ITO, New Delhi V. M/s Incom Wires & Cables Ltd., New Delhi

ITA 1078/DEL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7476 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 28-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALIL MISHRA
• Assessee Lawyers: PRAKASH NARAIN; S K CHATURVEDI
• Keywords: Deemed dividend

Judgement Text

ITA NO. 1078/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 1078/DEL/2011 A.Y. : 2006-07 INCOME TAX OFFICER, WARD 11(4), ROOM NO. 324, CR BUILDING, NEW DELHI VS. M/S INCOM WIRES AND CABLES LTD., A-90, NARAINA INDL. AREA, PHASE-1, NEW DELHI-110028 (PAN/GIR NO. : AAACI0470M) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSEESSEE BY : SH. PRAKASH NARAIN, ADVOCATE AND SHRI S.K. CHATURVEDI, CA DEPARTMENT BY : SH. SALIL MISHRA, SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 16.12. 2010 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED READ AS UNDER:- (I) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERR ED IN DELETING AN AMOUNT OF ` 39,90,517/- WHICH WAS ADDED U/S 2(22)(E) OF IT ACT, 1961 IN HANDS OF ASSESSEE AS DE EMED DIVIDEND. (II) ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERR ED IN ITA NO. 1078/DEL/2011 2 MAINTAINING THAT SECTION 2(22)(E) IS A DEEMING FICTIO N WHICH SHOULD NOT BE GIVEN A VIDE MEANING. WHEREAS IT IS A SETTLED LAW THAT THE PROVISION OF SECTION 2(22)(E) ARE SO COMPREHENSIVE THAT EVEN IN SITUATION WHERE AS COMPANY IS DEBTOR IN THE BOOKS OF CLOSELY HELD COMPANY OR SUCH A COMPANY WAS CREDITOR TO ANOTHER COMPANY, THE PROVISIO NS OF SECTION ARE ATTRACTED. (III) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF THE APPEAL RAISED ABOVE AT THE TIME OF HE ARING. 3. IN THIS CASE ASSESSING OFFICER HAS ASSESSED A SUM OF ` 39,90,517/- AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE IT ACT. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) GRANTED THE RELIEF ON TWO COUNTS. FIRSTLY, HE HELD THAT THE TRANSACTION WAS A COMMERCIAL / BUSINESS TRANSACTION WHICH BENEFITED BOTH THE PARTIES. HENCE, DEEMING PROVISION OF SECTIO N 2(22)(E) ARE NOT ATTRACTED. SECONDLY, LD. COMMISSIONER OF INCOME TA X (APPEALS) ALSO TOOK NOTE OF THE GROUND TAKEN BY THE ASSESSEE THAT SECTION 2(22)(E) IS NOT ATTRACTED IN THIS CASE AS THE ASSESSEE WAS NOT A SHARE HOLDER DURING THE FINANCIAL YEAR 2005-06 WITH M/S INCOM CABL ES, THE LOANER COMPANY. ACCORDINGLY, LD. COMMISSIONER OF INCOME T AX (APPEALS) REFERRED TO CERTAIN JUDICIAL DECISION INCLUDING THA T OF A.C.I.T. VS. BHAUMIK COLOR P. LTD. OF THE SPECIAL BENCH OF ITAT, MUMBAI. HE HELD THAT ASSESSEE COMPANY IS NOT REGISTERED SHARE HOLDER WITH M/S INCOM CABLES DURING THE FINANCIAL YEAR 2005-06, THEREFORE , ON THIS GROUND ALSO APPEAL IS ALLOWED IN FAVOUR OF THE ASSESSEE. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. ITA NO. 1078/DEL/2011 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL OF THE ASSESSEE CONTENDED THAT THE ISSUE IS SQUARELY COVERED IN FAV OUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. ANKITECH P. LTD. 340 ITR 14 (DEL). IN TH IS CASE IT WAS HELD THAT IT IS A DEFINITION OF DIVIDEND WHICH IS ENLAR GED BY THE DEEMING PROVISION OF SECTION 2(22)(E) AND NOT THAT OF SHAR EHOLDER AND, THEREFORE, A CONCERN WHICH IS GIVEN LOAN OR ADVANCE BY A COMPANY CANNOT BE TREATED AS SHAREHOLDER OF THE LATTER SIMPL Y BECAUSE A SHAREHOLDER OF THE LENDER COMPANY HOLDING VOTING POW ER OF 10 PER CENT OR MORE THEREIN HAS SUBSTANTIAL INTEREST IN SUCH CON CERN, AND SUCH LOAN OR ADVANCE CANNOT BE TREATED AS DEEMED DIVIDEND UNDE R SECTION 2(22)(E) AT THE HANDS OF SUCH A CONCERN. WE FIND THAT RATIO FROM THE SAID CASE LAW IS CLEARLY APPLICABLE IN THE PRESENT CASE. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS NOT A SHAREHOLDER OF M/S INCOM CABLES. HENCE, RESPECTFULLY FOLLOWING THE PRECEDEN T FROM THE JURISDICTIONAL HIGH COURT DECISION AS ABOVE, WE UPH OLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND HOLD THA T SINCE THE ASSESSEE COMPANY IS A NOT A REGISTERED SHARE HOLDER OF M/S INCOM CABLES DURING THE FINANCIAL YEAR 2005-06 THE PROVIS ION OF SECTION ITA NO. 1078/DEL/2011 4 2(22)(E) ARE NOT ATTRACTED AND HENCE, WE DECIDE T HE ISSUE IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/1/2012. SD/- SD/- [ [[ [I.P. BANSAL I.P. BANSAL I.P. BANSAL I.P. BANSAL] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 20/1/2012 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES