DCIT, CIR-12(1), KOLKATA, Kolkata V. M/s Amrit Breeder Farms Pvt. Ltd., Kolkata

ITA 1302/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1202 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 15-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Keywords: Deemed dividend

Judgement Text

1 ITA NO.1302/KOL/2015 AMRIT BREEDER FARMS PVT. LTD., AY 2011-12 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA () BEFORE .., /AND . ' # $% % , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1302/KOL/2015 ASSESSMENT YEAR: 2011-12 DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-12(1), KOLKATA. VS. M/S. AMRIT BREEDER FARMS PVT. LTD. (PAN:AAGCA6829C) APPELLANT RESPONDENT DATE OF HEARING 07.09.2017 DATE OF PRONOUNCEMENT 03.11.2017 FOR THE APPELLANT SHRI KALYAN NATH, ADDL. CIT, DR FOR THE RESPONDENT SHRI ANIL KOCHAR, ADVOCATE ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-4, KOLKATA DATED 03.08.2015 FOR AY 2011-12. 2. REVENUES SOLE GROUND OF APPEAL IS AGAINST THE O RDER OF LD. CIT(A) IN DELETING THE ADDITION MADE BY AO U/S. 2(22)(E) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) ON ACCOUNT OF ADDITION MADE ON ASSESSEE BY TREATING THE ADVANCE/LOAN RECEIVED AS DEEMED DIVIDEND. BRIEF FACTS IN SHORT ARE THAT T HE AO AT THE TIME OF ASSESSMENT PROCEEDINGS FOUND FROM THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND TAX AUDIT REPORT THAT THE ASSESSEE COMPANY RECEIVED UNSECURED LOAN OF RS.4,71 ,31,713/- FROM ITS SISTER CONCERN M/S. SHIVSHAKTI AGRO (INDIA) LTD. THE AO WAS OF THE OPI NION THAT DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT IS ATTRACTED AS SEC. 2(22)(E) OF THE ACT PLAINLY SEEKS TO BRING WITHIN THE TAX NET ACCUMULATED PROFITS WHICH ARE DISTRIBUTED BY CLOSEL Y HELD COMPANIES TO ITS SHAREHOLDERS IN THE FORM OF LOANS. IN THIS CASE, M/S. SHIVSHAKTI A GRO (INDIA) LTD. HAS HUGE ACCUMULATED PROFIT WHICH THE COMPANY IS PASSING ON TO ITS SISTE R CONCERN M/S. AMRIT BREEDER FARMS PVT. LTD., (THE ASSESSEE HEREIN), ACCORDING TO AO, THE P URPOSE OF WHICH IS TO AVOID THE PAYMENT 2 ITA NO.1302/KOL/2015 AMRIT BREEDER FARMS PVT. LTD., AY 2011-12 OF TAXES. THEREFORE, THE AO OBSERVED THAT IN THIS CASE SECTION 2(22)(E) OF DEEMED DIVIDENDS ARE FULLY APPLICABLE SINCE THE LOAN WAS GIVEN BY A CLOSELY HELD COMPANY M/S. SHIVSHAKTI AGRO (INDIA) LTD. AND GIVEN TO A CONCERN, HERE THE ASSESSEE M/S. AMRIT BREEDER FARMS PVT. LTD. THE AO, THEREFORE, TREATED THE MAXIMUM LOAN AM OUNT OF RS.1,08,00,000/- AT ANY TIME DURING THE YEAR AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY TO THE EXTENT OF ACCUMULATED PROFIT OF LENDER COMPANY M/S. SHIVSHAKT I AGRO (INDIA) LTD. AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS DEEMED DIVID END. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UNDER: 4.1. I HAVE CONSIDERED THE ARGUMENT OF THE AR OF THE APPELLANT IN THE BACKDROP OF THE ACTION OF THE AO IN INVOKING THE PROVISIONS OF SECTION 2( 22)(E) OF THE ACT. CONSIDERING THE MATTER ON BOTH LEGAL AS WELL AS ON FACTUAL BASIS, I FIND THAT THE AO WAS TOTALLY ON A WRONG FOOTING ON THE ISSUE. FROM A PLAIN READING OF SECTION 2(22)(E), DE EMED DIVIDEND IS TO BE CONSIDERED IN THE HANDS OF THE RECIPIENT OF LOAN OR ADVANCES FROM THE COMPANY (FROM ITS ACCUMULATED PROFITS) IN WHICH THE RECIPIENT IS HAVING BENEFICIAL SHARE HOLD ING AND ALSO BEING A REGISTERED SHAREHOLDER. IN THIS CASE THE RECIPIENT OF THE SAID LOAN I.E. THE APPELLANT COMPANY WAS NOT A SHAREHOLDER IN THE LOANER COMPANY AND THIS BEING TH E CASE, PROVISION OF SECTION 2(22)(E) COULD NOT BE BROUGHT INTO THE PICTURE. A COMPANY IS A DISTINCT SEPARATE ENTITY FROM ITS SHARE HOLDERS AND JUST BECAUSE THERE HAPPENED TO BE COMMO N SHAREHOLDERS IN THE TWO COMPANIES, THERE CANNOT BE AN INFERENCE THAT SECTION 2(22)(E) WAS ATTRACTED IN THE PRESENT CASE. THE AR HAS ALSO REFERRED TO A COUPLE OF JUDICIAL RULINGS I N THIS REGARD IN THE WRITTEN SUBMISSIONS WHICH ARE AS FOLLOWS: A) CIT VS. HOTEL HILLTOP (2009) 313 ITR 166 (RAJ) B) ACIT VS. BHAUMIK COLOUR (P) LTD. (2009) 313 ITR (AT ) 146 (MUMBAI) IT WAS HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOUR (P) LTD. THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS O F THE PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTH ER THAN A SHAREHOLDER AND NOT IN THE HANDS OF THE BORROWING CONCERN IN WHICH SUCH SHAREH OLDER IS MEMBER OR PARTNER HAVING SUBSTANTIAL INTEREST. SINCE THE ASSESSEE COMPANY IS NO: A SHAREHOLDER IN SHIV SHAKTI AGRO INDIA LTD., THEREFORE, MERELY BECAUSE THERE ARE COMMON SH AREHOLDERS IN BOTH THE CONCERNS NO AMOUNT CAN BE TAXED IN THE HANDS OF THE APPELLANT U /S 2(22)(E) OF THE INCOME TAX ACT, 1961. 4.2. IT IS NOT THE CASE THAT THE AO HAS PROVEN WITH ANY MATERIAL FACTS THAT THE APPELLANT WAS A REGISTERED AS WELL AS A BENEFICIAL SHAREHOLDER IN T HE LOANER OF COMPANY. UNDER THE FACTS AND CIRCUMSTANCES, I DO NOT FIND ANY BASIS TO SUSTAIN T HE ACTION OF THE AO AND CONSEQUENTLY, THE ADDITION MADE IN THIS REGARD IN A SUM OF RS.1,08,00 ,000/- IS THEREFORE DIRECTED TO BE DELETED. THIS IS ALLOWED. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT SECTION 2(22)(E) OF THE ACT IS NOT APPLICABLE IN THE CASE OF THE ASSESSEE COMPANY AS THE ASSESSEE COMPANY IS NOT A SHAREHOLDE R OF M/S. SHIVSHAKTI AGRO (INDIA) LTD., WHICH FACT COULD NOT BE CONTROVERTED BY THE LD. DR BEFORE US. THE LD. CIT(A) RELIED ON 3 ITA NO.1302/KOL/2015 AMRIT BREEDER FARMS PVT. LTD., AY 2011-12 JUDICIAL PRECEDENT THAT HAS BEEN QUOTED BY HIM WHI CH WE APPROVE AND SO CONFIRM THE ORDER OF LD. CIT(A) AND, THEREFORE, THE SAME IS HEREBY UP HELD. THE APPEAL OF REVENUE IS DISMISSED. 4. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 3 RD NOVEMBER, 2017. SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 3RD NOVEMBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT DCIT, CIRCLE-12(1), KOLKATA. 2 RESPONDENT M/S. AMRIT BREEDER FARMS PVT. LTD., A- 15, 3 RD FLOOR, 234/3A, AJC BOSE ROAD, KOLKATA-700020 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY