Current Account Transactions would not attract Deemed Dividend: ITAT [Read Order]

The Kolkata bench of Income Tax Appellate Tribunal ( ITAT ) has ruled that Current Account Transactions would not attract deemed dividend.

In instant case, Assessee is a private company declared its income under the head business and profession for Rs.18,914/- only. Later on, scrutiny pr.commissioner of income tax found that Assessee has taken a loan to the tune of 2 crores from DVPL in which Assessee hold its shares. In the instant case, Ld. Pr. CIT u/s 263 of the Act held that the order of AO is erroneous in so far as prejudicial to the interest of revenue on the ground that AO has not treated the amount of loan received by the assessee from DVPL as deemed dividend income in pursuance to Section 2(22)(e) of the Income Tax Act.

Being aggrieved by this order of Pr. CIT, the assessee has come up in appeal before this ITAT and submitted that assessee was maintaining the current account with DVPL. So the provision of Section 2(22)(e) of the Act is not applicable to the impugned loan received by the assessee. The assessee also filed the ledger copy of DVPL maintained in its books of account and pressed that above amount was representing the current account and accordingly the same cannot be treated as dividend income under section 2(22)(e) of the Income Tax Act.

On contrary to this Revenue relied on the decision of lower Authority and reiterated the submissions made before.

The Tribunal bench heard the submission and perused the records made by both the parties. On perusal of the ledger Filed by Assessee found that certain transaction was held between two parties and initially Assessee provided the loan to DVPL and later assessee has taken the loan from DVPL.

Hence there was the change in the balance shown by the Assessee. Thus, it cannot be termed as advance taken by the assessee as it was fluctuating during the year. ITAT bench also pressed the decision of co-ordinate Bench of this Tribunal in the case of Bombay Oil Industries Ltd where it has been held that there is a clear distinction between the inter-corporate deposits viz-a-vz loans/advances, according to us the authorities below were not right in treating the same as deemed dividend u/. 2(22)(e) of the Act.

The bench comprising of Judicial Member N.V.Vasudevan and Accountant Member Waseem Ahmed in light of above decision held that the transactions held between assessee and DVPL in the nature of current account transactions. Therefore, the provision of Section 2(22)(e) of the Income Tax Act cannot be attracted to such transactions.