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)

Santosh Kumar Jaiswal, Kolkata vs. ITO, Ward - 45(4), Kolkata

Appeal is allowed

ITA 2405/KOL/2017[2009-10]Status: DisposedITAT Kolkata15 May 2019AY 2009-10

Bench: Shri S.S, Godaraassessment Year:2009-10 Santosh Kumar Jaiswal Income Tax Officer, बनाम / 31F, Ramkrishna Samadhi Ward-45(4), 3, V/S. Road, Kolkata-700054 Government Place [Pan No.Acspj 6607 N] (West), Kolkata-700001 .. अपीलाथ" /Appellant ""यथ" /Respondent Shri Subash Agarwal, Advocate अपीलाथ" क" ओर से/By Appellant Shri C.J. Singh, Jcit-Sr-Dr ""यथ" क" ओर से/By Respondent 05-03-2019 सुनवाई क" तार"ख/Date Of Hearing 15-05-2019 घोषणा क" तार"ख/Date Of Pronouncement आदेश /O R D E R This Assessee’S Appeal For Assessment Year 2009-10 Arises Against The Commissioner Of Income-Tax (Appeals)-13, Kolkata’S Order Dated 18.07.2017 Passed In Case No.118/Cit(A)-13/W-44(1)/Kol/2015-16, Involving Proceedings U/S. 143(3) R.W.S. 147 Of The Income Tax Act, 1961; In Short ‘The Act’. Heard Both The Parties. Case File Perused. 2. The Assessee’S Sole Substantive Grievance Canvassed In The Instant Appeal Challenges Correctness Of Both The Lower Authorities Making Deemed Dividend Addition Of ₹6,32,449/- In His Hands. The Cit(A);S Detailed Discussion To This Effect Reads As Under:- “Decision:- 6. I Have Gone Through The Contention Of The Assessee, The Order Passed By The Ao & The Submissions Made By The Appellant. The Decision Of This Appeal Is Given As Under:- 6.1. In This Case The Only Issue Relates To The Addition Of Rs.6,33,449/- As A Deemed Evident Under Section 2(22)(E) Of The I.T Act. While Making Addition The Ao Found That ''During The Course Of Assessment Proceeding M/S. Benchmark Developers Pvt. Ltd For The A. Y 2009-10, It Was Observed That The Assessee Has Taken Loan From M/S. Benchmark Developers Pvt. Ltd. Amounting To Rs. 6,60,000/- In Which He Is One Of The Director & Holds About 35% Of

Section 143(3)Section 2(22)(e)