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2014 (10) TMI 41 - HC - Income TaxDeemed dividend u/s 2(22)(e) – Security deposits received from sister concern - colourable device adopted to avoid the incidence of tax or not - The Tribunal rightly held that the amount given by the sister concern to the assessee was not a loan or an advance, but was a security deposit - the amount given by the sister concern to the assessee was given in the course of business and was not given to a shareholder and, the provision of Section 2(22)(e) was not applicable - it has the effect of bringing to tax as dividend where any payment of any sum is made by way of advance or loan to a shareholder in which a shareholder holds a substantial interest or any payment is made on behalf of a shareholder or any payment is made for the individual benefit of a shareholder - the assessee firm was having a business dealing with its sister concern, which was apparent from the books of account of the assessee, which showed various job works being carried out by the sister concern. The borrowing is primarily for the benefit of the borrower although the person, who lends the money, may also stand to gain by earning interest on the amount lent - Another distinction is the obligation to return the money so received - In the case of a deposit, the deposit becomes payable when a demand is made and, in the case of the "loan", the obligation to repay the amount arises immediately on receipt of the loan - the deposit made by the sister concern was a business transaction arising in the normal course of business between the two concerns – thus, the order of the Tribunal is upheld – Decided against revenue.
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