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applicability os section 2(22)(e) in case of ICDs

Started by murali Krishnamurthy, March 07, 2013, 05:53:16 PM

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murali Krishnamurthy

My client had received ICD from another company where there is only common shareholder. my client (assessee company) is not a shareholder of the other company. The AO under directions of Addl CIT had included the ICD as deemed dividends. On appeal, the CIT(A) allowed the claim. The department is in appeal before the ITAT.

Please advise whether the action of the AO is correct? Any case law to support the claim of the assessee company.

An early reply will be greatly appreciated as the appeal is listed for hearing on Monday.


ICDs are different from loans or advances and would not come within the purview of deemed dividend as per the citations reported in 28 sot 383 and  28 ITCL(II)551. Please go through the same and use in support of your argument.

subash agarwal,Adv kolkata

Dear Mr. Murali you can read my article on the issue which i have hosted on my blog.


murali Krishnamurthy

Respected Agarwalji,

Please give case law in support of the proposition that ICD are different from loans and advances.

An early action will be greatly appreciated.

With best regards,


subash agarwal,Adv kolkata

Dear Muraliji,

Pls. go through the following case laws for d proposition that loans & Advances are different than ICDs/deposits & sec 2(22)(e) does not apply to such cases-
a)   Bombay Oil Industries Ltd. Vs DCIT 28 SOT 383
b)   Housing & Urban Development Corpn. Ltd. v. Jt. CIT [2006] 5 SOT 918 (Delhi) (SB),
c)   Gujarat Gas Financial Service Ltd. v. Asstt. CIT [2008] 115 ITD 218 (Ahd.) (SB)
d)   Basant Poddar, Bangalore vs Assessee ,ITA.521/Bang/09
        link http://www.indiankanoon.org/doc/103880816/
e)   Ifb Agro Industries Limited vs Assessee, I.T.A No. 1721/Kol/2012
        link http://www.indiankanoon.org/doc/94896384/
f)   S.Dev Fashion Pvt.Ltd vs Department , ITA No.2491/Ahd/2010   
         link http://www.indiankanoon.org/doc/187251207/



issue also covered by special bench judgement of Bhaumik and confirmed by Delhi and Bombay and Rajasthan high court.

subash agarwal,Adv kolkata

Respected Pawanji,

In Bhaumik Colour (P.) Ltd's case 118 ITD 1(Mum) (SB), the issue whether loans & Advances are different than ICDs/deposits never fell for consideration. The issue there was whether deemed dividend can be assessed only in hands of a person who is a shareholder of lender company and not in hands of a person other than a shareholder. The question before the Spl. Bench was answered in affirmative.



i agree. But i gave him a judgementwhich also supports his facts. His client is not shareholder of the company. There is only one common shareolders. Acoording to my limited knowledge of tax , the rati of bhaumik amy also apply to his case.