MATESHWARI BUS OPERATION PRIVATE LIMITED,AHEMDABAD vs. INCOME TAX OFFICER, TDS WARD 2, AHEMDABAD

Facts

The assessee, Mateshwari Bus Operations Pvt. Ltd., advanced Rs.20,00,000 to M/s Tak Bus Operations Pvt. Ltd. (TBOPL), a related concern. The Assessing Officer treated this as 'deemed dividend' under Section 2(22)(e) and held the assessee liable for not deducting TDS under Section 194. The Ld. CIT(A) dismissed the assessee's appeal ex-parte.

Held

The Tribunal held that TBOPL was not a registered shareholder of the assessee-company, thus the primary condition for applying Section 2(22)(e) was not met. Citing precedents, it reiterated that deemed dividend provisions apply only when the recipient is a shareholder. As it was a commercial lending, neither Section 2(22)(e) nor Section 201(1) of the Act were attracted.

Key Issues

Whether an advance to a related company, where the recipient is not a registered shareholder, can be treated as 'deemed dividend' under Section 2(22)(e) and attract TDS liability under Section 194 read with Sections 201(1)/201(1A).