INCOME TAX ACT, 1961

Section 2(22)(e)

Dividend - Deemed dividend under section 2(22)(e) - Receipt from subsidiary company under current account between parties -

Assessee-company received loans and advances for a value of Rs. 23 crores from its subsidiary company M/SE (P) Ltd. Assessee held 98% shares of M/s. E (P) Ltd. Therefore, AO took the view that amount received was to be considered as deemed dividend in the hands of assessee. Under section 2(22)(e). Assessee submitted that it had taken money from its subsidiary company which was repaid within a short span of time. The transaction between assessee-company and the subsidiary were in the nature of current account transactions and hence section 2(22)(e) was not applicable. Held: The ledger account of subsidiary company in the books of assessee-company revealed that initially assessee-company had taken amount from subsidiary company which was repaid and thereafter, it was assessee-company which had given the amount to subsidiary company on most of the occasions and later on subsidiary company had returned the amount to assessee. Therefore, such facts would clearly reveal that current account was maintained between the parties for business purpose and ultimately the balance was squared up at the end of year. Accordingly, there was no reason to apply section 2(22)(e) especial when AO did not dispute transactions in current account between assessee-company and the subsidiary company in earlier as well as as in subsequent year.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-2014

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