The Kolkata Income Tax Appeals Tribunal (ITAT) removed the addition as interest on the loan duly paid by the appraised after deduction of TDS.
The rated, M / s. Heilgers Development & Construction Company Pvt. Ltd. is a company active in the field of real estate development. The tax returns for the two years considered were filed by her on 09/28/2015 and 09/30/2019 stating losses of Rs. 2,00,75,757 / – & Rs. 1,57,35,156 / – for AY 2015-16 and 2016-17 respectively. During the appraisal procedure, the AO noted that the appraised company had contracted the various loans.
The AO also found, upon further examination, that the provisions of Article 2 (22) (e) were clearly invoked in the case of the above lending operations and that the amount of said loans was therefore liable to be affected. ‘be treated as a deemed dividend in the hands of an assessed company.
The assessed company submitted to the CIT (A) and reiterated during the hearing before the Tribunal, the amounts of the loan in question treated as deemed dividends under Article 2 (22) (e) by the OA were taken by the appraised company of the three interest companies and since the said loan companies were compensated by the interest paid by the appraised company on the loans, the appraised company did not actually derive any benefit from said loans in such a way. to attract the provisions of paragraph 2 (22) (e).
The coram of Vice-President PMJagpat and Judicial Member ATVarkey considered that the expression “by way of advance or loan” appearing in subparagraph (e) of Article 2 (22) should be interpreted as referring to advances or loans that a shareholder simply benefits from being the beneficial owner of the shares, but if this loan or advance is granted to that shareholder as a result of additional consideration, which benefits the company , received from this shareholder, in this case, this advance or loan cannot be considered as a dividend within the meaning of article 2 (22) (e). It was considered that a free loan or advance granted by a company to these categories of shareholders would therefore fall within the scope of Article 2 (22) (e) and not in cases where loans or advances granted in exchange for a benefit conferred on the company by that shareholder.
“The entire amount in question was deducted by the company assessed on the interest and interest of the said loan having been duly paid by the company assessed after withholding tax, we do not find any infirmity in the contested orders of the CIT (A) by deleting the addition made by the AO treating said amount as a deemed dividend under Article 2 (22) (e) based on the decision of the Honorable Juridictional High Court in the Pradip Kumar case Malhotra. The same are therefore confirmed and the two tax appeals are rejected, ”ITAT said.
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