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ITAT upheld deletion of addition on account of deemed dividend u/s 2(22)(e) (of Income Tax Act, 1961)
ITAT upheld deletion of addition on account of deemed dividend u/s 2(22)(e) (of Income Tax Act, 1961)
Assessee company was a stock exchange broker. AO disallowed business expenses claimed in sponsoring education in foreign countries for children of interested parties, which AO held to be unrelated to assessee's business. AO treated a loan from a group concern as deemed dividend of assessee u/s 2(22)(e) (of Income Tax Act, 1961) and made addition. CIT(A) deleted additions. ITAT upheld the CIT(A)'s order.-501484
1. The assessee company was a stock exchange broker, earning brokerage on trading of shares and other income as a member of NSE, BSE and securities on self account. The assessee filed its return declaring income of Rs.45,57,136/-. Notices under section 143(2) (of Income Tax Act, 1961) and 142(1) of the Act were issued under scrutiny. During assessment, the AO made addition of Rs.14,96,226/- of which expenses, the assessee claimed as business expenses in sponsoring the education in foreign countries for children of interested parties. The AO disallowed it as they were not related to the assessee's business nor it would benefit any way assessee's business for such huge expenses towards given to relations of interested persons directly/ indirectly. AO found the assessee received Rs.1,50,00,000/- as loan from a group concern, which the AO treated as deemed dividend of the assessee u/s 2(22)(e) (of Income Tax Act, 1961) and added to the income of the assessee.
2. CIT(A) deleted the additions.
3. On appeal, the ITAT held as under:
"4. We hold that the offer to pursue higher studies or studying abroad is a better education and which gives greater experience and it is helpful to the assessee's business and such expenses has to be treated as incurred wholly or exclusively for the betterment of assessee's own business.
Therefore, the expenses incurred towards studies abroad of the employees can be disallowed.
5. Respectfully following the same as it is binding on us and remained uncontroverted by the Revenue, we uphold that the section contemplated in 2(22)(e) of the Act is not applicable to the assessee's case. Accordingly, grounds raised by the Revenue are dismissed.”
Case Reference - JCIT(OSD), Circle-8, Vs M/s. Baljit Securities Pvt. Ltd.
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH 'A', KOLKATA
[Before Shri P.M.Jagtap, AM & Shri S.S.Viswanethra Ravi, JM]
ITA No. 136/Kol/2012
(Assessment Year : 2008-09)
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