisition took place]. Explanation 3.- For the purposes of this clause,- (a) "concern" means a Hindu undivided family, or a firm or an association of persons or a body of individuals or a company; (b) a person shall be deemed to have a substantial interest in a concern, other than a company, if he is, at any time during the previous year, beneficially entitled to not less than twenty per cent of the income of such concern;]" 8. On perusal of the above provision, it is clear that as the assessee was holding more than 10% of the shares in both the companies, the provisions of Section 2(22)(e) of the Act would come into play. However, the section further provides that the dividend does not include any advances or loan made to a share holder by the Company in the ordinary course of business where lending of money is a substantial part of the business of the Company.. In the case on hand, it is not in dispute that both the companies were having money lending as the substantial part of their business. Therefore, the Tribunal has rightly hold that no addition ca....