2023 (1) TMI 859 - AT - Income Tax
Deemed dividend addition u/s 2(22) - day on which BTB Retail Pvt. Ltd., advances to assessee the company was having reserve & surplus more than the amount advanced, therefore the A.O. was right in holding that all the conditions stipulated u/s. 2(22)(e) are fulfilled to the impugned loan/advance given to the assessee - HELD THAT:- We may note that the assessee has repaid an amount of Rs. 50,00,000/- during the relevant financial period leaving balance of Rs. 44,00,000/-only. In the present it is also not dispute that the company has paid market rate of interest by the assessee on the amount of advance and in the real sense the assessee did not drive any benefit from the funds of the company so as to attract rigour of the provision of section 2(22)(e) of the Act, it is clearly observed that the transaction of loan to which the assessee provided collateral security to M/s. BTB Marketing Pvt. Ltd., and BTB Retail Pvt. Ltd., to secure capital for expansion of company business, and the transaction was pure of commercial transaction under running account.
These facts have not been controverted by the Authorities below or Ld. Sr. DR before us. Therefore, as per judgment of Pradip Kumar Malhotra[2011 (8) TMI 16 - CALCUTTA HIGH COURT] wherein it was held that the phrase “by way of advance or loan” appearing in section 2(22)(e) of the Act must constitute to mean impugned advances or loans, which is enjoyed by the shareholder for merely because on account of being a partner or a Director in the company, which the beneficiary owner of shares.
A position differs if such loan or advances given to such shareholder as a consequence of any further consideration, which is beneficial to the company received from such shareholder then in such advance or loan cannot be said to be deemed dividend within the ambit of section 2(22)(e) - Identical and similar situation is present in the case in hand. Therefore addition made by the A.O. and confirmed by the Ld. CIT(A) cannot be held as sustainable and thus we direct the A.O. to delete the same. Appeal of the assessee is allowed.