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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI G.S.PANNUDr.Choitram Gidwani Marg,
The captioned appeal filed by the assessee pertaining to assessment year 2009-10 is directed against an order passed by CIT(A)-7, Mumbai dated 31/10/2014, which in turn arises out of an order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) dated 25/11/2011.
The solitary issue in this appeal relates to an addition of s.5,75,902/- sustained by the CIT(Appeals) by invoking the provisions of section 2(22)(e) of the Act.
2. The solitary issue in this appeal relates to an addition of Rs.5,75,902/- sustained by the CIT(A) by invoking the provisions of section 2(22)(e) of the Act.
Briefly put, the facts relevant to decide the impugned controversy can be summarized as follows. The assessee is an individual, who is a shareholder as well as Director in a concern, M/s.Ramlaks Exports Pvt. Ltd. The said concern i.e. M/s.Ramlaks Exports Pvt. Ltd. was found to have paid a sum of Rs.5,75,902/- to Jaslok Hospital, where assessee’s father was availing medical treatment. The said payment has been held by the lower authorities to falling within the meaning of ‘deemed dividend’ defined under section 2(22)(e) of the Act.
Before me, the Ld. Representative for the assessee has raised a singular plea, which is to the effect that the said amount was paid by the concern, M/s.Ramlaks Exports Pvt. Ltd. in terms of the employment contract with the assessee. At the time of hearing reference was made to the terms of the employment contract dated 10/10/2004, a copy of which has been placed in the Paper Book in page -13. In terms thereof, it is provided that the concern, M/s.Ramlaks Exports Pvt. Ltd. was to pay for “current medical and emergency expenses” for assessee and his family members subject to the limits prescribed as per the company rules.
The Ld. Departmental Representative, on the other hand, pointed out that the CIT(A) sustained the treatment of the impugned sum as ‘deemed dividend’ under section 2(22)(e) on the ground that the payment made by the company is of personal nature.
Having considered the relevant material, it is quite clear that the amount paid by the concern M/s.Ramlaks Exports Pvt. Ltd. to Jaslok Hospital is in terms of the employment contract with the assessee. Be that as it may, the provisions of section 2(22)(e) of the Act , so far as it is relevant for the present purpose, are attracted only where payment is made by a concern for the ‘individual benefit’ of the shareholder. In the present case, the factum of the payment having been made in terms of the employment contract is emerging from record and, therefore, such payment cannot be construed to be for ‘individual benefit’ of the shareholder, as understood for the purposes of section 2(22)(e) of the Act. Accordingly, on this short point, I deem it fit and proper to set-aside the order of the CIT(A) and direct the Assessing Officer to delete the addition, since such sum is outside the purview of section 2(22)(e) being a payment made in terms of the employment contract.