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2014 (7) TMI 213 - AT - Income TaxDeemed dividend u/s 2(22)(e) of the Act - Excess advances received against the services to be rendered from another company - on person is holding 90% share or voting right in both the companies. - Held that:- Similar issue came up for consideration before the coordinate bench in assessee’s own case Dy. Commissioner of Income-tax Versus M/s Margadarshi Marketing (P) Ltd. [2013 (10) TMI 476 - ITAT HYDERABAD] wherein it was held that loan or advance given under the conditions specified u/s 2(22)(e) of the Act would also be treated as dividend - The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by way of legal fiction - the recipient would be a shareholder by way of deeming provision - if the amounts advanced are for business transactions between the parties, such payment would not fall within the deeming dividend u/s 2(22)(e) of the Act. The provision for deduction of tax at source and adjustment of tax is only in respect of the payments to the' shareholder would clearly indicate that even after the amendment, the effect of clause (e) of sub section (22) of Sec. 2 would apply only when the payment is made to shareholder - Wherever, the tax is to be deducted at source from a dividend or deemed dividend and the consequential effect of giving effect to such deduction of tax at source, etc., reference was made only to the payments to the shareholder - This would indicate clearly that clause (e) would apply only in case of payments to the shareholder and not to others - the advances cannot be treated as deemed dividend coming within the ambit of section 2(22)(e) of the Act. CIT(A) has come to the conclusion that the amounts received by the assessee from M/s Ushodaya Enterprises is in regular course of trade is outside the purview of section 2(22)(e) of the Act - AO has brought any materials to establish the fact that the amount received was not in regular course of trade but in the nature of loan and advance as envisaged u/s 2(22)(e) of the Act – there was no reason to interfere with the order passed by the CIT(A) in all the AYs - the order of the CIT(A) is upheld in deleting the addition made by the AO towards deemed dividend u/s 2(22)(e) of the IT Act – Decided against Revenue.
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