ACIT, CHENNAI V. M/s. R.R. Industries Ltd., CHENNAI

CO 133/CHNY/2016

• Counselvise Citation: [2017] 119 COUNSELVISE.COM (IT) 3439 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 29-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 14-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASISH TRIPATHY
• Assessee Lawyers: R VENKATESH
• Keywords: Reopening of assessment; Deemed dividend
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.2254/MDS/2016 & C.O. NO.133/MDS/2016 (IN I.T.A. NO.2254/MDS/2016) & '& / ASSESSMENT YEAR : 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1(4), CHENNAI - 600 034. V. M/S R.R. INDUSTRIES LTD., R.R. TOWER III, THIRU VI KA INDUSTRIAL ESTATE, GUINDY, CHENNAI - 600 032. PAN : AAACR 3594 H ()*/ APPELLANT) ( RESPONDENT & CO-OBJECTOR) )* + , / APPELLANT BY : SHRI ASISH TRIPATHY, JCIT -.)* + , / RESPONDENT BY : SHRI R. VENKATESH, CA / + 0' / DATE OF HEARING : 12.09.2017 12' + 0' / DATE OF PRONOUNCEMENT : 21.09.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THE APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3, CHENNA I, DATED 30.03.2016 FOR THE ASSESSMENT YEAR 2007-08. THE AS SESSEE HAS ALSO FILED CROSS-OBJECTION AGAINST THE VERY SAME OR DER OF THE 2 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 CIT(APPEALS). THEREFORE, WE HEARD THE APPEAL AND T HE CROSS- OBJECTION TOGETHER AND DISPOSING OF THE SAME BY THI S COMMON ORDER. 2. THERE WAS A DELAY OF 9 DAYS IN FILING THE APPEAL BY THE REVENUE. THE REVENUE HAS FILED A PETITION FOR COND ONATION OF DELAY. WE HAVE HEARD THE LD. D.R. AND THE LD. REPR ESENTATIVE FOR THE ASSESSEE. WE FIND THAT THERE WAS SUFFICIENT CA USE FOR NOT FILING THE APPEAL BEFORE THE STIPULATED TIME. THEREFORE, WE CONDONE THE DELAY AND ADMIT THE APPEAL. 3. SHRI ASISH TRIPATHY, THE LD. DEPARTMENTAL REPRES ENTATIVE, SUBMITTED THAT THE ASSESSEE-COMPANY WAS HOLDING MOR E THAN 10% OF SHARES IN M/S HANUDEV INVESTMENTS PVT. LTD. AND M/S RISHAB INFORPARK PVT. LTD. THE ASSESSEE-COMPANY HAS RECEI VED UNSECURED LOAN OF ` 2,54,05,731/- FROM M/S HANUDEV INFOPARK PVT. LTD. SIMILARLY, THE ASSESSEE HAS RECEIVED ` 84,30,876/- FROM M/S RISHAB INFOPARK PVT. LTD. SINCE THE ASSESSEE IS HAVING MO RE THAN 10% OF SHARES, ACCORDING TO THE LD. D.R., THE ASSESSING OF FICER FOUND THAT THE LOAN RECEIVED BY THE ASSESSEE HAS TO BE ASSESSE D AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME-TAX A CT, 1961 (IN SHORT 'THE ACT') ACCORDINGLY, AFTER REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT, THE ASSESSING OFFICER ASSES SED THE DEEMED 3 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 DIVIDEND AT ` 3,38,36,607/-. ON APPEAL BY THE ASSESSEE, ACCORDIN G TO THE LD. D.R., THE CIT(APPEALS) FOUND THAT IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2009-10, A SIMILAR ADDITIO N MADE BY THE ASSESSING OFFICER WAS DELETED. THE CIT(APPEALS) FO UND THAT SHARE PREMIUM ACCOUNT CANNOT BE CONSTRUED AS ACCUMULATED PROFIT, THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFIC ER WAS DELETED. ACCORDING TO THE LD. D.R., THE SHARE PREMIUM COLLEC TED BY THE ASSESSEE ALSO HAS TO BE TREATED AS ACCUMULATED PROF IT FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. 4. ON THE CONTRARY, SHRI R. VENKATESH, THE LD. REPR ESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT SECTION 2(22)(E) O F THE ACT CLEARLY SAYS THAT TO THE EXTENT TO WHICH THE COMPANY POSSES SES ACCUMULATED PROFIT, THE LOAN OR ADVANCE HAS TO BE T REATED AS DEEMED DIVIDEND. REFERRING TO THE BALANCE SHEET OF M/S HANUDEV INFORPARK PVT. LTD., A COPY OF WHICH IS AVAILABLE A T PAGE 18 OF THE PAPER-BOOK, THE LD. REPRESENTATIVE SUBMITTED THAT THERE WAS NO ACCUMULATED PROFIT FOR THE YEAR UNDER CONSIDERATION . SIMILARLY, THE BALANCE SHEET OF M/S RISHAB INFOPARK PVT. LTD., WHI CH IS AVAILABLE AT PAGE 21 OF THE PAPER-BOOK, THE LD. REPRESENTATIVE S UBMITTED THAT THERE WAS NO ACCUMULATED PROFIT FOR THE YEAR UNDER CONSIDERATION IN 4 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 THAT COMPANY ALSO. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT SHARE PREMIUM IS A CAPITAL CONTRIBUT ION, THEREFORE, THE SAME CANNOT BE CONSIDERED AS PROFIT OF THE COMPANY. FOR THE YEAR UNDER CONSIDERATION, THERE WAS NO ACCUMULATED PROFI T, ACCORDING TO THE LD. REPRESENTATIVE, HENCE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE DEDUCTION MADE BY THE ASSESSING OFFICER. 5. REFERRING TO THE CROSS-OBJECTION, THE LD. REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT APART FROM SUPPORTING T HE ORDER OF THE CIT(APPEALS), THE ASSESSEE HAS ALSO RAISED A GROUND WITH REGARD TO REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE AC T. ACCORDING TO THE LD. REPRESENTATIVE, EVEN THOUGH THE ASSESSME NT WAS REOPENED WITHIN THE PERIOD OF FOUR YEARS, THE ASSES SING OFFICER HAD NO MATERIAL OTHER THAN WHAT WAS FILED BY THE ASSESS EE AT THE TIME OF FILING OF RETURN OF INCOME FOR REOPENING THE ASSESS MENT. HENCE, ACCORDING TO THE LD. REPRESENTATIVE, THE REOPENING IS INVALID IN LAW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2( 22)(E) OF THE ACT WHICH READS AS FOLLOWS:- 5 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 2(22) DIVIDEND INCLUDES (A) .. . .. . .. .. .. .. .. .. .. .. . . . . . . (B) .. . . . . . . . . . . .. . . . . . (C) . . . . . . . . . . . .. . . . . . (D) . . . . . . . . . . . . . . . . . (E) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY I N WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WH ETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDE ND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDI NG NOT LESS THAN TEN PER CENT. OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH H E HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFE RRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULA TED PROFITS ; BUT DIVIDEND DOES NOT INCLUDE (I) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLAU SE (C) OR SUB- CLAUSE (D) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONSIDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN TH E EVENT OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS ; (IA) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB-CLA USE (C) OR SUB- CLAUSE (D) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIB UTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING BON US SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31ST D AY OF MARCH, 1964, AND BEFORE THE 1ST DAY OF APRIL, 1965 ; (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER OR T HE SAID CONCERN BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS , WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSIN ESS OF THE COMPANY ; 6 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET O FF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB-CLA USE (E), TO THE EXTENT TO WHICH IT IS SO SET OFF ; (IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF I TS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISION S OF SECTION 77A OF THE COMPANIES ACT, 1956 (1 OF 1956) ; (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERG ER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERG ED COMPANY (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY). EXPLANATION 1. THE EXPRESSION ACCUMULATED PROFITS, WHEREVER I T OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GA INS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31ST DAY OF MA RCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956 ; EXPLANATION 2. THE EXPRESSION ACCUMULATED PROFITS, IN SUB- CLAUSES (A), (B), (D) AND (E), SHALL INCLUDE ALL PR OFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB- CLAUSES, AND IN SUB-CLAUSE (C) SHALL INCLUDE ALL PR OFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION, BUT SHALL NO T, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISI TION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNE D OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS Y EAR IN WHICH SUCH ACQUISITION TOOK PLACE ; EXPLANATION 3. FOR THE PURPOSES OF THIS CLAUSE, (A) CONCERN MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT ANY TIM E DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS TH AN TWENTY PER CENT. OF THE INCOME OF SUCH CONCERN ; 7 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 7. A BARE READING OF SECTION 2(22)(E) OF THE ACT CL EARLY SAYS THAT TO THE EXTENT OF ACCUMULATED PROFIT, THE LOAN OR AD VANCE RECEIVED BY THE ASSESSEE-COMPANY CAN BE TREATED AS DIVIDEND FOR ASSESSMENT. IN THE CASE BEFORE US, EVEN THOUGH THE ASSESSING OF FICER FOUND THAT THERE WAS SOME ACCUMULATED PROFIT, THE BALANCE SHEE T FILED BY THE ASSESSEE BEFORE THIS TRIBUNAL INDICATES THAT THERE WAS NO ACCUMULATED PROFIT. FOR THE ASSESSMENT YEAR 2007-0 8, IN THE CASE OF M/S HANUDEV INFOPARK PVT. LTD., THE COMPANY DOES NOT HAVE ACCUMULATED PROFIT BUT ONLY HAS SHARE PREMIUM ACCOU NT. IN THE CASE OF RISHAB INFOPARK PVT. LTD., THERE IS ACTUALL Y REDUCTION IN THE AMOUNT DUE TO THEM DURING THE YEAR WHICH IS CLEARLY INDICATED IN THE BALANCE SHEET. THEREFORE, IN THE ABSENCE OF ANY AC CUMULATED PROFIT IN THE CASE OF M/S HANUDEV INFOPARK PVT. LTD. AND M /S RISHAB INFOPARK PVT. LTD., THE SHARE PREMIUM CANNOT BE TRE ATED AS ACCUMULATED PROFIT. THEREFORE, THE CIT(APPEALS) HA S RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY PLACI NG RELIANCE ON THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEAR 2009 -10. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 8 I.T.A. NO.2254/MDS/16 C.O. NO.133/MDS/16 8. SINCE THE ORDER OF THE CIT(APPEALS) IS CONFIRMED ON MERIT, IT MAY NOT BE NECESSARY FOR THE TRIBUNAL TO GO INTO TH E ISSUE OF REOPENING. 9. IN THE RESULT, BOTH THE APPEAL FILED BY REVENUE AND THE CROSS- OBJECTION FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED ON 21 ST SEPTEMBER, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 21 ST SEPTEMBER, 2017. KRI. + -056 76'0 /COPY TO: 1. )* /APPELLANT 2. -.)* /RESPONDENT 3. / 80 () /CIT(A)-3, CHENNAI 4. PRINCIPAL CIT, CHENNAI-5, CHENNAI 5. 69 -0 /DR 6. :& ; /GF.