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2020 (10) TMI 774 - AT - Income TaxDeemed dividend u/s 2(22)(e) - money received from the lending companies - ICDs between the common group companies - HELD THAT:- Funds were diverted from its group companies to another group company, the assessee, for importing the products for trading purposes in order to realize higher profits and the funds were received on short term basis depending on the business requirements. The said money borrowed was repaid during the year itself and nothing was outstanding at the year end. Thus we can reasonably presume that these funds were moved from one company to another which are under the same management and the purpose is to deploy the funds more efficiently and profitably and thus there exists a business and commercial expediency for the same. We find merit in the contentions of the Ld. A.R. that these transactions being in the nature of current account between the group concerns which can not be treated as loans or advances to be treated as deemed dividend under section 2(22)(e) of the Act. ICDs between the common group companies can not be equated with the loans and advances for the purpose of deemed dividend under section 2(22)(e) of the Act. We further note that the money was not at all diverted for the benefit of shareholders by the assessee company but in fact used for its business. Money advanced by two sister concerns to the assessee company which was repaid during the year along with interest @ 12.5% per annum and used for the purpose of business of the assessee is not a loan/deposit to be treated as deemed dividend. - Decided in favour of assessee.
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