S. 2(22)(e)


CCIT v Sarva Equity (P.) Ltd [IT APPEAL NOS. 322 TO 324 OF 2014 dtd 08.01.2014] – Karnataka HC Background: Assessee and Ittina Properties Private Limited are sister concerns. The assessee had taken an unsecured loan from Ittina of Rs.9,56,48,107. The AO  treated the loan as a deemed dividend under Section 2(22)(e).  The Directors and shareholders of both the companies, are members of one and the same family and they have substantial holding in M/s. Ittina and assessee company. The Appellate Authority reversed the order passed by the Assessing Officer holding that the respondent-assessee is not a shareholder of M/s. Ittina Properties Private Limited and in view thereof, not liable to pay taxes under Section 2(22)(e) of the Act. The order of the appellate authority has been confirmed by the Tribunal.

Indirect shareholding is not covered under the fiction of deemed dividend u/s 2(22)(e) – Karnataka ...


CIT v Bikaner Cuisine Pvt Ltd [ITA No. 475/2013 dated 04.10.13] (Delhi HC) Background: Assessee – M/s Bikaner Cuisine Pvt. Ltd. was not a shareholder of BIPS Systems Ltd. The latter company i.e. BIPS Systems Ltd. had granted unsecured loan of Rs.49,25,000/- to the assessee. The Assessing Officer invoked provisions of section 2(22)(e) of the Income Tax Act, 1961 and made an addition of Rs.33,84,290/- as deemed dividend in the hands of the assessee. The reason given was that the assessee and BIPS Systems Ltd. had common shareholder, namely, Narender Goel, who held more than 10% shares in BIPS Systems Ltd. and more than 20% voting rights in Bikaner Cuisine Pvt. Ltd. However, the accepted and admitted position is that the company is not a shareholder in BIPS Systems Ltd. 

Deemed dividend provision is a legal fiction; but does not enhance the definition of shareholder ...


M/s IFB AGRO INDUSTRIES LTD v JCIT (ITA No.114/Kol/2013) (Kolkata ITAT) Background: The assessee is a company engaged in the business of manufacture of rectified spirit and IMFL, marine products and trading of feed and beer. The assessee had received Inter-corporate deposits from M/s. IFB. Assessee held 18.82% of the shares of M/s. IFB. The AO treated the same as a loan received by the assessee from M/s. IFB. and invoked the provisions of section 2(22)(e) of the Act. An amount of Rs.17.5 cr. was deposited by M/s. IFB through RTGS in the bank account of the assesee but Rs.12 cr. out of the same was immediately returned as it was deposited without the assessee’s permission. On appeal, the CIT(A) had accepted the contention of the assessee that the Inter corporate deposit was only to an extent of Rs.11.20 cr. However, the CIT(A) had treated the Inter corporate deposits as a loan and had consequently treated the amount of Rs.11.20 cr. as deemed dividend u/s. 2(22)(e) of the Act.

Deemed dividend not applicable in case of inter-corporate deposits – Kol ITAT



Mrs Amisha B Koradia v ITO (ITA No.03/Mum/2011 dtd 19.04.2013) Mumbai ITAT Background: The assessee is a beneficial shareholder in M/s Koradia Construction Pvt Ltd, and has 50% of share-holding. During the course of assessment proceedings, the AO  noted that the assessee has taken loan of Rs. 78,10,000/- various dates from this company which has accumulated profit of Rs. 8,00,97,861/-. In the absence of explanation, the AO treated the loan as deemed dividend u/s 2(22)(e) of the Act and added Rs. 78,00,000/- to the income of the assessee.  The assessee filed an appeal before the CIT(A) and argued that the AO ignored the fact that the said sum includes remuneration of Rs 2 lacs, opening debit balance of Rs 5,32,396, other debit balances of Rs 4,75,000 amounting to Rs 12,10,396. Further, it includes a sum of Rs. 58 lacs represents advance received from the company towards purchase of flat which ultimately could not go through and the amount was later on refunded. The CIT(A) granted relief to the extent of Rs 12,10,396 and confirmed the balance addition. 

Deemed dividend not attracted for loan in the course of business transactions – Mum ITAT


DCIT vs. Vikas Oberoi (ITAT Mumbai) Background: The assessee was a beneficial shareholder of two companies named Kingston Properties P Ltd. (KPPL), New Dimensions Consultants P Ltd (NDCPL) & R. S. Estate Developers P Ltd (RSEDPL). NDCPL & RESEDPL advanced various sums of money to KPPL towards “share application money”. However, some of the advances were returned by KPPL while some were adjusted towards allotment of shares. The AO held that the transaction was a “colourable device” and a “loan and advance” which fell within the ambit of s. 2(22)(e). The said “loan and advance” was assessed as “deemed dividend” in the hands of the assessee – beneficial shareholder – following Universal Medicare 324 ITR 264 (Bom). The CIT(A) reversed the AO. On appeal by the department to the Tribunal HELD dismissing the appeal:

Share application money not subject to deemed dividend u/s 2(22)(e) – Mum ITAT