Section 2(22)(e) of the Income Tax Act

The decision most relied on for Section 2(22)(e) is CIT v. Winsome Textile Industries Ltd. (319 ITR 204), cited in 378 of the 1,757 judgments on BharatTax that turn on this section.

Leading authorities on Section 2(22)(e)

CIT v. Winsome Textile Industries Ltd.
319 ITR 204 · 2009 · High Court
378
citing judgments

Section 14A of the Income-tax Act, 1961, which disallows expenditure incurred in relation to exempt income, is not applicable if the assessee has not earned any exempt income in the relevant assessment year.

CIT v. Ankitech (P) Ltd.
340 ITR 14 · 2012 · High Court
202
citing judgments

Deemed dividend under section 2(22)(e) cannot be taxed in the hands of a non-shareholder. The Supreme Court confirmed this view, affirming the Delhi High Court's decision in Ankitech.

DCIT v. Core Health Care Ltd.
298 ITR 194 · 2008 · Supreme Court
165
citing judgments

Interest expenditure incurred for acquiring capital assets, even if capitalized in the books, is deductible if for the purpose of business. Section 36(1)(iii) is a self-contained code regarding such deductions.

Pradip Kumar Malhotra v. CIT
338 ITR 538 · 2011 · High Court
152
citing judgments

Section 2(22)(e) of the Income Tax Act, which addresses deemed dividends, does not apply to loans or advances provided by a company to its shareholders if these transactions occur in the normal course of business, are driven by business expediency, or are made in consideration of a benefit conferred upon the company by the shareholder. Conversely, gratuitous loans or advances given to shareholders fall within the purview of this section.

Jamshedpur Motor Accessories Stores v. CIT
72 ITR 612 · 1969 · Supreme Court
140
citing judgments

The reasonableness of an expenditure for business purposes must be assessed from the businessman's perspective, not the revenue's, and the primary motive to earn income directly is not a prerequisite for its admissibility as a deduction.

H T Media Ltd. v. PCIT
399 ITR 576 · 2017 · High Court
132
citing judgments

The Assessing Officer must first record satisfaction that the assessee’s claim regarding expenditure incurred for earning exempt income is incorrect or unreasonable before applying the provisions of Rule 8D to determine such disallowance under Section 14A(2) of the Income Tax Act.

CIT v. Creative Dyeing & Printing Pvt. Ltd.
318 ITR 476 · 2009 · High Court
119
citing judgments

Genuine trade advances or amounts advanced for bona fide business transactions, driven by commercial expediency, do not fall within the definition of deemed dividend under section 2(22)(e) of the Income-tax Act.

CIT v. Raj Kumar
318 ITR 462 · 2009 · High Court
119
citing judgments

Genuine trade advances made by a company in the ordinary course of business to a shareholder do not fall within the definition of deemed dividend under Section 2(22)(e) of the Income-tax Act.

CIT v. Universal Medicare Pvt. Ltd.
324 ITR 263 · 2010 · High Court
111
citing judgments

Deemed dividend under section 2(22)(e) is assessable only in the hands of the beneficial shareholder who receives the benefit of the loan or advance, and not in the hands of the company receiving the loan.

CIT v. Mukundray K. Shah
290 ITR 433 · 2007 · Supreme Court
99
citing judgments

For Section 2(22)(e) to apply, a payment by a company must be in the nature of a loan or advance, and the company must have accumulated profits. Such payments to a concern in which a shareholder, holding more than 10% voting power, has a substantial interest are deemed dividends if the shareholder ultimately benefits, even if routed through different modes or concerns.

Judgments on Section 2(22)(e)

ACIT, Panipat vs. M/S. Jindal Fibers, Panipat

In the result, the appeal of Revenue is dismissed

ITA 1838/DEL/2017[2012-13]Status: DisposedITAT Delhi22 Jul 2021AY 2012-13

Bench: Sh. Anil Chaturvedi & Ms. Suchitra Kamble(Through Video Conferencing) Acit Vs. M/S. Jindal Fibres Circle, Panipat E-1, Industrial Area, Panipat Pan No. Aadfj 7652 A (Appellant) (Respondent) Assessee By --None-- Revenue By Shri Kumar Pranav, Sr. D.R. Date Of Hearing: 22/07/2021 Date Of Pronouncement: 22/07/2021 Order Per Suchitra Kamble, Jm: This Appeal Filed By The Revenue Is Directed Against The Order Dated 16.01.2017 Passed By The Commissioner Of Income Tax (Appeals)- Karnal Relating To Assessment Year 2012-13. 2. Revenue Has Raised The Following Grounds Of Appeals: 1. “On The Facts & In The Circumstances Of The Case, The Ld Cit(A), Karnal Has Erred In Law In Deleting The Addition Of Rs.54,20,361/- Made By The Ao U/S 2(22)(E) On Account Of Deemed Dividend Since There Are Only A Few Sale Purchase Transactions & The Rest Are Actually Loans & Advances. 2. Further, On The Facts & In The Circumstances Of The Case, The Ld Cit(A), Karnal Has Also Erred In Law In Deleting The Addition Of Acit Vs. Jindal Fibers. A.Y. 2012-13 2 Rs.54,09,565/- Made By The Ao U/S 2(22)(E) On Account Of Deemed Dividend As Per The Information Submitted By The Assessee At Time Of Assessment Proceedings. 3. Further, On The Facts & In The Circumstances Of The Case, The Ld Cit(A), Karnal Has Also Erred In Law In Deleting The Disallowance Of Proportionate Interest Of Rs.5,48,592/- Made By The Ao On Account Of Negative Partner Capital. 4. The Appellant Craves Leave To Add Or Amend The Grounds Of Appeal Before The Appeal Is Heard Or Disposed Off.” 3. At The Time Of Hearing, We Inquired From The Ld. Dr As To Whether The Tax Effect Of The Grounds Raised By Revenue Is Less Than The Monetary Limit Prescribed By Cbdt For Filing The Appeals To Which He Fairly Admitted That The Tax Effect Is Less Than The Monetary Limit Prescribed By Cbdt For Filing The Appeals.

Section 2(22)(e)