VINITA PAWANKUMAR SARAF,MUMBAI vs. INCOME TAX OFFICER WARD 42(1)(5), MUMBAI

ITA 1982/MUM/2025Status: DisposedITAT Mumbai16 July 2025AY 2013-14Bench: SHRI PAWAN SINGH (Judicial Member), MS PADMAVATHY S (Accountant Member)1 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that Explanation 3 to Section 2(22)(e) is applicable only to 'concerns' other than companies. For companies, the test of shareholding percentage for deeming a loan as dividend should be at the relevant point of time in the previous year. Since the assessee's shareholding fell below 10% at the end of the financial year, Section 2(22)(e) was not attracted.

What were the facts?

The assessee, a director in Saraf Yarn Pvt. Ltd., received a loan of Rs. 25,58,638/- from the company. The Assessing Officer (AO) treated this loan as deemed dividend under Section 2(22)(e) of the Income Tax Act, 1961, considering the assessee's shareholding at certain points during the financial year. The CIT(A) upheld the AO's order.

What were the issues?

Whether a loan received by a director from a company can be treated as deemed dividend under Section 2(22)(e) when shareholding falls below the prescribed threshold at the end of the financial year, and if Explanation 3 to Section 2(22)(e) applies to companies.

Which sections of the Income-tax Act were involved?

Section 2(22)(e),Section 250,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI PAWAN SINGH, JM &

For Appellant: Shri Krupa Jimit Shah, CA
For Respondent: Shri Surendra Mohan, Sr. DR
Hearing: 16.07.2025

Per Padmavathy S, AM:

This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/ National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 31.01.2025 for Assessment Year (AY) 2013-14. The assessee raised the following grounds of appeal:

“1. The Ld. CIT (A), NFAC, Delhi, erred in law and on facts in upholding an addition of Rs. 25,58,638/- made by the Assessing Officer under section 2 (22) (e) of the I. T. Act, 1961, as deemed dividend in the hands of the Appellant wrongly invoking clause (b) of Expl

The order continues below.

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