Deemed dividend – Section 2(22)(e) – A. Y. 2007- 08 – Where assessee itself was not shareholder of lending company addition made by AO by invoking provisions of section 2(22)(e) was not sustainable –

The assessee was a 50 % shareholder of ‘L’. ‘L’ had advanced money to one ‘N’ company who in turn advanced money to assessee. The Assessing Officer brought to tax the amount of loan received by the assessee from ‘N’ as deemed dividend u/s. 2(22)(e). On appeal, the Commissioner (Appeals) held that the loan given by ‘N’ to the assessee was not the payment made by it to its shareholder and thus, section 2(22)(e) had no application. The Commissioner (Appeals) deleted the addition. The Tribunal upheld the order of the Commissioner (Appeals).

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) In the present facts, it is an admitted position that assessee is not a shareholder of ‘N’ from whom he has received loan. Therefore, no fault can be found with the decision of the Tribunal in having followed the decision of the High Court in CIT vs. Universal Medicare (P.) Ltd. [2010] 324 ITR 263/190 Taxman 144 (Bom.). This view has been further reiterated by another division bench of this court in CIT vs. Impact Containers (P.) Ltd. [2014] 367 ITR 346/225 Taxman 322/48 taxmann.com 294 (Bom.)

ii) The issue raised by the revenue stands concluded by the order of this court, no sustainable question of law arises. Accordingly, appeal is dismissed.”