2022 (2) TMI 320 - AT - Income Tax

Deemed dividend u/s 2(22)(e) - loan transaction and transaction for purchasing the shares - HELD THAT - From investment chart, ledger account of M/s Teleecare Network India Pvt. Ltd., confirmation of account and copy of allotment return submitted during the assessment, it is evident that the appellant has not received any amount / loan from Teleecare Network India Pvt. Ltd and as such there does not arise any question of any addition on account of deemed dividend u/s 2(22)(e) of the IT Act, 1961. Addition made by the A.O is therefore deleted - Decided against revenue.

Summary

Issues:
1. Deletion of addition under section 2(22)(e) as deemed dividend.
2. Justification of not appreciating shares allotment without consideration.
3. Ignoring loan statement filed by the assessee.

Analysis:
1. The appeal was filed by the Revenue against the order of Ld. CIT(A)-4, New Delhi for the Assessment Year 2014-15, challenging the deletion of an addition of ?9,50,00,000 made under section 2(22)(e) as deemed dividend. The Revenue contended that the shares allotted to the assessee company were without consideration, and thus should be treated as deemed dividend. The Assessing Officer observed that the assessee had received a loan amount from a company and treated it as deemed dividend. However, the Ld.CIT(A) deleted the addition after considering the material and documents presented by the assessee.

2. The Revenue argued that the Ld.CIT(A) erred in not appreciating that the allotment of shares without consideration was a means to circumvent the underlying loan received by the assessee company. On the other hand, the assessee's counsel contended that the amount in question was given for purchasing share holdings, not as a loan. The Ld.CIT(A) supported the deletion of the addition, emphasizing the confusion between a loan transaction and share purchase transaction by the Assessing Officer.

3. The Revenue further contended that the Ld.CIT(A) ignored the loan statement filed by the assessee during the assessment proceedings, which clearly showed that the assessee had received a loan amount from a specific company. However, the Ld.CIT(A) examined the documents and submissions provided by the appellant, which included details of investments in shares, ledger accounts, and letters clarifying the transactions. The Ld.CIT(A) found that the Assessing Officer misunderstood the facts and wrongly treated the amount as a fresh loan, leading to the deletion of the addition under section 2(22)(e).

In conclusion, the Appellate Tribunal upheld the decision of the Ld.CIT(A) and dismissed the appeal of the Revenue, stating that there was no reason to interfere with the finding that the amount in question was not a loan but an investment in shares, thereby not constituting deemed dividend under section 2(22)(e) of the Income Tax Act, 1961.