Dr T.J.Jaikish, Calicut V. ITO, Calicut

ITA 105/COCH/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64933 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2012
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 10-02-2011
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE
• Assessee Lawyers: R V VEERAMANI
• Keywords: Charitable institution; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 105/COCH/2011 ASSESSMENT YEAR : 2005-06 DR. T.J. JAIKISH, P.V.S. HOSPITAL (P) LTD., RLY. STATION ROAD, CALICUT. [PAN: ACJPJ 3717C] VS. THE I.T.O., WARD-1(1), KOZHIKODE. (ASSESSEE -APPELLANT) (REVENUE- RESPONDENT) ASSESSEE BY SHRI R.V. VEERAMANI, CA REVENUE BY SMT. SUSAN GEORGE, SR. DR DATE OF HEARING 08/10/2012 DATE OF PRONOUNCEMENT 16/11/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23.11.2010 PASSED BY LD CIT(A)-I, CALICUT AND IT RELATES TO TH E ASSESSMENT YEAR 2005-06. THE ONLY ISSUE URGED IN THIS APPEAL IS WHETHER THE PROVISIONS OF SEC. 2(22)(E) RELATING TO THE DIVIDEND ARE ATTRACTED IN THE HANDS OF THE ASSESSEE OR NOT. 2. THE FACTS RELATING TO THE SAID ISSUE ARE STA TED IN BRIEF. THE ASSESSEE IS ONE OF THE DIRECTORS OF A PRIVATE LIMITED COMPANY NAMED M/S P.V.S. HOSPITAL (P) LTD AND HE HIS HOLDING MORE THAN 10% OF THE VOTING POWE R. DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2005-06, IT WAS NOT ICED THAT THE ASSESSEE HEREIN HAS TAKEN LOAN/ADVANCE FROM THE ABOVE SAID PRIVATE LIMITED COMPANY. THE CLOSING BALANCE AS ON 31.3.2005 IN THE ASSESSEES A CCOUNT STOOD AT RS.39,14,983/-. THE ACCUMULATED PROFIT OF THE COMP ANY AS ON THAT DATE STOOD AT I.T.A. NO. 105/COCH/2011 2 RS.53,04,819/-. ACCORDINGLY, AFTER HEARING THE ASS ESSEE, THE AO ASSESSED THE AMOUNT OF RS.39,14,983/- AS DEEMED DIVIDEND U/S 2(2 2)(E) OF THE ACT. THE ASSESSEE CHALLENGED THE SAID ORDER BEFORE LD CIT(A) , BUT COULD NOT SUCCEED. HENCE THE ASSESSEE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE PARTIES. THE LD COUNSEL F OR THE ASSESSEE REITERATED THE CONTENTIONS SUBMITTED BEFORE THE TAX AUTHORITIES, V IZ., THE IMPUGNED ADVANCES HAVE BEEN MADE IN THE ORDINARY COURSE OF BUSINESS. THE EXPLANATION GIVEN BY THE ASSESSEE WITH REGARD TO THE CLAIM OF PAYMENT IN THE ORDINARY COURSE OF BUSINESS IS EXTRACTED BELOW:- ..IT WAS TRUE THAT AN AMOUNT OF RS.39,14,982/- WAS OUTSTANDING AS ADVANCE TO THE ASSESSEE AS PER THE BOOKS OF M/S P.V .S. HOSPITALS (P) LIMITED, BUT THIS AMOUNT WAS UTILIZED FOR THE PURPO SE OF CONSTRUCTION OF A BUILDING FOR P.V.S. NURSING COLLEGE. AS A CONDITIO N FOR OBTAINING APPROVAL, THE NURSING COLLEGE HAD TO BE RUN BY A TRUST AND AC CORDINGLY IT WAS RUN BY P.V.S. CHARITABLE TRUST. AS THE TRUST DID NOT H AVE A LONG STANDING, OBTAINING LOAN ETC. WAS NOT FEASIBLE. EVEN FOR P.V. S. HOSPITAL, IN VIEW OF THE EXISTING LOAN COMMITMENTS, FURTHER LOAN WAS NOT FEASIBLE. IN THIS BACK DROP, THE PROPERTY WAS ACQUIRED/CONSTRUCTED IN ASSE SSEES NAME AND THEN LET OUT TO THE CHARITABLE TRUST. FOR PVS HOSPITAL, THE NURSING COLLEGE HELD MUCH OF STRATEGIC IMPORTANCE. THE TIE UP BETWEEN T HE TWO OF THEM WAS NECESSARY AND ADVANTAGEOUS MUTUALLY. FOR STUDENTS, PVS HOSPITAL WAS ABLE TO PROVIDE PRACTICAL TRAINING AND FOR THE HOSP ITAL, A REGULAR STREAM OF STUDENTS AS TRAINEES WAS ENSURED. THUS, ALL THE AB OVE WERE IN THE REGULAR COURSE OF BUSINESS TRANSACTIONS. 4. IT MAY NOT BE DISPUTED THAT THE NORMAL BUSINES S ACTIVITY OF PVS HOSPITAL (P) LIMITED IS RUNNING OF HOSPITAL. THE ADVANCE WAS GI VEN TO THE ASSESSEE HEREIN FOR THE PURPOSE OF CONSTRUCTION OF A BUILDING. ADVANCI NG MONEY FOR CONSTRUCTION OF BUILDING IS NOT THE NORMAL BUSINESS ACTIVITY OF THE ABOVE SAID COMPANY. IT IS NOT THE CASE OF THE ASSESSEE THAT THE IMPUGNED ADVANCE WAS GIVEN DURING THE COURSE OF RUNNING OF HOSPITAL. ON THE CONTRARY, IN OUR VI EW, THE ASSESSEE IS TRYING TO ESTABLISH A REMOTE BUSINESS CONNECTION BETWEEN M/S PVS HOSPITAL (P) LTD AND THE IMPUGNED ADVANCE. IN OUR VIEW, SUCH REMOTE CON NECTION SHALL NOT FALL IN THE CATEGORY OF ADVANCING MONEY IN THE ORDINARY COURSE OF BUSINESS. I.T.A. NO. 105/COCH/2011 3 5. THE LD A.R, IN HIS ALTERNATIVE CONTENTION, SU BMITTED THAT THE TAX ON THE DEEMED DIVIDEND SHOULD HAVE BEEN LEVIED IN THE HAND S OF THE COMPANY AS PER THE PROVISIONS OF SEC.115-O OF THE ACT. WE HAVE GO NE THROUGH THE PROVISIONS OF SEC. 115-O AND NOTICE THAT THE SAID SECTION IS APPL ICABLE ONLY TO ANY AMOUNT DECLARED, DISTRIBUTED OR PAID BY A COMPANY BY WAY O F DIVIDENDS, I.E., THE AMOUNT SHOULD HAVE BEEN DISTRIBUTED OR PAID AS DIV IDEND. IN THE INSTANT CASE, THE COMPANY HAS PAID THE IMPUGNED AMOUNT AS ADVANC E AND THE SAID ADVANCE WAS TREATED AS DEEMED DIVIDEND DUE TO STATUTORY F ICTION. ACCORDINGLY, IN OUR VIEW, THE DEEMED DIVIDEND SHALL NOT BE ATTRACTED BY THE PROVISIONS OF SEC.115O OF THE ACT. 6. IN VIEW OF THE FOREGOING DISCUSSIONS, WE DO NOT FIND ANY INFIRMITY IN THE DECISION OF LD CIT(A). 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED ACCORDINGLY ON 16-11-201 2 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 16TH NOVEMBER, 2012 GJ COPY TO: 1. DR. T.J. JAIKISH, P.V.S. HOSPITAL (P) LTD., RLY . STATION ROAD, CALICUT. 2. THE I.T.O., WARD-1(1), KOZHIKODE 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, CALI CUT. 4. THE COMMISSIONER OF INCOME-TAX, CALICUT. I.T.A. NO. 105/COCH/2011 4 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN