ACIT, Pune V. Jyoti Stampings & Assemblies Pvt Ltd, Pune

ITA 1275/PUN/2012

• Counselvise Citation: 127524514 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 11-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K OJHA
• Assessee Lawyers: N O N E
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1275 / P N/ 20 12 ASSESSMENT YEAR : 2006 - 07 ASST. COMMISSIONER OF INCOME TAX, C IRCLE - 9, PUNE VS. JYOTI STAMPINGS & ASSEMBLES PVT. LTD., GAT NO. 276, (OLD NO. 146), MOSHI, TAL. HAVELI, PUNE (APPELLANT) (RESPONDENT) PAN NO. AABCJ5201E APPELLANT BY: SHRI K.K. OJHA RESPONDENT BY: N O N E DATE OF HEARING : 01 - 08 - 2013 DATE O F PRONOUNCEMENT : 26 - 08 - 2013 ORDER P ER G .S. PA NNU , A M : - THIS APPEAL BY THE R EVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - V, PUNE DATED 15 - 03 - 2012, WHICH IN - TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE ACT DATED 20 - 10 - 2008 PERTAINING TO THE A.Y. 2006 - 07. 2. IN THIS APPEAL OF THE R EVENUE , THE SOLITARY DISPUTE IS WITH REGARD TO THE ACTION OF THE CIT(A) IN DELETING AN ADDITION OF RS.83,79,697/ - MADE BY THE ASSESSING OFFICER AS DEEMED DIVIDEND INVOKING SEC.2( 22)(E) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT). 3. AT THE TIME OF HEARI NG THE LD. DR APPEARED FOR THE R EVENUE WHILE NON - APPEARED FOR THE RESPONDENT - ASSESSEE AND NEITHER WAS THERE ANY ADJOURNMENT APPLICATION ON BEHALF OF THE RESPONDENT - ASSESSEE, I N SPITE OF ISSUANCE OF THE NOTICE OF HEARING. ACCORDINGLY IN TERMS OF RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963 , T HE APPEAL IS DISPOSED OF ON MERITS AFTER HEARIN G THE LD. DR FOR THE APPELLANT - R EVENUE. 2 ITA NO.1275/PN/2012, JYOTI STAMPINGS & ASSEMB LIES PVT. LTD., PUNE 4. IN BRIEF, THE FACTS AND THE BACKGROUND OF TH E CASE, AS EMERGING FROM THE ORDERS OF THE AUTHORITIES BELOW CAN BE SUMMARIZED AS FOLLOWS. THE RESPONDENT - ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956 AND IS INTER - ALIA , ENGAGED IN THE BUSINESS OF MANUFACTURE OF TOOLS AND DIES USED IN THE MANUFACTURING OF AUTOMOBILE COMPONENTS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD RECEIVED ADVANCES OF RS.83,79,697/ - FROM ONE M/S. JYOTI TOOLING & PRESS COMPONENTS PVT. LTD. (IN SHORT THE JTPC), WHICH IS A SISTER CONCERN OF THE ASSESSEE COMPANY. THE ASSESSING OFFICER NOTED THAT SHRI T . KARUPAIYA IS THE PERSON HAVING SUBSTANTIAL HOLDING IN BOTH THE ABOVE CONCERNS INASMUCH AS HIS SHAREHOLDING IN THE ASSESSEE COMPANY WAS 54% AND IN JTPC IT WAS 27%. ACCORDINGLY , AS PER THE ASSESSING OFFIC ER THE PROVISIONS OF SEC. 2(22) (E) OF THE ACT WERE ATTRACTED. AS A CONSEQUENCE , THE ASSESSING OFFICER TREATED THE ADVANCES OF RS. 83,79,697/ - RECEIVED FROM JTPC AS DEEMED DIVIDE ND WITHI N THE MEANING OF SEC. 2 (22)(E) OF THE ACT AND SUCH AMOUNT WAS ADDED TO THE RETURNED INCOME. 5. IN APPEAL BEFORE THE CIT(A), ASSESSEE ASSAILED THE ADDITION ON FACTS AND ALSO IN LAW. ON FACTS , ASSESSEE CONTEN D ED THAT THE AMOUNTS RECEIVED FROM JTPC W ERE IN NORMAL COURSE OF BUSINESS AS CONSIDERATION FOR SUPPLIES TO BE MADE AND THE SAME WAS NOT IN THE NATURE OF LOANS. ON THE POINT OF LAW ALSO, THE ASSESSEE CONTENDED THAT THE ASSESSING OFFICER ERRED IN INVOKING SEC. 2 (22)(E) OF THE ACT. THE CIT(A) H AS DELE TED THE ADDITION ON TWO COUNTS. FIRSTLY , THE CIT(A) HAS CONCLUDED THAT THE AMOUNTS RECEIVED BY THE ASSESSEE COMPANY W ERE TRADE ADVANCES AND THEREFORE PROVISIONS OF SEC. 2(22)(E) OF THE ACT ARE NOT ATTRACTED. IN THIS REGARD, CIT(A) NOTED THAT AGAINST THE ADVANCES OF RS.83,79,697/ - THE AMOUNT OF SUPPLIES INVOICE D DURING THE YEAR UNDER THE ASSESSMENT WAS RS.43,23,586/ - AND RS.14,90,697/ - WAS RETURNED BACK ON ACCOUNT OF CA NC ELLATION OF PURCHASE ORDER S, LEAVING A BALANCE OF RS.42,26,565/ - 3 ITA NO.1275/PN/2012, JYOTI STAMPINGS & ASSEMB LIES PVT. LTD., PUNE WHICH REMAINED OUTST ANDING AND WAS SUBSEQUENTLY ADJUSTED AGAINST THE INVOICES RAISED IN THE FOLLOWING YEAR. O N THE BASIS OF THE AFORESAID FACTS , CIT(A) CONCLUDED THAT THE ADVANCE S WERE IN THE NATURE OF TRADE ADVANCE S TO WHICH PROVISIONS OF SEC. 2 (22)(E) OF THE ACT ARE NOT ATTRACTED. 6. SECONDLY , THE CIT(A) RELIED UPON THE JUDGMENT OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAVYUG PROMOTERS (P) LTD. (2011) 203 TAXMAN 618 (DELHI) WHICH LAID DOWN THAT THE ASSESSEE WHO IS NOT A SHAREHOLDER OF COMPANY FROM WHICH HE RECEIVED A LOAN OR ADVANCE, CANNOT BE TREATED AS BEING COVERED BY DEFINITION OF WORD DEEMED DIVIDEND AS PROVIDED IN SEC. 2(22)(E) OF THE ACT. THE CIT(A) NOTED THAT THE ASSESSEE COMPANY WAS NOT A SHAREHOLDER OF JTPC AND THEREFORE FOLLOWING THE RATIO OF T HE JUDGMENT OF THE HON'BLE DELHI HIGH COURT, THE ASSESSING OFFICER MISDIRECTED HIMSELF IN INVOKING THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT AND MAKING THE ADDITION IN THE HANDS O F THE ASSESSEE COMPANY. 7. FOR THE AFORESAID TWIN REASONS, CIT(A) DELE TED THE ADDITION, AGAINST WHICH R EVENUE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING THOUGH THE LD. DR ATTEMPTED TO SUPPORT OF THE ORDER OF THE ASSESSING OFFICER HOWEVER NO COGENT ARGUMENT OR MATERIAL HAS BEEN BROUGHT OUT SO AS TO NEGATE THE CONCLUSIONS DRAWN BY THE CIT(A). IN FACT THE POINT EMPHASIZE D BY THE CIT(A) TO THE EFFECT THAT THE DEEMED DIVIDEND I S TO BE TAXED IN HANDS OF THE SHAREHOLDER ALONE IS ALSO IN LI NE WITH THE PRONOUNCEMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVE RSAL MEDICARE PVT. LTD. 324 ITR 263 (BOM). NO DOUBT , AS PER THE FIRST PART OF CLAUSE (E) OF SEC. 2 (22)(E) OF THE ACT , THE PAYMENT BY A COMPANY HAS TO BE BY WAY OF AN ADVANCE OR LOAN AND THE SAME HAS TO BE MADE EITHER TO A SHAREHOLDER, BEING A BENEFICIAL O WNER HOLDIN G NOT LESS THAN 10% OF THE VOTING POWER OR TO ANY CONCERN IN WHICH SUCH A SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL 4 ITA NO.1275/PN/2012, JYOTI STAMPINGS & ASSEMB LIES PVT. LTD., PUNE INTEREST . OSTENSIBLY, SEC. 2(22)(E) OF THE ACT BROADEN S THE AMBIT OF THE EXPRESSION DIVIDEND BY I NCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER. HOWEVER, AS PER THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD . (SUPRA) THE PROVISIONS O F SEC. 2 (22)(E) OF THE ACT DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER. THEREFORE , APPLYING THE AFORESAID PROPOSITION TO THE FACTS OF THE PRESENT CASE, IT HAS TO BE HELD THAT TH E CIT(A) MADE NO MISTAKE IN DELETING THE IMPUGNED ADDITION BECAUSE THE RESPONDENT - ASSESSEE IS NOT A SHAREHOLDER IN JTPC. CONSEQUENTLY, THE IMPUGNED AMOUNT CANNOT BE TAXED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY. THEREFORE , ON THIS ASPECT ALONE WE ARE INCLINED TO AFFIRM THE ULTIMATE CONCLUSION OF THE CIT(A) IN DELETING THE ADDITION OF RS.83,79,697/ - . WE HOLD SO. 8. IN THE RESULT, THE APPEAL OF THE R EVENUE IS DISMISSED AS ABOVE . PRONOUNCED IN THE OPEN COURT O N 26 - 08 - 20 1 3 SD/ - SD/ - ( R. S. PA DVEKAR ) ( G .S. PA NNU ) JUDICIAL MEMBER ACCOUNTANT M EMBER RK /PS PUNE , DATED : 26 TH AUGUST, 2 0 1 3 COPY TO 1 DEPARTMENT 2 ASSESSEE 3 THE CIT(A) - V , PUNE 4 THE CIT - V, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE