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‘Deemed Dividend’ liability of Holding Company

In DCIT v. M/s. The Hooghly Mills Co.Ltd, the ITAT Kolkata held that shareholding by Subsidiary Company is irrelevant while considering ‘deemed dividend’ liability of Holding Company under section 2(22)(e) of the Income Tax Act.

Assessing Officer, while completing assessment against the assessee-Company, found that assessee had during the previous year accepted the loans of Rs.10,20,00,000/- from M/s. Mega Resources Ltd, in which the subsidiary company of the assessee holds equity shares. The Officer, considering  the shareholding of both the assessee and its subsidiary company and concluded that the assessee held more than 10% of the voting power in M/s. Mega Resources Ltd,. and therefore, the assessee is liable to pay tax on ‘deemed dividend’ under provision of section 2(22)(e) of the Income Tax Act. The first appellate authority allowed the plea of the assessee on first appeal.

Article referred: http://www.taxscan.in/shareholding-subsidiary-co-irrelevant-considering-deemed-dividend-liability-holding-co-itat-kolkata/8159/

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