ITAT deletes Addition as Interest on Loan duly paid by Assessee after deducting TDS [Read Order]

ITAT -TDS - Taxscan

The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) deleted the addition as interest on Loan duly paid by the assessee after deducting TDS.

The assessee, M/s. Heilgers Development & Construction Company Pvt. Ltd. is a company which is engaged in the business of property development. The returns of income for both the years under consideration were filed by it on 28.09.2015 & 30.09.2019 declaring losses of Rs. 2,00,75,757/- & Rs. 1,57,35,156/- for A.Y. 2015-16 & 2016-17 respectively. During the course of assessment proceedings, it was noticed by the AO that the assessee company has taken the various loans.

The AO also found on further examination that the provisions of section 2(22)(e) were clearly attracted in case of the above loan transactions and the amount of the said loans thus was liable to be treated as deemed dividend in the hands of the assessee company.

The assessee-company submitted before the CIT(A) and further reiterated during the course of hearing before the Tribunal, the loan amounts in question treated as deemed dividend under section 2(22)(e) by the AO were taken by the assessee-company from the three concerns on interest and since the said lending companies were compensated by interest paid by the assessee-company on the loans, the assessee- company in real sense did not derive any benefit from the said loans so as to attract the provisions of section 2(22)(e).

The coram of Vice President, P.M.Jagpat and Judicial Member A.T.Varkey held that held that the phrase “by way of advance or loan” appearing to sub-clause (e) of section 2(22) must be construed to mean those advances or loans which a shareholder enjoys for simply on account of being a beneficial owner of shares, but if such loan or advance is given to such shareholder as a consequence of any further consideration, which is beneficial to the company, received from such shareholder, in such case, such advance or loan cannot be said to be deemed dividend within the meaning of section 2(22)(e). It was held that gratuitous loan or advance given by a company to those classes of shareholder thus would come within the purview of section 2(22)(e) and not the cases where loans or advances given in return to an advantage conferred upon the company by such shareholder.

“The entire amount in question was taken by the assessee-company on interest and since the interest on the said loan was duly paid by the assessee-company after deducting tax at source, we find no infirmity in the impugned orders of the CIT(A) in deleting the addition made by the AO treating the said amount as deemed dividend under section 2(22)(e) by relying on the decision of Hon’ble Jurisdictional High Court in the case of Pradip Kumar Malhotra . The same are therefore upheld and both the appeals of the Revenue are dismissed,” the ITAT said.

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