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2021 (9) TMI 132 - AT - Income TaxDeemed dividend u/s. 2(22)(e) - AO noticed that assessee has shown in his return of income salary income in the capacity of directors of two companies - AO had not accepted the contention of the assessee that advances were against salary as well as incentive payable by the Biotech Vision Case Pvt. Ltd., and held that assessee has earned deemed dividend - CIT- A deleted the addition - HELD THAT - Assessee has included the amount of salary and incentive received from the company in his income and categorically shown that the aforesaid amount was received from the companies after deduction of TDS - we consider that action of Assessing Officer in taxing the impugned amount as deemed dividend has resulted into double addition on same income which has already been included by the assessee in his income. Therefore, we do not find any infirmity in the decision of ld. CIT(A). Therefore, the appeal of the revenue is dismissed.
Issues Involved:
1. Deemed Dividend under Section 2(22)(e) of the Income Tax Act, 1961. Detailed Analysis: Issue: Deemed Dividend under Section 2(22)(e) of the Income Tax Act, 1961 Facts: The appeal concerns the deletion of an addition of ?2,06,53,898/- by the CIT(A) made on account of deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961. The assessee had filed a return declaring a total income of ?3,79,13,200/- for the assessment year 2013-14. During the scrutiny assessment, the Assessing Officer (AO) noticed that the assessee, a director in Biotech Vision Care Pvt. Ltd. and Biotech Ophthalmics Pvt. Ltd., had withdrawn amounts from his salary account, expenses account, and WIP account, which were squared up by journal entries. The AO treated these withdrawals as deemed dividends under Section 2(22)(e) of the Act. Assessee's Explanation: The assessee explained that the withdrawals were advances against salary and incentives, which were adjusted at the year-end based on the company's performance. The company had deducted TDS on these amounts, and the assessee had included them in his return of income. The AO, however, did not accept this explanation and added the amounts as deemed dividends. CIT(A) Decision: The CIT(A) deleted the addition, noting that a similar issue had been adjudicated in favor of the assessee for the assessment year 2012-13. The CIT(A) found that the assessee received salary and incentives from Biotech Vision Care Pvt. Ltd., which were adjusted against the advances. The CIT(A) observed that the AO had allowed credit for salary but not for incentives, leading to double addition of the same income. Revenue's Argument: The Departmental Representative argued that no resolution for giving incentives to the director was passed by the companies, and the withdrawals were advances squared up by journal entries of incentives. The revenue relied on various Supreme Court and High Court decisions to support their contention that the advances should be treated as deemed dividends. Assessee's Argument: The assessee's counsel argued that the advances were against salary and incentives, which were already included in the return of income and taxed. The counsel cited decisions from the High Court of Calcutta and ITAT Ahmedabad, supporting the view that such advances adjusted against salary and incentives do not fall under the purview of Section 2(22)(e). Tribunal's Analysis: The Tribunal reviewed the facts and submissions. It noted that the assessee had included the salary and incentive amounts in his income and paid taxes on them. The Tribunal found that taxing the same amounts as deemed dividends would result in double taxation. The Tribunal agreed with the CIT(A) that the advances were adjusted against salary and incentives, and the AO's action led to double addition of the same income. Conclusion: The Tribunal upheld the CIT(A)'s decision to delete the addition of ?2,06,53,898/- as deemed dividends. The appeal of the revenue was dismissed. Order Pronounced: The order was pronounced in the open court on 27-08-2021. Summary: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision that the advances received by the assessee, adjusted against salary and incentives, should not be treated as deemed dividends under Section 2(22)(e) of the Income Tax Act, 1961, thereby preventing double taxation of the same income.
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