Amount given for Purchasing Shareholding cannot be treated as ‘Deemed Dividend’: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has held that the amount given for the purchase of shareholding cannot be treated as a deemed dividend for the purpose of section 2(22)(e) of the Income Tax Act, 1961.

The assessee filed their income tax return declaring ‘NIL” income. The case was selected for scrutiny under CASS and the assessment was framed vide 143(3) of the Income Tax Act, 1961. The Assessing Officer while framing the assessment notice observed that the assessee had received a total unsecured loan expenditure of Rs. 22,21,29,723/-, during the year out of which an amount of Rs. 950,000,00/- was received from M/s Telecare Network India (P), a closely held company having its office at Zen House, 261, Kohinoor Enclave, Western Marg, Saidullajab, New Delhi.

While completing the assessment proceedings, the Assessing Officer held that as per shareholding pattern profit and loss account and balance sheet of M/s Telecare Network India (P), shows that the assessee company had 37.22% shareholding in the equity shares of M/s Telecare Network India (P), as on 31/3/2013. Therefore, the Assessing Officer treated the loan amount of Rs.9,50,000,00/- as deemed dividend u/s 2(22)(e) of the Act and added the same into the income of the assessee.

The assessee submitted before the Tribunal that the amount was given for purchasing the shareholding and the Assessing Officer has confused itself between the loan transaction and transaction for purchasing the shares.

The bench comprising ITAT President Mr. G S Pannu and Mr. Kul Bharat has relied on the findings of the  Commissioner (Appeals), wherein it was observed that the appellant has not received any amount/loan from Teleecare Network India Pvt. Ltd and as such there does not arise any question of any addition on account of deemed dividend u/s 2(22)(e) of the IT Act, 1961.

While upholding the decision of the Commissioner (Appeals) granting relief to the assessee, the Tribunal held that “the above finding on fact as arrived by the Ld.CIT(A) is not rebutted by the Revenue by placing any contrary material. Therefore, we do not see any reason to interfere in the finding of Ld.CIT(A) The ground of Revenue’s appeal is dismissed.”

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