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2020 (3) TMI 1227 - AT - Income TaxDeemed dividend addition u/s 2(22)(e) - assessee has beneficial share holding in 2 companies namely M/s Jasubhai Business Services Pvt Ltd and M/s. ABM Steels Pvt M/s.- as per AO ABM Steels Pvt. Ltd is not a company in which public is substantially interested and assessee is holding beneficial interest and voting right and M/s ABM Steels Pvt. Ltd. is having accumulated reserves - HELD THAT:- Any credit or advantage taken by the persons having substantial interest will attract the provision of section 2(22)(e) - Even though, assessee has repaid the deposit within the same year, it does not mean that the loan or benefit is not taken. We can call any name but ultimately assessee has taken a credit/ benefit, the assessee should have known that it is surpassing the deeming provisions particularly when it has holding beneficial interest. It is settled law that deemed dividend provisions get attracted as soon as it takes benefit and it does not matter whether it is repaid within the same year. It is similar to the case of Miss P. Sarda vrs. CIT [1997 (12) TMI 1 - SUPREME COURT] the Hon’ble Apex court held that even though the loan is repaid at the end of the year, will attract the provision of section 2(22)(e) of the act. Even though assessee claims it as inter corporate deposit, the literal meaning will remain same as the short term loan enjoyed by the assessee, hence in our considered view, the provision of section 2(22)(e) is attracted in the present case. With regard to payment by M/s ABM Steels Pvt. Ltd. on behalf of the assessee for the purchase of machinery, it is brought on record that M/s ABM Steels Pvt. Ltd. has purchased the similar machinery from the assessee in the subsequent assessment year and it is a back to back purchase of machinery. Therefore, in our considered view, it is a business transaction and we are inclined to agree with the findings of Ld. CIT(A). With regard to issue of debentures, since assessee has issued redeemable debentures and M/s Jasubhai Business Services Pvt. Ltd has subscribed for the debentures and during this year, they have also exercised the options and assessee has redeemed the debentures and current outstanding amount is of ₹ 2,02,25,000/.This transaction involving issue of securities, even though it is a private placement but it cannot be considered as a loan transaction. The provisions of section 2(22)(e) of the Act are not attracted, it attracts only when loan and advances taken in place of direct issue of dividends. In order to avoid dividend tax, some of the assessee are resorting to taking loan instead of dividend being issued to the respective shareholders. The securities are a separate scripts and having stand alone capital liability, which cannot be equated with loan, which is current liability. Therefore, we are in agreement with the findings of led CIT(A). Accordingly, grounds raised by revenue are dismissed.
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