TOWER CAPITAL & FINANCIAL SERVICES P. LTD, MUMBAI V. ITO 5(3)(3), MUMBAI

ITA 1206/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1982 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 20-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-02-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: VIKAS MEHTA
• Keywords: Deemed dividend; Set aside
• Section: 2(22)(e)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI RAJENDRA SINGH(AM) AND SHRI VIJAY PA L RAO (JM) ITA NO.1206/M/2009 ASSESSMENT YEAR 2005-06 M/S. TOWER CAPITAL & FINANCIAL SERVICES PVT.LTD. TH E ITO 5(3)(3), AAYAKAR BHAVAN 4-A, RIZVI PARK, 5-A ALTAMOUNT ROAD M.K.ROAD, MUMB AI 400 020. MUMBAI 400 026. PAN : AAACD3122H APPELLANT RESPONDENT ASSESSEE BY : SHRI VIKAS MEHTA REVENUE BY : SHRI D. SONGATE O R D E R PER RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 7.11.2008 OF CIT(A) FOR THE ASSESSMENT YEAR 2005-06 . THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION OF RS.29,98,16 5/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). 1.1 THERE IS DELAY OF 24 DAYS IN FILING THE APPEAL FOR WHICH A CONDONATION APPLICATION ALONG WITH AFFIDAVIT HAS BEEN FILED. AF TER HEARING BOTH THE PARTIES THE BENCH CONDONED THE DELAY IN FILING THE APPEAL A ND ADMITTED THE APPEAL FOR ADJUDICATION. 2 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY DURING THE RELEVANT YEAR HAD RECEIVED LOANS OF RS.2,55,63, 000/- AND THE CLOSING BALANCE OF THE LOAN AT THE END OF THE YEAR WAS RS.9 9,71,813/-. AO NOTED THAT SMT. SMITA N. AMBANI WAS HOLDING MORE THAN 10% OF S HARES OF THE ASSESSEE COMPANY. AO ALSO NOTED THAT SMT. SMITA N. AMBANI WA S ALSO HOLDING 23.77% SHARES OF M/S.PRATHIBHUTHI HOLDINGS PVT. LTD. (PHPL ) FROM WHICH THE LOANS HAD BEEN RECEIVED DURING THE YEAR. HE THEREFORE HELD TH AT THE PROVISIONS OF SECTION 2(22)(E) WERE APPLICABLE AND ADDED THE SUM OF RS.29 ,98,165/- UNDER SECTION 2(22)(E) AS DEEMED DIVIDEND. IN APPEAL CIT(A) CONFI RMED THE ORDER OF AO AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LEARNED AR FOR THE ASSESSEE SUBMIT TED THAT PROVISIONS OF SECTION 2(22)(E) WERE APPLICABLE ONLY WHEN A REGIST ERED SHAREHOLDER WHO IS ALSO A BENEFICIAL SHAREHOLDER RECEIVED LOAN FROM CO NCERNED COMPANY AS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF BHAUMI K COLOUR PVT. LTD. (118 ITD 1). IT WAS SUBMITTED THAT IN THIS CASE THE ASSESSEE COMPANY WAS NOT A SHAREHOLDER OF PHPL AND THEREFORE PROVISIONS OF SEC TION 2(22)(E) CANNOT BE APPLIED. IT WAS ALSO SUBMITTED THAT SIMILAR ADDITIO NS MADE BY THE AO IN ASSESSEES OWN CASE IN A.Y.2004-05 IN RESPECT OF LO ANS TAKEN FROM THE SAME COMPANY HAD BEEN DELETED BY THE TRIBUNAL IN ITA NO. 1424/M/2009 HOLDING THAT THE ASSESSEE COMPANY WAS NOT A SHARE HOLDER IN PHPL . THE LEARNED DR ON THE OTHER PLACED RELIANCE ON THE ORDERS OF AUTHORITIES BELOW. 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION MADE UNDER SECTION 2( 22)(E) AS DEEMED DIVIDEND IN RESPECT OF LOANS TAKEN FROM THE ASSESSEE COMPANY FROM SISTER CONCERN I.E. PHPL. THE PROVISIONS OF SECTION 2(22)(E) HAVE BEEN APPLIED BY THE AUTHORITIES 3 BELOW ON THE GROUND THAT A SHAREHOLDER IN THE ASSES SEE COMPANY HAVING MORE THAN 10% VOTING POWER WAS ALSO HAVING A SHAREHOLDIN G MORE THAN 20% IN CASE OF PHPL. THE VIEW TAKEN BY THE AUTHORITIES BELOW CA NNOT BE UPHELD AS PROVISIONS OF SECTION 2(22)(E) CAN BE APPLIED ONLY IF THE LOAN IS TAKEN BY A SHAREHOLDER WHO IS NOT ONLY THE REGISTERED SHAREHOL DER BUT ALSO BENEFICIAL SHAREHOLDER IN THE COMPANY GIVING THE LOAN. THIS VI EW IS SUPPORTED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CA SE OF ACIT VS BHOUMIK COLOURS PVT. LTD. (118 ITR 1). THERE IS NO DISPUTE THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER OF PHPL. THEREFORE IN OUR VIEW PROVISIO NS OF SECTION 2(22)(E) CANNOT BE APPLIED IN RESPECT OF LOANS TAKEN BY THE ASSESSEE COMPANY FROM PHPL. WE THEREFORE SET ASIDE THE ORDER OF CIT(A) AN D DELETE THE ADDITION MADE BY THE AO. 5. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. 6. THE DECISION PRONOUNCED IN THE OPEN COURT ON 27. 04.2011. SD/- SD/- ( VIJAY PAL RAO ) (RAJENDRA SIN GH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE : 27.04.2011 AT :MUMBAI COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CITY CONCERNED 5. THE DR E BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ALK 4