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2014 (4) TMI 1290 - HC - Income TaxDeemed dividend u/s 2(22)(e) - Addition based on peak amount of the debit balance - ITAT deleted the addition that after merging all accounts, the final position is zero in the balance sheet in the name of the assessee in the books of accounts of the company as on 31.03.2008 - HELD THAT:- Though the said Company did advance loan to the assessee in different accounts, it is also an established fact that in two separate accounts, the assessee was the creditor of the Company - At the end of the year, this exactly is the amount which is in net the assessee withdrew from the company, may be in different accounts. The peak credit in different accounts never exceeded Rs.13.16 crore. Under the circumstances, the CIT (Appeals) as well as the Tribunal, both took an overall view of the accounts of the assessee and the said Company to hold that section 2(22)(e) of the Act would not apply. As is well known, section 2(22)(e) of the Act pertains to dividend, which would include several payments made by the Company. In particular clause (e) of the said subsection (22) pertains to payment by a company to which a legal friction would arise and such payment shall be deemed to be dividend distributed by such company to the person. It is well known that a legal friction can arise only at the circumstance in which the legislature envisages giving rise to the same. In the present case, when the very fundamental condition of a payment made by the Company is on facts found not established, in our opinion, both the CIT (Appeals) and the Tribunal correctly refused to apply the said section. Decided against revenue.
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