The assessee received loan from one NS Fincon Pvt. Ltd. The Revenue seeks to tax this loan as deemed dividend. The case of the Revenue was that one Lafin Financial Services Pvt. Limited had advanced money to NS Fincon Pvt. Ltd. who in turn advanced money to the Assessee. The Assessee a 50% share holder of Lafin Financial Services Pvt. Limited and in view thereof, loan advanced by NS Fincon Pvt. Ltd. to the Assessee is to be treated as a dividend in the hands of the Assessee. It is the admitted position that the Assesee is not a share holder in NS Fincon Pvt. Ltd. The AO brought to tax the amount of loan received by the Assesee from NS Fincon Pvt. Ltd. as deemed dividend under Section 2 (22)(e) of the Act. This was deleted by the CIT(A) and the Tribunal. On appeal by the department to the High Court HELD dismissing the appeal:<\/p>\n
The submission on behalf of the Revenue made before us is that one has to look at the substance of the transaction and that if one looks at the substance, then the Assessee would be chargeable to tax. This is not acceptable as fiscal status have to be interpreted strictly. Section 2 (22)(e) of the Act creates a fiction by bringing to tax an amount as dividend when the amount so received is otherwise then dividend. On a strict interpretation of Section 2(22)(e) of the Act, unless the Assessee is the shareholder of the company lending him money, no occasion to apply it can arise (CIT v\/s. Vatika Township<\/a><\/strong> 2015 (1) SCC 1, CIT v\/s. Universal Medicare Pvt. Ltd<\/strong>. 324 ITR 263 CIT v\/s. Impact Containers Pvt. Ltd<\/a><\/strong>. 367 ITR 346 followed)<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"
The submission on behalf of the Revenue made before us is that one has to look at the substance of the transaction and that if one looks at the substance, then the Assessee would be chargeable to tax. This is not acceptable as fiscal status have to be interpreted strictly. Section 2 (22)(e) of the Act creates a fiction by bringing to tax an amount as dividend when the amount so received is otherwise then dividend. On a strict interpretation of Section 2(22)(e) of the Act, unless the Assessee is the shareholder of the company lending him money, no occasion to apply it can arise<\/p>\n