M/s Emm Vee Infrastructures (India) Pvt. Ltd., Meerut V. ITO, New Delhi

ITA 1050/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5206 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 28-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC , NEW DELHI BEFORE SH. N. K. SAINI, A CCOUNTANT M EMBER ITA NO. 1050/DEL/2017 : ASSTT. YEAR : 2011 - 12 EMM VEE INFRASTRUCTURES (INDIA) PVT . LTD., OPP. APEX COLLEGE, VED VYAS PURI, MEERUT DEHRADUN BY PASS ROAD, MEERUT - 250103 VS INCOME TAX OFFICER, WARD - 1 ( 2 ), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A A BCE0893K ASSESSEE BY : SH. CHANDER MEHRA , CA RE VENUE BY : SH. T. VASANTHAN , SR. DR DATE OF HEARING : 2 8 .0 6 .201 7 DATE OF PRONOUNCEMENT : 14 .08 .201 7 ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 09.12.2016 OF LD. CIT(A) , ALIGARH. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE ORDER DATED 05/12/2016 U/S 250 OF THE INCOME TAX ACT, 1961 PASSED BY THE COMMISSIONER OF INCOME TAX APPEALS, ALIGARH CAMP M EERUT IS ARBITARY, ERONEOUS, UNJUST AND WITHOUT JURISDICTION AND SO MUST BE QUASHED. 2. THAT THE LEARNED COMMISSIONER INCOME TAX, ALIGARH CAMP M EERUT ERRED IN LAW BY TREATING THE BUSINESS ADVANCE TO A COMPANY WHICH EVEN WAS RETUR N ED BACK AS DEEMED DIVIDEND WITH OUT GOING I N TO ITA NO . 1050 /DEL /201 7 EMM VEE INFRAST RUCTURES (INDIA) PVT. LTD. 2 F A CTS THAT THE RECIPIENT COMPANY IS NOT A REGISTERED SHARE HOLDER OF THE LENDER COMPANY. 3. THAT THE LEARNED COMMISSIONER INCOME TAX, ALIGARH CAMP M EERUT ERRED IN LAW BY CITING CIRCULAR NO. 495 DATED 22 - 09 - 1987 AND CONFIRMING THE ADDITION OF R S.12,50,000/ - AS DEEMED DIV IDEND THOUGH THE SAME WAS A BUSINESS ADVANCE AND IGNORING THE VARIOUS CASE LAWS CITED BY THE ASSESSES. 4. THE ASSESSEE RESERVES ALL RIGHTS TO ADD/MODIFY ANY OF THE GROUNDS OF APPEAL FOR THE SAKE OF JUSTICE AND REQUESTS FOR T HE ACCEPTANCE OF RETURNED INCOME AS DECLARED BY THE ASSESSEE. 3 . FROM THE ABOVE GROUNDS, IT IS GATHERED THAT ONLY GRIEVANCE OF THE ASSESSEE RELATES TO THE CONFIRMATION OF ADDITION OF RS.12,50,000/ - , MADE BY THE AO, CONSIDERING THE SAME AS DEEMED DIVIDEND. 4. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE E - FILED ITS RETURN OF INCOME ON 21.09.2011 DECLARING AN INCOME OF RS.9,36,170/ - AND AGRICULTURAL INCOME OF RS.2,05,150/ - . LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2011 - 12, OF M/S PRASANDI BIOTECH PARK (P) LTD. ( A SISTER CONCERN OF THE ASSESSEE ) IT WAS SEEN THAT THE ASSESSEE HAD RECEIVED A LOAN/ADVANCE OF RS.12,50,000/ - ON 24.06.2010 FRO M THE SAID COMPANY AND THAT THE SHAREHOLDERS OF M/S PRASANDI BIOTECH PARK (P) LTD. INCLUDED SH. VIJAY PAL YADAV, WHO H E LD 74.70% OF ITS SHARES , HE ALSO HELD 68.08% OF THE ITA NO . 1050 /DEL /201 7 EMM VEE INFRAST RUCTURES (INDIA) PVT. LTD. 3 SHARE CAPITAL OF THE ASSESSEE. THE AO FURTHER OBSERVED THAT M/S PRASANDI BIOTECH PARK (P) LTD. HAD ADEQUATE ACCUMULATED PROFITS DURING THE ASSESSMENT YEAR 2011 - 12. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AFORESAID AMOUNT OF RS. 12.50 LAC MAY NOT BE ADDED BACK TO THE INCOME OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE ADVANCE GIVEN WAS A TRADE ADVANCE FOR DEVELOPMENT OF LAND AND HENCE WAS A COMMERCIAL TRANSACTION TO BE EXCLUDED FROM THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. IN SUPPORT OF THE ABOVE CONTENTION, TH E ASSESSEE FURNISHED A COPY OF LETTER DATED 23.06.2010 WRITTEN BY SMT. SUNITA YADAV , DIRECTOR OF M/S PRASANDI BIOTECH PARK (P) LTD. WHICH READ AS UNDER: THE COMPANY IS ENCLOSING A CHEQUE FOR RS.12,50,000/ - AS AN ADVANCE, FOR THE SITE DEVELOPMENT EXPENSES AT VILLAGE NOORPUR, FOR WHICH THE DISCUSSIONS WE HAD WITH YOUR MANAGER. IF THE TERMS AND CONDITIONS, WHICH WERE VERBAL DISCUSSED, ARE NOT SUITABLE, THE AMOUNT BE REFUNDED BACK BY 31 ST AUGUST, 2010. 5. THE AO, HOWEVER, DID NOT FIND MERIT IN THE SUBMISSI ON OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE DID NOT FURNISH THE REASONS FOR CANCELLATION DUE TO WHICH THE ADVANCE WAS REFUNDED AND HAD ALSO NOT FURNISHED DETAILS/DOCUMENTARY EVIDENCE SUCH AS COPY OF AGREEMENT/EXACT LOCATION AND DESCRIPTION OF SITE FO R DEVELOPMENT , FOR WHICH ADVANCE WAS PAID. ACCORDINGLY, ADDITION OF RS.12,50,000/ - WAS MADE. ITA NO . 1050 /DEL /201 7 EMM VEE INFRAST RUCTURES (INDIA) PVT. LTD. 4 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE WAS NOT THE SHAREHOLDER OF M/S PRASANDI BIOTECH PARK (P) LTD . AND THAT NONE OF THE COMPANIES WERE SHAREHOLDER OF EACH OF THEM. HENCE, THE DEEMED DIVIDEND COULD NOT HAVE BEEN APPLIED TO NONE SHAREHOLDER. THE RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: ACIT VS BRITTO AMUSEMENT PVT. LTD. (2013) 360 ITR 544 (BOM) CIT VS MCC MARKETING PVT . LTD . (2011) 343 ITR 350 (DELHI) CIT VS ANKITECH PVT . LTD (2012) 340 ITR 14 (DELHI) CIT VS IMPACT CONTAINERS P. LTD (2014) 367 ITR 346 (BOM) 7 . THE LD. CIT(A), HOWEVER, DID NOT FIND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND S USTAINED THE DISALLOWANCE MADE BY THE AO. 8. NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND DREW OUR ATTENTION TOWARDS PAGE NOS. 21 & 22 OF THE ASSESSEE S PAPER BOOK WHICH IS THE COPY OF THE LIST OF THE SHAREHOLDER S OF M/S PRASANDI BIOTECH PARK (P) LTD. WHICH REVEALED THAT THE ASSESSEE S NAME WAS NOT THERE IN THE LIST OF THE SHAREHOLDER. IT WAS STATED THAT WHEN THE ASSESSEE WAS NOT A SHAREHOLDER OF M/S PRASANDI BIOTECH PARK (P) LTD., THE DISALLOWANCE MADE ON ACCOUNT OF DEEMED DIVIDEND WAS NOT JUSTIFIED. IT WAS FURTHER STATED THAT THE ASSESSEE RECEIVED ADVANCE FOR DEVELOPMENT OF SITE WHICH ITA NO . 1050 /DEL /201 7 EMM VEE INFRAST RUCTURES (INDIA) PVT. LTD. 5 WAS RETURNED BACK AS THE DEAL COULD NOT BE MATERIALIZED, SO IT WAS A BUSINESS TRANSACTIO N. THEREFORE, THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) WAS NOT JUSTIFIED. THE LEARNED D.R. IN HIS RIVAL SUBMISSION REITERATED IN OBSERVATIONS MADE BY THE AUTHORITIES BELOW AND SUPPORTED IN ORDERS PASSED BY THEM. 9. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE RECEIVED AN ADVANCE FOR LAND DEVELOPMENT FROM M/S PRASANDI BIOTECH PARK (P) LTD. , WHICH WAS RETURNED BACK, SO THE ADVANCE WAS FOR A BUSINESS TRANSACTION. RECENTLY, THE CENTRAL BOARD OF DIRECT TAXES ISSUED CIRCULAR NO. 19/17 DATED 12.06.2017 STATING THEREIN THAT TRADE ADVANCES WHICH ARE IN THE NATURE OF COMMERCIAL TRANSACTION WOULD NOT FALL WITHI N THE AMBIT OF THE ADVANCE IN SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, HENCEFORTH APPEALS MAY NOT BE FILED ON THIS GROUND BY THE OFFICIAL O F THE DEPARTMENT AND THOSE PARTIES FILED COURT/TRIBUNAL MAY BE WITHDRAWN . FROM THE AFORESAID CIRCULAR ALSO, IT IS C LEAR THAT WHEN THE ADVANCE RELATES TO THE COMMERCIAL TRANSACTION, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE. IN THAT VIEW OF THE MATTER, I AM OF THE VIEW THAT THE DISALLOWANCE MADE BY THE AO AND SUSTAINED BY THE LD. CIT(A) IN THE ASS ESSEE S CASE WAS NOT JUSTIFIED , A CCORDINGLY, THE SAME IS DELETED. ITA NO . 1050 /DEL /201 7 EMM VEE INFRAST RUCTURES (INDIA) PVT. LTD. 6 10. FURTHERMORE, THE ASSESSEE WAS NOT THE SHAREHOLDER IN M/S P RASANDI BIOTECH PARK (P) LTD., FROM WHOM ADVANCE WAS RECEIVED. IN THAT VIEW OF THE MATTER ALSO THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT WERE NOT APPLICABLE IN ASSESSEE S CASE. 1 1 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . (O RDE R P RONOUNCED IN THE COURT ON 14 /08 /2017 ) SD/ - (N. K . SAINI) ACCOUNTANT MEMBER DAT ED: 14 /0 8 /2017 *SUBODH* COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(APPEALS) 5 . DR: ITAT ASSISTANT REGISTRAR