ITO, CHENNAI V. Ritambara Associates, CHENNAI

ITA 1149/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6460 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 08-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1149/MDS/2017 & '& / ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER, NON CORPORATE WARD - 8(2), CHENNAI - 600 034. V. M/S RITAMBARA ASSOCIATES, NO.34, POONAMALLEE HIGH ROAD, KOYAMBEDU, CHENNAI - 600 107. PAN : AAIFR 6551 P ()*/ APPELLANT) (+,)*/ RESPONDENT) )* - . / APPELLANT BY : SHRI AR.V. SREENIVASAN, JCIT +,)* - . / RESPONDENT BY : SHRI SANDEEP BAGMAR, ADVOCATE / - 0' / DATE OF HEARING : 12.07.2017 12' - 0' / DATE OF PRONOUNCEMENT : 03.08.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 19, CHEN NAI, DATED 08.02.2017 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. SHRI AR.V. SREENIVASAN, THE LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE, PARTNE RSHIP FIRM RECEIVED ADVANCE OF ` 82,09,775/- FROM M/S LANSON MOTORS PVT. LTD. 2 I.T.A. NO.1149/MDS/2017 OUT OF ITS ACCUMULATED PROFIT. ACCORDING TO THE LD . D.R., THE PARTNERS OF THE ASSESSEE-FIRM HAVE SUBSTANTIAL INTEREST AND HOLDING SUBSTANTIAL SHARES IN M/S LANSON MOTORS PVT. LTD. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSING OFFICER TR EATED THE ADVANCE OF ` 82,09,775/- AS DEEMED DIVIDEND UNDER SECTION 2(22) (E) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). HOWEVER , ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) DELETED THE SAME ON THE GROUND THAT THE ASSESSEE-FIRM IS THE SISTER CONCERN OF M/S LANS ON MOTORS PVT. LTD. ACCORDING TO THE LD. D.R., THE ASSESSEE-FIRM IS HOLDING SUBSTANTIAL INTEREST IN THE SHARES OF M/S LANSON MO TORS PVT. LTD., THEREFORE, THE DEEMED DIVIDEND HAS TO BE ASSESSED I N THE HANDS OF THE ASSESSEE ONLY. 3. ON THE CONTRARY, SHRI SANDEEP BAGMAR, THE LD.COU NSEL FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE-FIRM IS N OT A SHAREHOLDER IN M/S LANSON MOTORS PVT. LTD. ACCORDING TO THE LD . COUNSEL, THE INDIVIDUAL PARTNERS INVESTED THEIR OWN FUNDS IN THE SHARES OF M/S LANSON MOTORS PVT. LTD. THE PARTNERSHIP FIRM ITSEL F WAS ESTABLISHED BY A PARTNERSHIP DEED DATED 15.10.2005. THE INVEST MENTS IN THE SHARES IN THE NAME OF INDIVIDUAL PARTNERS WERE MADE BEFORE THE PARTNERSHIP FIRM ITSELF CAME INTO EXISTENCE. THERE FORE, ACCORDING TO 3 I.T.A. NO.1149/MDS/2017 THE LD. COUNSEL, IT CANNOT BE SAID THAT THE PARTNER SHIP FIRM INVESTED ITS OWN FUND IN THE NAME OF ITS PARTNERS. SINCE TH E PARTNERS INVESTED THEIR OWN FUNDS, ACCORDING TO THE LD. COUNSEL, THE PARTNERSHIP FIRM CANNOT BE CONSIDERED AS BENEFICIAL OWNER OF SHARES, THEREFORE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE PARTNERSHIP FIRM CAME INTO EXISTEN CE ONLY ON 15 TH OCTOBER, 2005 BY MEANS OF PARTNERSHIP DEED. THE IN VESTMENT IN SHARES OF M/S LANSON MOTORS PVT. LTD. WAS MADE BY T HE PARTNERS OF THE ASSESSEE-FIRM BEFORE THE PARTNERSHIP FIRM ITSEL F CAME INTO EXISTENCE, THEREFORE, IT CANNOT BE SAID THAT THE PA RTNERSHIP FIRM INVESTED ITS FUNDS. HENCE, THE PARTNERSHIP FIRM CA NNOT BE ASSESSED FOR RECEIVING ADVANCE FROM M/S LANSON MOTORS PVT. L TD. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PART NERSHIP FIRM CANNOT BE CONSIDERED AS BENEFICIAL OWNER OF THE SHARES. I T IS A WELL SETTLED PRINCIPLE OF LAW THAT THE DEEMED DIVIDEND HAS TO BE ASSESSED ONLY IN THE HANDS OF REGISTERED SHAREHOLDER OR BENEFICIAL S HAREHOLDER. IN THIS CASE, THE INDIVIDUAL PARTNERS ARE THE REGISTER ED AND BENEFICIAL 4 I.T.A. NO.1149/MDS/2017 SHAREHOLDERS. THEREFORE, AT THE BEST, THE ADVANCE OF ` 82,09,775/- HAS TO BE ASSESSED ONLY IN THE HANDS OF INDIVIDUAL PARTNERS. 5. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON 3 RD AUGUST, 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 3 RD AUGUST, 2017. KRI. - +056 76'0 /COPY TO: 1. )* /APPELLANT 2. +,)* /RESPONDENT 3. / 80 () /CIT(A)-19, CHENNAI-34 4. PRINCIPAL CIT, CENTRAL-2, CHENNAI 5. 69 +0 /DR 6. :& ; /GF.