Income: Deemed dividend – Section 2(22)(e) – A. Y. 2008-09: Assessee having current account with company and earning interest income by advancing funds to company – Credit balance only for a period of 55 days – No tax evasion – Section 22(e) not applicable:

The
assessee was having a current account with a company DM and was earning
interest income by advancing money to the company as per its need. The
assessee was a shareholder of the company. The assessee’s account with
the company showed credit balance for a period of 55 days. In view of
the said credit balance, the Assessing Officer made an addition of Rs.
2,75,00,000/- u/s. 2(22)(e) of the Income-tax Act, 1961 for the A. Y.
2008-09. The CIT(A) and the Tribunal deleted the addition.

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

“i)
The assessee had a running account with the company and had been
advancing money to it. The provisions of section 2(22)(e) of the Act
were not attracted in the present case as this provision was inserted to
stop the misuse by the assessee by taking the funds out of the company
by way of loan advances instead of dividend and thereby avoid tax.

ii)
In the present case, the assessee had in fact advanced money to the
company and there was a credit for only 55 days for which the provisions
of section 2(22)(e) of the Act could not be invoked.

iii) No substantial question of law arises in this appeal. Appeal is dismissed.”