DCIT,Circle-1, Kolkata, Kolkata V. Suresh Kumar Patni, Kolkata

ITA 1143/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83213 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2005-2006
• Appeal Filed On: 08-08-2012
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: KOLKATA [ BEFORE SHRI SHAMIM YAHYA , A . M . & SHRI GEORGE MATHAN , J.M. ] I.T. A . NO. 1143 /KOL/20 1 2 ASSESSMENT YEAR : 2005 - 06 DCIT , CENTRAL CIRCLE - I, KOLKATA .. ( APPELLANT ) - VS - SURESH KUMAR PATNI .. ( RESPONDENT ) (PAN:AESPP 2029L ) DATE OF CONCLUDING THE HEA RING : 01 . 12 .201 4 DATE OF PRONOUNCING THE ORDER : 01 . 12 .201 4 APPEARANCES : F OR THE APPELLANT : SHRI P. K. CHAKRAVOR TY, ACIT : FOR THE RESPONDENT : NONE ( EX - PARTE ) O R D E R PER SHRI SHAMIM YAHYA, A .M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT (A) DATED 15.05.2012 AND PERTAINS TO ASSESSMENT YEAR 2005 - 06 . 2. THE GROUND S OF APPEAL R AISED BY THE REVENUE READ AS UNDER: 1. THE LD. CIT(A) ERRED BOTH IN FACTS AS WELL AS IN LAW IN ALLOWING THE ASSESSEE S APPEAL IN DELETING THE ADDITION MADE BY THE A.O. U/S 2(22)(E) OF THE INCOME - TAX ACT, 1961 CONSIDERING THE ASSESSEE AS LENDING COMPANY AS NBFC MERELY RELYING ON THE REGISTRATION OF RBI AND WITHOUT CONSIDERING THE BASIS OF BUSINESS AND TRADING ACTIVITY OF THE SAID COMPANY. 2. THAT THE DEPARTMENT CRAVES LEAVE TO ALTER/AMEND/MODIFY ANY OR ALL GROUNDS OF APPEAL. 3 . BRIEF FACTS OF THE CA SE ARE THAT THE ASSESSEE HAD TAKEN A LOAN OF RS.13,00,000/ - FROM M/S. PODDAR MECH TECH SERVICES P. LTD., IN WHICH COMPANY HE WAS HAVING SHARE HOLDING OF 58.96% DURING THE YEAR UNDER APPEAL. ITA NO.1143/KOL/2012 : ASSESSMENT YEAR 200 5 - 06 SURESH KUMAR PATNI 2 THAT COMPANY HAD RESERVES AND SURPLUS TO THE TUNE OF RS.7,71,49, 330/ - DURING THE SAME YEAR. THEREFORE, THE A.O. WAS OF THE VIEW THAT THE SAID SUM OF RS. 13 LAKHS WAS TO BE TREATED AS DEEMED DIVIDEND AS PER THE PROVISION OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, HE ADDED THE SUM OF RS.13,00,000/ - TO ASSESSEE S INCOME . 4 . B EFORE THE LD. CIT(A ) , THE ASSESSEE SUBMITTED THAT THE PROVISION OF SECTION 2(22)(E) WAS NOT APPLICABLE TO THE FACTS OF THE CASE. HE INFORMED THAT M/S. PODDAR MECH TECH SERVICES P. LTD. IS A NON - BANKING FINANCIAL COMPANY (NBFC) AND WAS RECOGNIZED SO BY THE RESERVE BANK OF INDIA (RBI) BY CERTIFICATE ISSUED TO THAT EFFECT BY THE RBI. THE LD. A. R . FURTHER SUBMITTED THAT THE LOAN OF RS.13,00,000/ - TAKEN BY THE ASSESSEE FROM M/S. PODDAR MECH TECH SERVICES P. LTD. WAS INTEREST BEARING LOAN ON WHICH THE ASSE SSEE HAD PAID INTEREST OF RS.1,08,025/ - DURING THE YEAR UNDER APPEAL. THE LD. A. R . CONTENDED BEFORE THE LD. CIT(A) THAT THE PROVISION S OF SECTION 2(22)(E) ARE NOT APPLICABLE TO THE LOAN TRANSACTIONS WHERE THE LOAN IS ADVANCED / TAKEN FOR CONSIDERATION. IN SUPPORT OF HIS CONTENT ION THE A. R RELIED UPON FOLLOWING JUDICIAL PRONOUNCEMENTS: 1. RAJ KUMAR (DEL) 318 ITR 462, HOLDING THAT TRADE ADVANCES ARE NOT ASSESSABLE AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 2. CREATIVE DYING AND PRINTING P. LTD. (DEL) 318 ITR 476, HOLDING THAT ADVANCE TO BE ADJUSTED AGAINST DUES FOR JOB WORK TO BE DONE BY THE ASSESSEE, IS A BUSINESS TRANSACTION AND THE ADVANCE IS NOT ASSESSABLE AS DEEMED DIVIDEND. 3. AMBASSADOR TRAVELS P. LTD. (DEL) 318 ITR 376, HOLDING THAT FINANCIA L TRANSACTIONS IN NORMAL COURSE OF BUSINESS CANNOT BE TREATED AS LOANS OR ADVANCES AND HENCE THEY WOULD NOT BE TAXABLE AS DEEMED DIVIDEND. 4. SUNIL CHOPRA (ITAT, DEL) [2010] 002 ITR (TRIB) 469, HOLDING THAT RECEIPTS IN ORDINARY COURSE OF BUSINESS CANNOT BE TREATED AS DEEMED DIVIDEND. ITA NO.1143/KOL/2012 : ASSESSMENT YEAR 200 5 - 06 SURESH KUMAR PATNI 3 5. PRADIP KUMAR MALHOTRA V. CIT [ITA NO.219 OF 2003 DECIDED ON 02/08/2011 BY CALCUTTA HIGH COURT] 5. CONSIDERING THE ABOVE, THE LD. CIT(A) NOTED THAT THE PLEA TAKEN BY THE ASSESSEE BEFORE HIM WERE ALSO TAKEN BY HIM BEFOR E THE AO BUT THE AO HAD CITED NO REASON IN THE ASSESSMENT ORDER FOR NOT ACCEPTING THE ASSESSEE S EXPLANATION. THE LD. CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAD TAKEN LOANS FROM M/S. PODDAR MECH TECH SERVICES P. LTD. AND THIS LOAN WAS INTEREST - BEARING O NE AND THE ASSESSEE HAD PAID INTEREST OF RS.1,08,025/ - ON SUCH LOAN. THE LD. CIT(A) FURTHER REFERRED TO THE DECISION OF THE HON BLE CALCUTTA HIGH COURT IN PRADIP KUMAR MALHOTRA V.CIT IN ITA NO.219 OF 2003 DECIDED ON 02/08/20 11 RELIED UPON BY THE ASSESSEE, WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 2(22)(E) WILL BE APPLICABLE TO THOSE ADVANCES OR LOANS WHICH A SHAREHOLDER ENJOYS FOR SIMPLY ON ACCOUNT OF BEING A PERSON WHO IS THE BENEFICIAL OF THE OWNER OF SHARES HOLDING NOT LESS THAN 10% OF VOTING PO WER. HOWEVER, THE HON BLE COURT FURTHER HELD THAT IF THE LOAN OR ADVANCE WAS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH WAS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH SHAREHOLDER, IN THAT CASE SUCH ADVANCE OR LOAN CANNO T BE SAID TO BE A DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E). LD. CIT(A) OPINED THAT S INCE, IN THE INSTANT CASE THE AMOUNT RECEIVED BY THE ASSESSEE FROM M/S. PODDAR MECH TECH SERVICES PVT. LTD. WAS IN FACT INTEREST BEARING LOAN ON WHICH THE A SSESSEE HAD PAID INTEREST TO THE COMPANY, SUCH LOAN WAS NOT GRATUITOUS AND THE SAME WAS RECEIVED FOR A CONSIDERATION, IN THE FORM OF INTEREST, THAT WAS BENEFICIAL TO THAT COMPANY. HENCE, LD. CIT(A) CONCLUDED THAT RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA V. CIT (SUPRA), IT IS HELD THAT THE LOAN RECEIVED BY THE ASSESSEE FROM M/S. PODDAR MECH TECH SERVICES PVT. LTD. DOES NOT FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND UNDER THE PROVISIONS OF SE CTION 2(22)(E). HENCE, THE ADDITION OF RS.13,00,000/ - MADE BY THE A.O. ON ACCOUNT OF DEEMED DI VIDEND ITA NO.1143/KOL/2012 : ASSESSMENT YEAR 200 5 - 06 SURESH KUMAR PATNI 4 IN THIS CASE IS DELETED. 6. AGAIN ST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7 . WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FI ND THAT THE ASSESSEE HAS TAKEN LOAN FROM M/S. PODDAR MECH TECH SERVICES P. LTD.. THE SAID COMPANY IS A NON - BANKING FINANCIAL COMPANY. THE COMPANY HAS GIVEN LOAN TO THE ASSESSEE IN THE COURSE OF ITS NORMAL BUSINESS. IT HAS CHARGED INTEREST ON THE SAID LOAN ALSO AND THE ASSESSEE HAS DULY PAID THE INTEREST THEREON. IT IS NOT THE CASE OF THE AO THAT NO INTEREST HAS BEEN CHARGED OR THE ASSESSEE HAS BEEN GIVEN ANY EXTRA FAVOUR. NO EVIDENCE HAS ALSO BEEN PRODUCED BEFORE US BY THE REVENUE THAT THE ASSESSEE IS NOT A NON - BANKING FINANCIAL COMPANY AND GIVING LOAN AND ADVANCE IS NOT IN THE NORMAL COURSE OF THE BUSINESS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE CASE LAWS REFERRED TO IN THE LD. CIT(A) S ORDER COME TO THE RESCUE OF THE ASSESSEE. WE MAY GAINFULLY REF ER TO THE SAME AS UNDER: - 1. RAJ KUMAR (DEL) 318 ITR 462, HOLDING THAT TRADE ADVANCES ARE NOT ASSESSABLE AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 2. CREATIVE DYING AND PRINTING P. LTD. (DEL) 318 ITR 476, HOLDING THAT ADVANCE TO BE ADJUSTED AGAINST DUES FOR JOB WORK TO BE DONE BY THE ASSESSEE, IS A BUSINESS TRANSACTION AND THE ADVANCE IS NOT ASSESSABLE AS DEEMED DIVIDEND. 3. AMBASSADOR TRAVELS P. LTD. (DEL) 318 ITR 376, HOLDING THAT FINANCIAL TRANSACTIONS IN NORMAL COURSE OF BUSINESS CANNOT BE TR EATED AS LOANS OR ADVANCES AND HENCE THEY WOULD NOT BE TAXABLE AS DEEMED DIVIDEND. 4. SUNIL CHOPRA (ITAT, DEL) [2010] 002 ITR (TRIB) 469, HOLDING THAT RECEIPTS IN ORDINARY COURSE OF BUSINESS CANNOT BE TREATED AS DEEMED DIVIDEND. 5. PRADIP KUMAR MALHO TRA V. CIT [ITA NO.219 OF 2003 DECIDED ON 02/08/2011 BY CALCUTTA HIGH COURT FOR THE PROPOSITION THAT WHEN LOAN OR ADVANCE WAS GIVEN FOR CONSIDERATION WHICH ITA NO.1143/KOL/2012 : ASSESSMENT YEAR 200 5 - 06 SURESH KUMAR PATNI 5 WAS BENEFICIAL TO THE COMPANY, THE SAME WOULD NOT COME WITHIN THE MEANING OF DEEMED DIVIDEND IN SE CTION 2(22)(E). NO COUNTER - ARGUMENT HAS BEEN PRODUCED BEFORE US THAT THE LOAN GRANTED TO THE ASSESSEE BY THE CONCERNED COMPANY WAS NOT IN THE NORMAL COURSE OF BUSINESS. IN THIS VIEW OF THE MATTER AND IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECE DENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. 8 . IN THE RE SULT, THIS APPEAL FILED BY THE REVENUE STANDS DISMISSED . THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 1 ST DECEMBER , 2014. SD/ - SD/ - ( GEORGE MATHAN ) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 ST DECEMBER , 201 4 COPY OF THE ORDER FORWARDED TO: 1 . SURESH KUMAR PATNI, 15, BURDWAN ROAD, KOLKATA 700 027 2 DCIT, CENTRAL CIRCLE - I, KOLKATA 3 . THE CIT(A), 4. CIT, 5 . DR, TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR(SR.P.S.)