ASST CIT CIR 16(1), MUMBAI V. GAYATRI FILMS & MUSIC P.LTD, MUMBAI

ITA 1193/MUM/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8687 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 01-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T S KHALSA
• Keywords: Deemed dividend
• Section: 2(22)(e); 64; 113; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.1193/M/2018 ASSESSMENT YEAR: 2012-13 ACIT 16(1), ROOM NO.439, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, CHURCHGATE, MUMBAI 400 020 VS. M/S. GAYATRI FILMS & MUSIC PVT. LTD., SAGAR VILLA, ROAD NO.12A, JVPD SCHEME, VILE PARLE (W), MUMBAI 400 049 PAN: AAACG8142J (APPELLANT) (R ESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI K. GOPAL, A.R. REVENUE BY : SHRI T.S. KHALSA, D.R. DATE OF HEARING : 15.07.2021 DATE OF PRONOUNCEMENT : 26.07.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 18.12.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE ISSUE RAISED IN GROUND NO.1 TO 3 IS AGAINST THE ORDER OF LD. CIT(A) DIRECTING THE AO TO DELETE THE ADDITION OF DEEMED DIVIDEND OF RS.5,37,46,284/- AS MADE BY THE AO UNDE R SECTION 2(22)(E) OF THE ACT. ITA NO.1193/M/2018 M/S. GAYATRI FILMS & MUSIC PVT. LTD. 2 3. THE FACTS IN BRIEF ARE THAT THE AO DURING THE CO URSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT ASSESSEE HAS R ECEIVED AN ADVANCE OF RS.5,37,46,284/- FROM M/S. SAGAR ENTERTA INMENT PVT. LTD. IN WHICH THE TWO SHAREHOLDERS SHRI JYOTI SAGAR AND SHRI PREM SAGAR HELD 26.17% AND 18.40% OF HOLDINGS IN THE LENDING COMPANY AND ALSO HELD SUBSTANTIAL INTEREST IN THE ASSESSEE COMPANY EQUAL TO 32.40% AND 25.34% RESPECT IVELY AND CONSEQUENTLY THE AO INVOKED THE PROVISIONS OF SECTI ON 2(22)(E) OF THE ACT AND MADE AN ADDITION ON ACCOUNT OF A DEEMED DIVIDEND OF RS.5,37,46,284/- IN THE HANDS OF THE ASSESSEE. 4. THE ORDER OF LD. CIT(A) WAS CHALLENGED BEFORE TH E FIRST APPELLATE AUTHORITY AND LD. CIT(A) DELETED THE ADDI TION BY OBSERVING AND HOLDING AS UNDER: 6.3/ I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSES, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER AND MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE S AID ISSUE ON THE ADDITION MADE OF THE SAME AMOUNT IN THE HANDS OF SHRI PREM SAGAR IN A.Y. 2012-13 U/S 2(22)(E) OF THE ACT HAS BEEN DECIDED BY MY LD. PREDECESSOR BY HIS O RDER IN APPEAL NO. CIT(A)-4/IT- 41/ACIT-16(1)/2015-16 DATED 09/09/2016, WHERE IN AT PARA 4.3 OF THE ORDER IT HAS BEEN OBSERVED AS UNDER: 'I HAVE CONSIDERED THE ABOVE SUBMISSIONS MADE BY AU THORISED REPRESENTATIVE AND FIND SUBSTANCE INTO IT. SECTION 2(22)(E) VERY CLEARLY SPEAKS ABOUT THE BENEFICIAL OWNERSHIP OF THE SHAREHOLDER A ND THUS THE HOLDING OF THE APPELLANT IN HIS INDIVIDUAL CAPACITY CANNOT BE COMBINED WITH THE HOLDING OF HIS HUF AND HOLDING OF JYOTI SAGAR IN HIS INDIVI DUAL CAPACITY CANNOT BE COMBINED WITH THE HOLDING BY HIM AS EXECUTOR TO THE ESTATE OF LATE SUBHASH SAGAR AND HELD THAT SECTION 2(22)(E) CANNOT BE INVO KED IN THE PRESENT CASE. THE SHAREHOLDING PATTERN AS EXPLAINED BY THE APPELL ANT IS AS UNDER :- GAYATRI FILMS & MUSIC PVT LTD (LENDER COMPANY) SAGAR ARTS PVT. LTD. (RECEIVER COMPANY) NAME SHARES % NAME SHARES % MR. ANAND SAGAR 800 8 MR. ANAND SAGAR 373 11.89 MR. PREM SAGAR 1400 14 MR. PREM SAGAR 398 12.69 ITA NO.1193/M/2018 M/S. GAYATRI FILMS & MUSIC PVT. LTD. 3 MR. JYOTI SAGAR 706 7.06 MR. JYOTI SAGAR 392 12.49 MR. JYOTI SAGAR (OF ESTATE OF SUBHASH SAG AR HOLDING FOR REKHA SAGAR & OTHERS) 1400 14 MR. JYOTI SAGAR (OF ESTATE OF SUBHASH SAGAR HOLDING FOR REKHA SAGAR & OTHERS) 453 14.45 MR. ANAND SAGAR HUF 603 6.03 MR. ANAND SAGAR HUF 150 4.78 MR. PREM SAGAR HUF 1134 11.34 MR. PREM SAGAR HUF 125 3.99 MR. SUBHASH SAGAR HUF 1134 11.34 MR. SUBHASH SAGAR HUF 200 6.38 MR. SHANTI SAGAR 800 8 MR. SHAKTI SAGAR 523 16.68 MR. SHANTI SAGAR HUF 905 9.05 MR. SHIV SAGAR 522 16.55 SARITA CHOUDHARY 905 9.05 REKHA SAGAR 425 4.25 SAGAR LILA FIN VEST 90 9 TOTAL 10000 100% TOTAL 10000 100% OBVIOUSLY, THE LD. ASSESSING OFFICER HAS ERRED IN H OLDING THAT THE ASSESSEE HAS SUBSTANTIAL INTEREST IN M/S. GAYATRI FILMS & MUSIC PVT. LTD. OR IN M/S. SAGAR ENTERTAINMENT PVT. LTD. THE ABOVE CHART REVEALS THE FACT THAT NONE OF THE SHAREHOLDER OF M/S. GAYATRI FILMS & MUSIC PVT. LTD. IS HAVING MORE THAN 20% OF EQUITY CAPITAL AND IS SIMULTANEOUSLY HAVING MORE TH AN 10% SHARE IN THE LENDING COMPANY. THUS, THE FACTS OF THE CASE SUGGESTS THAT THE APPELLANT IS NOT A BENEFICIAL SHAREHOLDER. IF THE ABOVE CHART IS CORRECT AND NO CONTRARY EVIDE NCE IS THERE ON RECORD, THE CONTENTION OF THE LD. A.R. DESERVES TO BE ACCEPTED. THERE ARE PLETHORA OF JUDGMENTS OVER SUCH ISSUE FAVORING THE APPELLANT . SOME OF THEM ARE; MUMBAI IT AT (SB) IN CASE OF BHAUMIK COLOUR P VT. LTD. (2009) 28 (II) ITCL 249 MUMBAI E BENCH RAMESHWARLAL SANWARMAL V. CIT (1980) 122 ITR 1 1 (SC) CIT V.CP SARATHY MUDALIAR (1972) 83 ITR 170 ( SC) CIT V. ANKITECH PVT. LTD. (DELHI HC) ITA 2087 OF 2010 PRAVIN B CHHEDA V. CIT ITA 2483/MUM/2011 MUMBA I TRIBUNAL C BENCH CIT V. NATIONAL TRAVEL SERVICE ITA 219 OF 2010 DELHI HC CIT V. IMPACT CONTAINERS PVT. LTD. ITA 114 OF 2012 (BOMBAY HC) N S N JEWELLERS PVT. LTD. 57 TAXMANN.COM 113 B OMBAY HC ACIT V. BOMBAY REAL ESTATE DEVELOPMENT CO. PVT . LTD. (2011) 64 DTR 137 (MUM)TRIB. ITA NO.1193/M/2018 M/S. GAYATRI FILMS & MUSIC PVT. LTD. 4 K N PATEL V. DC OF IT AHMEDABAD TRIB. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENTS AND CONS IDERING THE FACTS OF THE CASE, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION OF 5,37,46,284/- MADE U/S.2(22)(E) OF THE I.T. ACT, 1961.' IT IS SEEN THAT MY LD. PREDECESSOR HAS CONSIDERED T HE HOLDING OF SHARES AS HAS-BEEN BY ARRIVING AT THE FACT THAT THE ASSESSEE SHRI PREM SAGAR DID NOT HAVE SUBSTANTIAL INTEREST IN M/S GAYATRI FILMS AND MUSIC PVT. LTD. O R IN SAGAR ENTERTAINMENT PVT. LTD. THE SHARE HOLDING CHART SUBMITTED BY THE ASSESSEE I N THE INSTANT CASE AND THAT CONSIDERED BY MY LD. PREDECESSOR IS SAME. AS PER TH E CHART SUBMITTED BY THE APPELLANT, NONE OF THE SHAREHOLDERS OF SEL HAS SIMU LTANEOUS HOLDING OF MORE THAN 20% IN THE ASSESSEE COMPANY AND 10% HOLDING IN SEL. ACCORDINGLY, KEEPING IN VIEW THE PRINCIPLES OF CONSISTENCY AND RESPECTFULLY FOLL OWING THE DECISIONS RELIED UPON BY THE APPELLANT, THE AO IS DIRECTED TO DELETE THE ADD ITION SO MADE AND THE GROUND NO. 1 OF THE APPEAL IS ACCORDINGLY ALLOWED. 5. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT THE AO HAD MADE PROTECTIVE ADD ITION OF RS.5,37,46,284/- IN THE HANDS OF THE ASSESSEE UNDER SECTION 2(22)(E) OF THE ACT WHEREAS THE SUBSTANTIVE ADDITIO N WAS MADE IN THE HANDS OF SHRI PREM SAGAR THE SHAREHOLDER OF THE ASSESSEE FOR A.Y. 2012-13. WE NOTE THAT LD. CIT(A) IN HIS FINDI NGS HAS NOTED THE SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY A ND M/S. SAGAR ENTERTAINMENT PVT. LTD. WHICH IS REPRODUCED A BOVE AND CAME TO CONCLUSION THAT NONE OF THE SHAREHOLDERS OF M/S. SAGAR ENTERTAINMENT PVT. LTD. HAS SIMULTANEOUSLY HELD MO RE THAN 20% IN THE ASSESSEE COMPANY AND 10% IN M/S. SAGAR ENTERTAINMENT PVT. LTD. AND THUS DELETED THE ADDITI ON IN THE HANDS OF THE ASSESSEE. WE NOTE THAT LD. CIT(A) REL IED ON THE ORDER OF PREDECESSOR IN THE CASE OF SHRI PREM SAGAR FOR A.Y. 2012-13. WE ALSO NOTE THAT THE SAID ORDER OF THE L D. CIT(A) HAS BEEN CHALLENGED BY THE REVENUE BEFORE THE TRIBUNAL AND THE CO- ORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THE ISSU E IN FAVOUR OF THE ASSESSEE IN ITA NO.7442/M/2016 VIDE ORDER DATED 16.10.2019 DISMISSING THE DEPARTMENTS APPEAL AND A FFIRMING THE ORDER OF LD. CIT(A). THE CO-ORDINATE BENCH OF THE TRIBUNAL ITA NO.1193/M/2018 M/S. GAYATRI FILMS & MUSIC PVT. LTD. 5 HAS GIVEN A FINDING WHILE PASSING THE ORDER IN THE CASE OF SHRI PREM SAGAR THAT ADDITION UNDER SECTION 2(22)(E) OF THE ACT IS PRINCIPALLY NOT SUSTAINABLE AS NONE OF THE SHAREHOLDERS OF M/S. GAYATRI FILMS & MUSIC PVT. LTD. WAS HAVING NOT LESS THAN 20% OF THE EQUITY CAPITAL AND WAS SIMULTANEOUSLY HAVING NO T LESS THAN 10% OF THE SHARE HOLDING IN THE LENDING COMPANY M/ S. SAGAR ENTERTAINMENT PVT. LTD. IN VIEW OF THESE SIMILAR F ACTS AND DECISION OF THE COORDINATE BENCH AS DISCUSSED ABOVE , WE ARE INCLINED TO UPHOLD THE ORDER OF LD. CIT(A) BY DISMI SSING THE GROUND NO.1 TO 3. 6. THE ISSUE RAISED IN GROUND NOS.4 & 5 IS AGAINST THE DELETION OF RS.1,70,00,000/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF CONTRACT WITH SATAR INDIA PVT. LTD. BY I GNORING THE FACT THAT TERM AND EXECUTION DATE OF THE AGREEMENT WITH STAR INDIA LTD. CLEARLY SHOWED THAT INCOME ACCRUED DURIN G A.Y. 2012- 13 AS PER MERCANTILE SYSTEM OF ACCOUNTING. 7. THE FACTS IN BRIEF ARE THAT ASSESSEE ENTERED INT O AN AGREEMENT WITH M/S. STAR INDIA PVT. LTD. ON 04.10.2 011. BY VIRTUE OF THIS AGREEMENT THE ASSESSEE GRANTED M/S. STAR INDIA PVT. LTD. A LICENCE OF TELECASTING RIGHTS FOR FIVE YEARS IN RESPECT OF TWO OF ITS FLAGSHIP TV SERIALS SAMPURNA RAMAYAN AND SHRI KRISHNA. SCHEDULE D OF THE AGREEMENT PROVIDES THE DETAIL OF CONSIDERATION AND CONDITION OF REFUND THEREOF FOR UNEXPIRED LICENSE PERIOD. ACCORDINGLY, THE ASSESSEE OFFERED RS.13,00,000/- AS INCOME ON ACCOUNT OF AGREEMENT WITH M/S. STAR IN DIA PVT. LTD. FOR IMPUGNED ASSESSMENT YEAR ON THE BASIS OF P ERIOD ELAPSED UP TO THE YEAR END AND THUS SPREADING THE E NTIRE CONSIDERATION RECEIVED OVER THE PERIOD COVERED UNDE R THE LICENCE. ITA NO.1193/M/2018 M/S. GAYATRI FILMS & MUSIC PVT. LTD. 6 ACCORDING TO THE AO THE ENTIRE CONSIDERATION OF RS. 2,00,00,000/- IS TO BE TAXED IN THE CURRENT YEAR AND ACCORDINGLY CALLED UPON THE ASSESSEE TO SHOW CAUSE AS TO WHY THE SAME SHOUL D NOT BE TAXED IN THE CURRENT YEAR. THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE CONSIDERATION RECEIVED WAS DULY OFFERED T O TAX IN THE SUBSEQUENT YEARS BASED UPON THE PERIOD PROPORTIONAT ELY. HOWEVER, THE REPLY OF THE ASSESSEE DID NOT FIND FAV OUR WITH THE AO AND HE ADDED THE REMAINING RS.1,70,00,000/- WITH THE INCOME OF THE ASSESSEE. 8. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALL OWED THE APPEAL OF THE ASSESSEE BY HOLDING AND OBSERVING AS UNDER: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ORAL CONTENTIONS AND WRITTEN SUBMISSION OF THE ASSESSEE, DISCUSSION OF THE AO IN THE ASSESSMENT ORDER AND MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE A O IN HIS ORDER HAS MENTIONED THAT IN THE ASSESSEE'S OWN CASE OF A.Y. 2010-11, THE ADD ITION WAS MADE IN THE YEAR OF AGREEMENT FOR RECEIPT OF SUCH INCOME. IT IMPLIES TH AT THE FACTS OF THE YEAR UNDER CONSIDERATION AND IN THE A.Y. 2010-11 ARE SIMILAR. IT IS SEEN THAT THE CASE OF THE APPELLANT FOR A.Y. 2010-11 HAS BEEN DECIDED BY THE HON'BLE ITAT IN ITA NO.1881 /MUM/201 5 VIDE THEIR ORDER DATED 21.06.2017, WHERE IN FOLLOWING THEIR ORDER IN THE CASE OF SAGAR ENTERTAINMENT PVT. LIMITED (ITA/1 150/MUM/2013 FOR A.Y. 2009- 10, DATED 02/02/2015) THE HON'BLE ITAT HAVE DECIDED THE ISSUE IN THE FAVOUR OF THE APPELLANT. THE FACTS IN THE CASE ON HAND AND THAT I N THE CASE OF THE ASSESSEE FOR A.Y. 2010-11 ARE SIMILAR, THEREFORE RESPECTFULLY FOLLOWI NG THE ORDER OF HON'BLE ITAT IN THE APPELLANTS OWN CASE FOR A.Y. 2010-11, IN ITA N O.1881/MUM/2015, DATED 21.06.2017, THIS GROUND OF APPEAL IS ALLOWED. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT LD. CIT(A) HAS FOLLOWED THE OR DER OF THE CO- ORDINATE BENCH OF THE TRIBUNAL IN ITA NO.1881/M/201 5 ORDER DATED 21.06.2017 FOR A.Y. 2010-11 IN ASSESSEES OWN CASE. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORDER O F LD. CIT(A) AND ACCORDINGLY THE GROUND NOS.4 & 5 ARE DISMISSED. ITA NO.1193/M/2018 M/S. GAYATRI FILMS & MUSIC PVT. LTD. 7 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 26.07.2021. SD/- SD/- ( RAVISH SOOD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 26.07.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASS TT. REGISTRAR, ITAT, MUMBAI.