Receiving Advances for purpose of availing Credit facilities, cannot be considered as gratuitous payments U/s 2(22)(e) of the Income Tax Act: ITAT
Receiving advances for purpose of availing credit facilities, cannot be considered as gratuitous payments under Section 2(22)(e) of the Income Tax Act, so was held by the Income Tax appellate Tribunal (ITAT), Visakhapatnam. The assessee, Smt. Sabhapathi Padmasree is deriving income from salary, house property and other sources filed her return of income declaring total income of...
Receiving advances for purpose of availing credit facilities, cannot be considered as gratuitous payments under Section 2(22)(e) of the Income Tax Act, so was held by the Income Tax appellate Tribunal (ITAT), Visakhapatnam.
The assessee, Smt. Sabhapathi Padmasree is deriving income from salary, house property and other sources filed her return of income declaring total income of Rs. 11,26,444/-. The case was selected for scrutiny under manual selection under Section 147 of the Act and statutory notice under Section 148 was issued. The Assessing Officer (AO) after considering the submissions made by the assessee’s representative completed the assessment by adding 1,04,28,518/- as deemed dividend under Section 2(22)(e) of the Act. Aggrieved by the order of the AO assessee filed an appeal before the Commissioner of Income Tax (CIT). Considering the submissions made by the assessee’s representative, upheld the order of the AO and dismissed the appeal. Aggrieved by the order of the CIT, the assessee is in appeal before the Tribunal.
Duvvuru RL Reddy, Judicial Member and S Balakrishnan, Accountant Member relied on the judgment in Pradip Kumar Malhotra vs. CIT and held that “the deemed section 2(22)(e) has no application as the debit balance in the company’s books of accounts is normal current account wherein the company has credited amounts payable to her and debited amounts withdrawn by her and net result of which is shown debit balance which cannot be considered as gratuitous payment.
Considering the fact that the assessee had given her personal property as collateral security to the bank for the purpose of availing credit facilities by the company, in turn the company has given certain advances, therefore, the same cannot be considered as gratuitous payments which are coming within the meaning of loans and advances as defined U/s. 2(22)(e) of the Act.”
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