M/s. Kingston Threads Pvt. Ltd., Baroda V. The Dy. CIT, Circle-1(2), Baroda

CO 83/AHD/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1131 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 16-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JUNGID
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I RAJPAL YADAV , JUDICIAL MEMBER KINGSTON THREADS PVT. LTD., 801 - A WING, ALKAPURI ARCADE, R.C. DUTT ROAD, BARODA PAN: AABCK5828L (CROSS OBJECTOR ) VS THE DCIT, CIRCLE 1(2), BARODA (RESPONDENT) REVENUE BY : S H RI J.P. JUNGID , SR. D . R. ASSESSEE BY: S H RI MANISH J. SHAH , A.R. DATE OF HEARING : 08 - 07 - 2 015 DATE OF PRONOUNCEMENT : 03 - 08 - 2 015 / ORDER P ER : RAJPAL YADAV , JUDICIAL MEMBER : - ON RECEIPT OF NOTICE IN THE REVENUE S APPEAL BEARING ITA NO. 3002/AHD/2010, ASSESSEE HAS FILED CROSS OBJECTION BEARING NO. 83/A HD/2014. THE APPEAL AND CO WERE HEARD TOGETHER ON 8 TH JULY, 2015 . C.O. NO. 83/ AHD/2014 (IN I T A NO . 3002 / A HD/20 10 ) A SSESSMENT YEAR 200 6 - 07 CO NO. 83/AHD/2014 (IN 3002 /AHD/20 10) A.Y. 2006 - 07 PAGE NO KINGSTON THREADS PVT. LTD. VS. DCIT 2 2. AP PEAL OF THE REVENUE HAS BEEN DISPOSED OFF BY US VIDE ORDER DATED 24 TH JULY, 2015. 3. THE GRIEVANCE OF THE ASSESSEE IN THE CROSS OBJECTION IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE DELETED THE ENTIRE ADDITION PROPOSED U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961. T HE REVENUE IN ITS APPEAL HAS ALSO TAKEN GROUND NO. 3 WHEREIN IT HAS CHALLENGED THE DELETION OF ADDITION MADE U/S. 2(22)(E) . I N THE REVENUE S APPEAL, W E HAVE RECORDED FOLLOWING FINDING . 9. IN GROUND NO. 3, GRIEVANCE OF THE REVENUE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION MADE U/S. 2(22)(E) OF THE INCOME TAX ACT, 1961. THE BRIEF FACTS OF THE CASE ARE THAT ON SCRUTINY OF THE ACCOUNTS, LD. ASSESSING OFFICER FOUND THAT ASSESSEE - COMPANY HAD RECEIVED A SUM OF RS. 16,71,757/ - AS AN ADVANCE FROM THE ASSOCIATE CONCERN M/S. JET TECH PVT. (GUJ). THE ASSESSING OFFICER HAS OBSERVED THAT SHRI SHIBANSHU MISHRA IS A DIRECTOR/SHARE - HOLDER WITH SUBSTANTIAL SHARE EXCEEDING 10% OF THE VOTING POWERS IN BOTH THE COMPANIES. THEREFORE, THE ADVANCES GIVEN BY M/S. JET TECH PVT LTD TO THE ASSESSEE IS TO BE CONSIDERED AS A DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE INCOME TAX ACT. HE ACCORDINGLY, MADE AN ADDITION OF RS. 16,21,755/ - IN THE TOTAL INCOME OF THE ASSESSEE. 10. ON APPEAL, LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS DELETED THE ADDITION. 11. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH OF THE ITAT RENDERED IN THE CASE OF ACIT VS. BHAUMIK COLOURS PVT. LTD REPORTED IN 118 ITD PAGE 01. THE SPECIAL BENCH OF THE ITAT HAS HELD THAT IN ORDER TO ATTRACT SECTION 2(22)(E) OF THE ACT, THE BOR ROWER SHOULD BE THE REGISTERED SHARE - HOLDER OF THE LENDER COMPANY. IN THE PRESENT CASE, M/S. JET TECH PVT LTD HAS ADVANCED A SUM OF RS. 16,71,755/ - , IN ORDER TO ATTRACT SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961, THE ASSESSEE SHOULD BE SHARE - HOLDER OF M/S CO NO. 83/AHD/2014 (IN 3002 /AHD/20 10) A.Y. 2006 - 07 PAGE NO KINGSTON THREADS PVT. LTD. VS. DCIT 3 JET TECH PVT. LTD HOLDING NOT LESS THAN 10% OF THE TOTAL VOTING SHARE. THE ASSESSEE IS NOT THE SHARE - HOLDER RATHER IT IS SHRI SHIVANSHU MISHRA WHO WAS HOLDING SHARES IN BOTH THE COMPANIES. IN THIS SITUATION, SECTION 2(22)(E) CANNOT BE ATTRACTED IN THE GIVEN FACTS AND CIRCUMSTANCES. RESPECTFULLY, FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE ITAT, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL. IT IS DISMISSED. 4. THE ASSESSEE IN ITS CROSS OBJECTION HAS SUBMITTED THAT COMMISSIONER OF INCO ME TAX (A PPEALS) IN PRINCIPLE UPHELD THE ADDITION U/S. 2(22)(E) BUT OBSERVED THAT THE AMOUNT TREATED AS DEEMED DIVIDEND AND TAXED IN THE HANDS OF THE ASSESSEE IN ASSESSMENT YEAR 2004 - 05 MAY BE REDUCED FROM ACCUMULATED PROFITS OF M/S JTPL AND THEREAFTER THE DEEMED DIVIDEND WILL BE WORKED OUT. ACCORDING TO THE ASSESSEE, ONCE SECTION 2(22)(E) IS NOT ATTRACTED UPON THE ASSESSEE , THEN , THERE CANNOT BE ANY DEEMED DIVIDEND REQUIRED TO BE ASSESSED IN THE HANDS OF ASSESSEE. ACCEPTING THIS CONTENTION OF THE ASSESSE E THAT SECTION 2(22)(E) IS NOT APPLICABLE, WE HAVE REJECTED THE GROUND OF APPEAL RAISED BY THE REVENUE. 5 . IN VIEW OF THE ABOVE DISCUSSION, WE ALLOW THE GROUND S RAISED IN THE CROSS OBJECTION AND DIRECT THE ASSESSING OFFICER NOT TO TREAT A NY AMOUNT TAKEN AS ADVANCE FROM M/S. JTPL AS DEEMED DIVIDEND BECAUSE ASSESSEE IS NOT A REGISTERED SHARE - HOLDER OF M/S. JTPL AND NO DEEMED DIVIDEND CAN BE ASSUMED IN THE HANDS OF THE ASSESSEE QUA ADVANCES FROM M/S. JTPL. 6 . IN THE RESULT, CO FILED BY ASSESSEE IS ALLOWED. ORDER PR ONOUNC ED IN THE OPEN COURT ON 03 - 0 8 - 2015 SD/ - SD/ - ( PRAMOD KUMAR ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 03 /0 8 /2015 CO NO. 83/AHD/2014 (IN 3002 /AHD/20 10) A.Y. 2006 - 07 PAGE NO KINGSTON THREADS PVT. LTD. VS. DCIT 4 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,