Jaypeem Granites Private Limited, Hyderabad V. ITO, Hyderabad

ITA 128/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61907 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 14-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 27-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K VISWANATHAM
• Assessee Lawyers: AJAY GANDHI
• Keywords: Deemed dividend
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A, HYDERABAD BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.128/HYD/2010 : ASSESSMENT YEAR 2005- 06 ITA NO.129/HYD/2010 : ASSESSMENT YEAR 2006- 07 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD ( PAN - AAACJ 8260 C ) (APPELLANT) V/S INCOME TAX OFFICER, WARD 14(3), HYDERABAD (RESPONDENT) ITA NO.372/HYD/2010 : ASSESSMENT YEAR 2005- 06 ITA NO.373/HYD/2010 : ASSESSMENT YEAR 2006- 07 INCOME TAX OFFICER, WARD 14(3), HYDERABAD (APPELLANT) V/S M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD ( PAN - AAACJ 8260 C ) (RESPONDENT) ASSESSEE BY : SHRI AJAY GANDHI DEPARTMENT BY : SHRI K.VISWANATHAM, DR DATE OF HEARING 6.6.2012 DATE OF PRONOUNCEMENT 8.6.2012 O R D E R PER D.KARUNAKARA RAO, ACCOUNTANT MEMBER: THESE ARE CROSS APPEALS FOR TWO YEARS, VIZ. ASSES SMENT YEARS 2005-06 AND 2006-07. HENCE, THERE ARE FOUR APPEALS IN ALL IN THIS BUNCH. THEY ARE DIRECTED AGAINST A COMMON ORDER OF THE CIT (A) II, HYDERABAD DATED 30.12.2009, DISPOSING OFF THE APPEALS OF THE ASSESSEE, ARISING OUT OF THE ORDERS OF THE ASSESSING OFFICER PASSED UNDER S.201(1)(1) AND S.201(1)(1A) OF THE INCOME-TAX ACT, 1961. SINCE CO MMON ISSUES ARE INVOLVED, THESE APPEALS ARE BEING DISPOSED OFF WITH THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 2 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E IS IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GRANITE PRODU CTS CONSISTING OF HANDICRAFTS AND ARTISTIC STONE PRODUCTS, TILES, SLA BS, MONUMENTS ETC. A SURVEY U/S. 133 A WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE ON 19.8.208. IT WAS FOUND DURING THE COURSE OF SURVEY THAT THE ASSESSEE GIVEN ADVANCES TO ITS SISTER CONCERN, M/S. ODLINGS MEMORIAL PVT. LTD. (OMPL), IN WHICH SHARE-HOLDERS OF THE ASSESSEE ARE HAVING SUBSTANTIAL INTEREST OF MORE THAN 20% BY WAY OF SHARES. THE ASS ESSING OFFICER FOUND THAT THE ADVANCES GIVEN BY THE ASSESSEE WERE OF RS. 1,35,60,236 FOR THE ASSESSMENT YEAR 2005-06 AND RS.1,35,99,959 FOR THE ASSESSMENT YEAR 2006-07. THE ASSESSING OFFICER FOUND THAT SHRI HARV ESH MARWAHA AND SMT.ASMITA GUNTI MARWAHA ARE COMMON SHARE-HOLDERS I N THESE TWO COMPANIES AND THAT SHRI HARVESH MARWAHA WHO IS A SH ARE-HOLDER OF M/S. JAYPEEM GRANITES PVT. LTD., HAS MORE THAN 20% SHARE HOLDING IN OMPL, WHILE HIS SHARE HOLDING IN THE APPELLANT COMPANY IS MORE THAN 10%. THE ASSESSING OFFICER THEREFORE, FOUND THAT THE AFO RESAID ADVANCES BY THE ASSESSEE COMPANY TO OMPL CONSTITUTE DEEMED DIVIDEND WITHIN THE MEANING OF S.2(22)(E) REQUIRING DEDUCTION OF TAX AT SOURCE U/S. 194. THE ASSESSING OFFICER, ACCORDINGLY INITIATED THE PROCEE DINGS UNDER S.201(1) AND S.201(1A), AND AFTER CONSIDERING THE OBJECTIONS OF THE ASSESSEE IN RESPONSE TO THE SHOW-CAUSE NOTICE ISSUED IN THAT BE HALF, NOTED THAT THE LEDGER EXTRACTS SHOWS ONLY CHEQUES ISSUED TO OMPL, BUT DID NOT SHOW THE PAYMENTS MADE TOWARDS PROCESSING CHARGES. HE FURTH ER NOTED THAT THE ASSESSEE HAS NOT SPECIFIED THE NATURE OF FUNDS TRAN SFERRED IN THE LEDGER. HE ALSO FOUND THAT THERE WAS NO CORRELATION BETWEEN THE ADVANCES GIVEN AND THE INVOICES, IF ANY, FOR PURCHASE OR PROCESSIN G CHARGES TO TREAT THE PAYMENTS AS TRADE ADVANCES. THE ASSESSING OFFICER A LSO FOUND THAT THE ASSESSEE COMPANY HAD FLUSH OF FUNDS AND THERE IS AL WAYS DEBIT BALANCE IN THE ACCOUNT OF OMPL DUE TO REGULAR ADVANCES GIVEN BY THE ASSESSEE AND SUCH DEBIT BALANCES CONSTITUTE DIVIDEND WITHIN THE MEANING OF S.2(22)(E). ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 3 THE ASSESSING OFFICER FOUND THAT THE MAIN ISSUE WAS DEDUCTION OF TAX AT SOURCE U/S. 194 OF THE ACT, WHICH THE ASSESSEE FAIL ED TO DEDUCT @ 22.44%. THE ASSESSING OFFICER OBSERVED THAT FOR THE LIMITED PURPOSE OF TDS, IT DOES NOT MATTER FOR HIM AS TO IN WHOSE HAND S, BUT SUCH DIVIDEND IS TAXABLE. ACCORDINGLY, VIDE IMPUGNED ORDERS BOTH DATED 14.9.2009, PASSED UNDER S.201(1) READ WITH S.194 AND 201(1A) O F THE ACT, TREATING THE ASSESSEE AS AN ASSESSEE IN DEFAULT, RAISED DEMA NDS OF TAX U/S. 201(1) AMOUNTING TO RS.30,42,920 FOR THE ASSESSMENT YEAR 2 005-06 AND OF RS.28,20,079 FOR THE ASSESSMENT YEAR 2006-07, BESID ES CORRESPONDING INTEREST LEVIED UNDER S.201(1A) FOR BOTH THE ASSESS MENT YEARS. 3. ON APPEAL, THE CIT(A) OBSERVED THAT FOR THE APP LICATION OF PROVISIONS OF S.2(22)(E) OF THE ACT, THERE SHOULD B E ACCUMULATED PROFITS AND THE ADVANCES SHOULD BE TO A CONCERN IN WHICH A SHAREHOLDER OF THE ASSESSEE SHOULD HAVE NOT LESS THAN 10% OF REGISTER ED OWNERSHIP AND SUCH PERSONS SHOULD HOLD MORE THAN 20% OF REGISTERE D AS WELL AS BENEFICIAL OWNERSHIP IN THE RECIPIENT COMPANY. IN THE ASSESSEES CASE, THE CIT(A) OBSERVED, THESE CONDITIONS WERE FULFILLE D AND HENCE, THE ADVANCES PAID TO OMPL BY THE ASSESSEE COMPANY IS DI VIDEND WITHIN THE MEANING OF S.2(22) OF THE ACT. HAVING HELD THAT T HE ADVANCES IN QUESTION CONSTITUTE DIVIDEND WITHIN THE MEANING OF S.2(22)(E) OF THE ACT, THE CIT(A) HELD THAT THE PROVISIONS OF S.194 ARE A LSO APPLICABLE, AND THE ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ON PAYME NT OF SUCH ADVANCES. HE DISTINGUISHED THE CASE-LAW RELIED UPON BY THE AS SESSEE. THE CIT(A) COLLECTED DETAILS OF THE ADVANCES IN QUESTION MADE BY THE ASSESSEE TO OMPL, DULY CATEGORIZED AS TRADE ADVANCES AND OTHER THAN TRADE ADVANCES FOR THE ENTIRE PERIOD IN QUESTION. HE HELD THAT TH E ASSESSEE IS LIABLE TO DEDUCT TAX AT SOURCE ONLY IN RELATION TO CASH ADVAN CES MADE BY IT TO OMPL OF RS.77,41,805 FOR THE ASSESSMENT YEAR 2005-06 AND RS.31,01,169 FOR THE ASSESSMENT YEAR 2006-07, AND ACCORDINGLY DIRECT ED THE ASSESSING ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 4 OFFICER TO RESTRICT THE DEMANDS UNDER THE PROVISION S OF S.201(1) AND 201(1A) TO THE ADVANCES ARRIVED AT AFTER DUE VERIFI CATION AFTER EXCLUDING THE TRADE ADVANCES TO OMPL. 4. WHILE THE ASSESSEE PREFERRED APPEALS, ITA NOS. 128 AND 129/HYD/2012 FOR THESE TWO YEARS, AGAINST THE ORDER OF THE CIT(A) AGGRIEVED BY THE SUSTENANCE OF THE ORDERS PASSED UN DER S.201(1) AND 201(1A) IN RELATION TO CASH ADVANCES MADE BY THE AS SESSEE TO OMPL, THE REVENUE IS IN APPEAL FOR BOTH THESE YEARS, VIDE ITA NOS.372- 373/HYD/2012, AGGRIEVED BY THE RELIEF GRANTED BY TH E CIT(A) IN RELATION TO PAYMENTS MADE BY THE ASSESSEE TO OMPL BY WAY OF TRADE ADVANCES AND PROCESSING CHARGES. ASSESSEES APPEALS: ITA NO.128/HYD/2010 : ASSESSMENT YEAR 2005- 06 ITA NO.129/HYD/2010 : ASSESSMENT YEAR 2006- 07 5. EFFECTIVE GROUNDS OF THE ASSESSEE IN BOTH THESE APPEALS ARE IDENTICAL, EXCEPT FOR THE AMOUNTS INVOLVED. THE SA ME, AS TAKEN FROM ITA NO.128/HYD/2010 FOR ASSESSMENT YEAR 2005-06, READ A S FOLLOWS- 1. THE ORDER OF THE CIT IS IN GROSS VIOLATION OF T HE PROVISIONS OF LAW AND HENCE IS BAD IN LAW. 2. THE CIT(APPEALS) HAS ERRED IN NOT CONSIDERING TH E ASSESSING OFFICERS ACTION OF INITIATING THE PROCEEDINGS AFTE R ELAPSE OF 4 YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR. 3. THE CIT(A) HAS ERRED IN UPHOLDING THE TRADE ADVA NCES GIVEN BY THE COMPANY AS ADVANCE GIVEN WITHIN THE MEANING OF THE PROVISIONS OF SEC.2(22)(E) OF THE INCOME TAX ACT, 1 961. 4. THE CIT(A) HAS ERRED IN UPHOLDING THAT TAX HAS T O BE DEDUCTED AT SOURCE U/S. 194. 5. THE CIT(A) HAS ERRED IN UPHOLDING THE ASSESSEE AS AN ASSESSEE IN DEFAULT FOR NOT DEDUCTING TAX AT SOURC E. ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 5 6. THE CIT(A) HAS ERRED IN UPHOLDING RS.77,41,804 A S DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. 7. THE CIT(A) HAS ERRED IN UPHOLDING THE DEMAND RAI SED BY THE ASSESSING OFFICER U/S. 201(1) 8. THE CIT(A) HAS ERRED IN UPHOLDING THE DEMAND RAI SED BY THE ASSESSING OFFICER U/S. 201(1A) 6. IN THE VERY BEGINNING, LEARNED COUNSEL SUMMED U P BY STATING THAT THERE ARE COUPLE OF ISSUES ONE RELATING TO LE GALITY AND VALIDITY OF THE PROCEEDINGS UNDER S.201(1) AND 201(1A) OF THE INCOM E-TAX ACT AFTER LAPSE OF A PERIOD OF FOUR YEARS, AND THE SECOND ONE RELATES TO APPLICABILITY OF THE TDS PROVISIONS IN RESPECT OF THE ADVANCES HE LD AS DEEMED DIVIDENDS BY THE ASSESSING OFFICER UNDER S.2(22)(E) OF THE ACT. 7. IN CONNECTION WITH THE FIRST ISSUE, LEARNED CO UNSEL ARGUED BY STATING THAT THE PROCEEDINGS INITIATED BY THE ASSES SING OFFICER UNDER S.201(1) AND 201(1A) OF THE ACT AFTER A LAPSE OF FO UR YEARS FROM THE END OF THE RELEVANT FINANCIAL YEAR AMOUNT TO INVALID PR OCEEDINGS. FOR THIS PURPOSE, LEARNED COUNSEL RELIED ON VARIOUS DECISION S AND PROVIDED RELEVANT CITATIONS TOO. 8. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE FOR THE REVENUE ARGUED BY STATING THAT FOR THE PU RPOSE OF APPLICABILITY OF TDS PROVISIONS, SIX YEARS IS HELD TO BE A REASONABL E PERIOD. FOR THIS PURPOSE, HE RELIED ON THE DECISION OF THE SPECIAL B ENCH OF THE TRIBUNAL IN THE CASE OF MAHINDRA AND MAHINDRA LIMITED V/S. DCIT (30 SOT 374). 9. WE HEARD BOTH THE PARTIES AND PERUSED THE IMPUG NED ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECO RD. WE HAVE ALSO PERUSED THE CASE-LAW RELIED UPON BY THE PARTIES. W E FIND THAT THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MAHINDRA AND M AHINDRA LIMITED (SUPRA) HAS DECIDED THE ISSUE RELATING TO THE LIMIT ATION IN FAVOUR OF THE ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 6 REVENUE AND AGAINST THE ASSESSEE. THE SPECIAL BENC H OF THE TRIBUNAL IN THAT CASE HAS ANSWERED IN THE AFFIRMATIVE THE QUEST ION WHETHER THE MAXIMUM TIME LIMIT FOR PASSING FOR INITIATING AND C OMPLETING PROCEEDINGS UNDER S.201(1) AND 201(1A) IS SAME AS PRESCRIBED UN DER S.149, I.E. FOUR YEARS OR SIX YEARS FROM THE END OF RELEVANT ASSESS MENT YEAR, AS THE CASE MAY BE, DEPENDING UPON AMOUNT OF INCOME IN RESPECT OF WHICH PERSON RESPONSIBLE IS SOUGHT TO BE TREATED AS ASSESSEE-IN- DEFAULT. IT HAS ALSO ANSWERED IN THE AFFIRMATIVE THE QUESTION WHETHER AN Y ORDER PASSED UNDER S.201(1) OR 201(1A) CANNOT BE HELD AS BARRED BY LIM ITATION IF IT IS NOT PASSED WITHIN FOUR YEARS FROM THE END OF THE RELEVA NT FINANCIAL YEAR. RESPECTFULLY FOLLOWING THE RECENT DECISION OF THE S PECIAL BENCH OF THE TRIBUNAL REFERRED TO ABOVE, WHICH HAS BEEN RENDERED AFTER DETAILED CONSIDERATION OF THE RELEVANT STATUTORY PROVISIONS IN THE LIGHT OF THE CASE- LAW ON THE POINT, WE DECIDE THE FIRST ISSUE IN FAVO UR OF THE REVENUE AND AGAINST THE ASSESSEE, AND HOLD THAT THE IMPUGNED PR OCEEDINGS UNDER S.201(1) AND 201(1A) INITIATED BY THE ASSESSING OFF ICER FOR THESE TWO YEARS ARE NOT BARRED BY LIMITATION. 10. AS REGARDS THE OTHER ISSUE RELATING TO THE APP LICABILITY OF THE RELEVANT TDS PROVISIONS TO DEEMED DIVIDEND UNDER S. 2(22)(E) OF THE ACT, THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED BY STAT ING THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ANZ REALITY PVT. LTD. V /S. ITO(120 TTJ 142), WHICH IS RELEVANT FOR THE PROPOSITION THAT PAYMENT OF ADVANCES TO NON- SHARE HOLDERS DOES NOT REQUIRE TDS UNDER S.194 OF THE ACT, AND HENCE THE ASSESSEE CANNOT BE HELD TO BE AN ASSESSEE-IN DE FAULT UNDER S.201(1) SO AS TO ATTRACT INTEREST UNDER S.201(1)(1A) OF THE ACT. LEARNED COUNSEL FOR THE ASSESSEE NARRATED THE CHRONOLOGY OF FACTS O F BOTH THE CASES AND RELIED ON PARA 6 OF THE SAID ORDER OF THE JAIPUR BE NCH OF THE TRIBUNAL IN THE CASE OF ANZ REALITY (SUPRA). ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 7 11. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRES ENTATIVE FOR THE REVENUE READ OUT THE RELEVANT PORTION OF PARA 6 .3 OF THE IMPUGNED ORDER OF THE CIT(A) AND MENTIONED THAT THE FACTS OF THE CITED CASE ARE DISTINGUISHABLE, AS HELD BY THE CIT(A) IN THE IMPUG NED ORDER, AND HENCE THE IMPUGNED ORDER OF THE CIT(A) IS LIABLE TO BE U PHELD. 12. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDE RS OF THE REVENUE AS WELL AS THE PAPER BOOK FIELD BEFORE US. WE HAVE ALSO GONE THROUGH THE VARIOUS CITATIONS FILED BEFORE US BY TH E LEARNED COUNSEL FOR THE ASSESSEE IN GENERAL AND THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ANZ REALITIES (SUPRA) IN PARTICULAR. IN THE FIRST PLACE AND AT THE VERY OUTSET, WE HOLD THAT AS FAR AS TRADE ADVAN CES ARE CONCERNED, THERE IS NO QUESTION OF APPLICABILITY OF THE PROVIS IONS OF S.194 OF THE ACT, AND CONSEQUENTLY, APPLICABILITY OF PROVISIONS OF S. 201(1) AND S.201(1)(1A) DOES NOT ARISES. AS FOR THE OTHER ADV ANCES AS WELL, WE HAVE PERUSED PARA 6 OF THE SAID ORDER OF THE TRIBUN AL. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, WE REPRODUCE THE SAID P ARA HEREUNDER- 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ARGUMENTS MADE BY SHRI RAJEEV SOGANI, LEA RNED AUTHORISED REPRESENTATIVE, APPEAR TO BE CONVINCING THAT S.194 CASTS OBLIGATION FOR TDS ONLY WHEN PAYMENT IS MADE TO A SHAREHOLDER. IT IS UNDISPUTED FACT IN THE PRESENT CASE THAT THE FUNDS HAVE BEEN ADVANCED BY THE ASSESSEE COMPANY TO THE FOLLOWING COMPANIES, WHICH ARE NOT S HAREHOLDERS OF THE ASSESSEE COMPANY: (1) M/S. CITYBUILD REALTORS (P)LTD. (2) M/S. INDIANA CLASSIC REALTORS (P)LTD. (3) M/S. MINU CONSTRUCTIONS (P) LTD. THE SHAREHOLDERS OF THE ASE COMPANY ARE SNRI MOHD. RAFI BAGDIA -50 PER CENT AND SHRI TEHSIN RAFI BAGDIA 50 PER CENT. THE COMPLETE PICTURE IS DEPICTED IN THE CHART PLACED ON RECORD. THE LEGISL ATURE HAVE RIGHTLY RESTRICTED THE TDS REQUIREMENT ONLY WHEN PAYMENT IS MADE TO SHAREHOLDERS. UNDER THE PROVISIONS OF THE COMPANIE S ACT, 1965, EVERY COMPANY IS EXPECTED TO MAINTAIN A REGISTER OF SHARE HOLDERS UNDER S.150 OF THE COMPANIES ACT, 1956. COMPANY IS NOT OBLIGED TO MAINTAIN ANY REGISTER WHEN DETAILS OF SUCH CONCERNS M AY BE MAINTAINED TO WHICH PROVISIONS OF S.2(22)(A) APPLY. UNDER THESE CIRCUMS TANCES, WHEN PAYM ENT IS MADE TO A NON-SHAREHOLDER, IT IS IMPOSSIBLE FOR THE PAYER ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 8 COMPANY TO ASCERTAIN WHETHER IT WILL ATTRACT THE PR OVISIONS OF S.2(22)(E) OF THE IT ACT 1961 OR NOT. THEREFORE, IN THIS VIEW OF THE MATTER, LAW DOES NOT EXPECT THE PAYER COMPANY TO DEDUCT TDS WHEN PAY MENT IS MADE TO A NON-SHAREHOLDER. THIS IS THE REASON THE LAW EXPRESS LY PROVIDES FOR TDS REQUIREMENT ONLY WHEN PAYM ENT IS MADE TO A SHARE-HOLDER. THUS, S.194 REQUIRES TDS ONLY WHEN PAYMENT IS MADE TO A SHAREHO LDER. PAYMENT TO SHAREHOLDER WILL COVER BOTH TYPES OF DIVIDENDS I.E. NORMAL DIVIDEND AS WELL AS DEEMED DIVIDEND. OTHERWISE ALSO, DEEMED DI VIDEND WILL BE TAXED IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE HAND S OF NON-SHARE-HOLDER PAYEE. THEREFORE, S.194 DOES NOT REQUIRE TDS WHEN P AYM ENT IS MADE TO A NON-SHAREHOLDER. ALSO, UNDER S.206 OF THE COMPANIES ACT, 1956, THE DIVIDEND CAN BE PAID TO A REGISTERED SHAREHOLDER ON LY. THEREFORE, S.194 OF THE IT ACT, 1961 IS SYNCHRONIZED WITH THE REQUIR EMENT OF THE COMPANIES ACT, 1956 CONTAINED IN SS.150 AND 206 OF THE COMPANIES ACT, 1956. IN THE LIGHT OF THE ABOVE DECISION, IT IS CLEAR THA T IT IS ONLY WHERE THE PAYEE IN RELATION TO THE PAYMENTS IN QUESTION IS A SHARE-HOLDER, SUCH PAYMENTS MAY ATTRACT THE PROVISIONS OF S.2(22)(E) O F THE ACT, AND CONSEQUENTLY LIABILITY TO TDS UNDER S.194 OF THE A CT. THE POINTS OF DISTINCTION BETWEEN THE FACTS IN THE CITED CASE AND THE CASE OF THE ASSESSEE, MADE OUT BY THE CIT(A) IN THE IMPUGNED OR DER MERELY BASING ON THE STATUS OF THE ASSESSEE, IN OUR OPINION, ARE TOTALLY ARTIFICIAL AND NOT VALID. IN THIS VIEW OF THE MATTER, THE RATIO OF THE SAID DECISION OF THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF ANZ REA LITY (SUPRA), APPLIES TO THE FACTS OF THE PRESENT CASE. HENCE, IN SO FAR AS THE ASPECT OF DEEMED DIVIDED INVOLVED IN CASH ADVANCES IS CONCERNED, ASS ESSEE IS ENTITLED FOR RELIEF IN THIS REGARD. WE ACCORDINGLY ALLOW THE G ROUNDS OF THE ASSESSEE IN THIS APPEAL. 13. IN THE RESULT, ASSESSEES APPEALS ARE ALLOWED. REVENUES APPEALS: ITA NO.372/HYD/2010 : ASSESSMENT YEAR 2005- 06 ITA NO.373/HYD/2010 : ASSESSMENT YEAR 2006- 07 14. GROUNDS OF BOTH THE APPEALS ARE IDENTICAL. THE RE IS A MISTAKE IN NUMBERING OF THE GROUNDS. THE CORRECT SL.NO AND THE GROUNDS READ AS UNDER- ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 9 1. THE COMMISSIONER OF INCOM E TAX(APPEALS) ERRED IN FACTS AS WELL AS IN LAW. 2. THE COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE APPRECIATED THAT SECTION 2(22)(E) CONTEMPLATES ALL KINDS OF ADVANCES SO AS TO TREAT AS DEEMED DIVIDEND AND NO DISTINCTION IS MADE BETWEEN ADVANCES FOR TRADE AND PROCESSING CHARGES AND OTHER KIND OF ADVANCES. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS) OUGHT TO HAVE APPRECIATED HAT FUTURE ADJUSTMENT OF ADVANCES FOR T RADE AND PROCESSING CHARGES DOES NOT ALTER THE CHARACTER OF THE ADVANCES SO AS TO TREAT THE SAME AS DEEMED DIVIDEND , AS HELD IN THE CASES OF A) CIT VS. P.K. ABUBUCKER (MAD ) 259 ITR 507 B) WALCHAND & CO. LTD. VS. CIT (BOM) 100 ITR 598 4.. 15. DURING THE PROCEEDINGS BEFORE US, LEARNED COUN SEL FOR THE ASSESSEE ARGUED STATING THAT THE CIT(A) RIGHTLY ALL OWED THE ASSESSEES APPEALS ON (A) TRADE CREDITS AND (2) PROCESSING CHA RGES. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE STATED THAT THERE IS NO DECISION OF CIT(A) ON THESE ISSUES. 16. WE HEARD THE PARTIES AND PERUSED THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES AND OTHER MATERIAL ON RECORD. WE FIND ON FACTS, AS NOTED ABOVE, THE CIT(A) COLLECTED THE DETAILS OF AD VANCES CATEGORISED INTO TRADE ADVANCES AND PROCESSING CHARGES. THOUGH HE R ESTRICTED THE APPLICABILITY OF TDS PROVISIONS ONLY TO CASH ADVANC ES, AND TOOK THE OTHER TWO TYPES OF ADVANCES AS NOT ATTRACTING THE TDS PRO VISIONS, HE HAS NOT PASSED ANY SPEAKING ORDER IN THAT BEHALF. HE HAS N OT ELABORATED ANY REASONS TO ARRIVE AT THE CONCLUSION THAT THE TRADE ADVANCES AND PROCESSING CHARGES DO NOT ATTRACT THE TDS PROVISION S. CONSIDERING TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, WE DEEM IT FAIR AND PROPER TO SET ASIDE THE IMPUGNED ORDER OF THE CIT(A) ON THE ISSUE RELATING TO THE APPLICABILITY OF TDS PROVISIONS TO TRADE ADVANCES A ND PROCESSING CHARGES ITA NO.128-129 & 372-373/HYD/ 2010 M/S. JAYPEEM GRANITES PRIVATE LIMITED, HYDERABAD 10 AND RESTORE THESE MATTERS TO HIS FILE FOR FRESH CON SIDERATION AND DISPOSAL OF THE APPEAL BEFORE HIM IN ACCORDANCE WITH LAW BY PASSING A SPEAKING ORDER ON THE SAID ASPECTS OF THE ISSUE IN DISPUTE A ND AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. 17. IN THE RESULT, BOTH THESE APPEALS OF THE REVEN UE ARE ALLOWED FOR STATISTICAL PURPOSES. 18. TO SUM UP, THE APPEALS OF THE ASSESSEE, BEING ITA N OS.128 AND 129/HYD/2012 ARE ALLOWED AND THE APPEALS FILED BY THE REVENUE, BEING ITA NOS.372 AND 373/HYD/2012, ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 08 JUNE, 201 2 SD/- SD/- ( ASHA VIJAYARAGHAVAN) (D.KARUNAKARA RAO) JUDICIAL MEMBER. ACCOUNTANT MEMBER. DT/- JUNE, 2012 COPY FORWARDED TO: 1. M/S. JAYPEEM GRANITES PRIVATE LIMITED, C/O. M/S. GA NDHI & GANDHI, CHARTERED ACCOUNTANTS, 1002 PAIGAH PLAZA, BASHEERBAGH, HYDERABAD 2 . 3. INCOME - TAX OFFICER, WARD 1 4 ( 3 ), HYDERABAD COMMISSIONER OF COMMISSIONER OF INCOME-TAX(APPEALS) -II HYDERABAD 4. COMMISSIONER OF INCOME-TAX (TDS), HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.