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)

Sumit Lundia, Kolkata vs. ITO, Ward 36(2), Kolkata

In the result, the appeal filed by the assessee is allowed

ITA 818/KOL/2017[2013-14]Status: DisposedITAT Kolkata18 Oct 2017AY 2013-14

Bench: Shri S.S. Viswanethra Ravi, Jm &Dr. A.L.Saini, Am आयकरअपीलसं./Ita No.818/Kol/2017 (िनधा"रणवष" / Assessment Year: 2013-14 Vs. I.T.O, Ward-36(2),Kolkata Sumit Lundia 63, Geeta Apartments, Dum Dum Aayakarbhawanpoorva 110, Park, Dum Dum Park Bazaar, Shant Pally, Kolkata – Kolkata – 700055. 700107. "थायीलेखासं./जीआइआरसं./Pan/Gir No. : Abwpl 4613 P (Assessee) .. (Respondent) Assessee By :Shri A. K. Tibrewal,Fca Respondent By :Shri Pinaki Mukherjee, Acit सुनवाईकीतारीख/ Date Of Hearing : 22/08/2017 घोषणाकीतारीख/Date Of Pronouncement : 18/10/2017 आदेश / O R D E R Per Dr. Arjun Lal Saini, Am: The Captioned Appeal Filed By The Assessee, Pertaining To Assessment Year 2013-14, Is Directed Against The Order Passed By The Ld. Commissioner Of Income Tax (Appeals)–10, Kolkata, In Appeal No.48/Cit(A)-10/W-36(2)/2016-17, Dated 06.01.2017, Which In Turn Arises Out Of An Order Passed By The Assessing Officerunder Section 143(3) Of The Income Tax Act, 1961, (Hereinafter Referred To As The ‘Act’), Dated 21.03.2016. 2. The Assessee Has Raised The Following Grounds Of Appeal: “1.That, On The Facts & Circumstances Of The Case, Ld. Commissioner Of Lncome Tax (Appeals) Erred In Confirming The Addition Of Rs.27,00,000/- Made By The Assessing Officer Under Section 2(22)(E) Of The Lncome Tax

For Appellant: Shri A. K. Tibrewal,FCAFor Respondent: Shri Pinaki Mukherjee, ACIT
Section 133(6)Section 143(2)Section 143(3)Section 2(22)(e)