SHARP & TANNAN ASSOCIATES, MUMBAI V. ACIT CIR 11(3), MUMBAI

ITA 1067/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75304 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 21-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 04-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PITAMBER DAS
• Assessee Lawyers: HEENA DOSHI
• Keywords: Deemed dividend
• Section: 6

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO. 1067/MUM/2011 ( / ASSESSMENT YEAR : 2007-08 M/S SHARP & TANNA N ASSOCIATES, 87, NARIMAN BHAVAN, 227, NARIMAN POINT, MUMBAI 400 020. / VS. ASSTT. COMMISSIONER OF INCOME TAX CIR. 11(3), AAYAKAR BHAWAN, MAHARSHI KARVE MARG, MUMBAI -20. . / PAN : AAAFS1034J ( # / APPELLANT ) .. ( $%# / RESPONDENT ) APPELLANT BY MS. HEENA DOSHI RESPONDENT BY : SHRI PI T AMB E R DAS ) * / DATE OF HEARING : 21-1-2014 ) * / DATE OF PRONOUNCEMENT : 24-1-2014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DTD. 21- 12-2010 PASSED BY THE LD. CIT(A) 2, MUMBAI WHEREB Y HE CONFIRMED THE ADDITION OF RS. 28,04,172/- MADE BY THE A.O. ON ACC OUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS A FIRM OF CH ARTERED ACCOUNTANTS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED BY IT ON 2-11- 2007 DECLARING TOTAL INCOME OF RS. 58,86,038/-. IN THE BALANCE SHEET FILED ALONG WITH THE RETURN OF INCOME, UNSECURED LOAN OF RS. 28,04,172/- TAKEN FROM M/S SHARP & TANNAN ASSOCIATES ADVISOR PVT. LTD . WAS SHOWN BY THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, IT CAME TO THE NOTICE ITA 1067/M/11 2 OF THE A.O. THAT THE PARTNERS OF THE ASSESSEE FIRM WERE ALSO THE SHAREHOLDERS OF M/S SHARP & TANNAN ASSOCIATES ADVISOR PVT. LTD. HE, THEREFORE, INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND A DDED THE LOAN AMOUNT OF RS. 28,04,172/-RECEIVED FROM THE SAID COMPANY TO THE TO TAL INCOME OF THE ASSESSEE FIRM TREATING THE SAME AS DEEMED DIVIDEND. 3. THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DEE MED DIVIDEND WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFO RE THE LD. CIT(A) AND IT WAS CONTENDED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(A) THAT THE ASSESSEE FIRM NOT BEING A SHAREHOLDER OF M/S SHARP & TANNAN ASSOCIATES ADVISOR PVT. LTD., THE AMOUNT OF LOAN RECEIVED FROM THE SAID COM PANY COULD NOT BE TAXED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. R ELIANCE IN SUPPORT OF THIS CONTENTION WAS PLACED BY THE ASSESSEE ON THE DECISI ON OF SPECIAL BENCH OF ITAT IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT. LT D. [2009] 118 ITD 1 (MUM)(SB). THE LD. CIT(A), HOWEVER, DID NOT FIND M ERIT IN THIS CONTENTION RAISED ON BEHALF OF THE ASSESSEE AND RELYING ON THE CBDT CIRCULAR NO. 495 DATED 22 ND SEPTEMBER, 1987, HE CONFIRMED THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DEEMED DIVIDEND TO THE TOTAL INCOME OF T HE ASSESSEE IN RESPECT OF AMOUNT OF LOAN RECEIVED FROM M/S SHARP & TANNAN ASS OCIATES ADVISOR PVT. LTD. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE SOLITARY ISSUE INVOLVED IN THIS APPEAL OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UN IVERSAL MEDICARE PRIVATE LIMITED [2010] 324 ITR 263 (BOM.) WHEREIN IT WAS HE LD THAT THE AMOUNT OF DEEMED DIVIDEND AS PER PROVISIONS OF SECTION 2(22)( E) COULD BE TAXED ONLY IN THE HANDS OF THE ASSESSEE WHO IS A SHAREHOLDER. IT WAS HELD THAT THE EFFECT OF CLAUSE (E) OF SECTION 2(22) IS TO BROADER THE AMBIT OF THE EXPRESSION DIVIDEND ITA 1067/M/11 3 BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SHAREHOLDER. IT WAS HELD THAT THE SAID DEFINITION, HOWEVER, DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED ONLY I N THE HANDS OF THE SHAREHOLDER. RESPECTFULLY FOLLOWING THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD. ( SUPRA), WE DELETE THE ADDITION OF RS. 28,04,172/- MADE BY THE A.O. U/S 2( 22)(E) OF THE ACT AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF DEEMED DI VIDEND RECEIVED FROM M/S SHARP & TANNAN ASSOCIATES ADVISOR PVT. LTD. AND ALL OW THIS APPEAL OF THE ASSESSEE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JANUARY, 2014. . ) 0 1 24-01-2014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 1 DATED 24-01-2014 .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. 4 () / THE CIT(A)2, MUMBAI. 4. 4 / CIT 1,, MUMBAI 5. $8 , * 8 , / DR, ITAT, MUMBAI H BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA 1067/M/11 4 DRAFT DICTATED ON 21 - 1 - 14 SR PS 2 DR AFT PLACED BEFORE AUTHOR ON 22-1-14 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 K EPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH SR PS