Spry Hospitality Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 1372/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52768 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 20-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTY
• Assessee Lawyers: TAPAS RAM MISRA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G DELHI) BEFORE SHRI G.E. VEERABHADRAPPA, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO. 1372(DEL)2010 ASSESSMENT YEAR: 2006-07 SPRY HOSPITALITY PVT. LTD. ASSTT .COMMISSIONER OF INCOME TAX, 38, 1 ST FLOOR, PHASE III, OKHLA INDL. V. CIRCLE 9(1), NEW DELHI. AREA, NEW DELHI-20. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI TAPAS RAM MISRA, ADV. RESPONDENT BY : MS. S. MOHANTY, DR ORDER PER A.D. JAIN, J.M. THIS IS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006- 07, TAKING THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE IMPUGNED ORDER OF THE CIT(A) IS VAGUE, PASSED WITH UNDUE HASTE, BASED ON INCORRECT APPRECIATION OF FACTS, BAD IN LA W AND VOID AB INITIO. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT DELETING TH E ADDITION MADE TO THE APPELLANTS INCOME ON ACCOUNT OF DEEMED DIVIDEN D UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS THE ACT). ITA 1372(DEL)2010 2 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATIN G THAT THE LOAN PROVIDED BY M/S. KMB EXPORT (P)LTD. WAS IN THE ORDI NARY COURSE OF ITS BUSINESS OF LENDING AND HENCE NO ADDITION ON TH AT ACCOUNT COULD BE MADE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF T HE ACT. 4. WITHOUT PREJUDICE, THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT ADDITION OF AN AMOUNT DEEMED TO BE DIVIDEND UNDER SECTION 2(22)(E) COULD BE MADE, IF AT ALL, I N THE HANDS OF THE SHAREHOLDER AND NOT IN THE HANDS OF THE ENTITY RECE IVING THE LOAN. 4.1 THAT THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT THE APPELLANT WAS NOT A SHAREHOLD ER OF M/S. KMB EXPORTS (P)LTD. AND HENCE NO ADDITION UNDER SECTION 2(22)(E) OF THE ACT COULD BE MADE IN THE APPELLANTS HANDS. 2. THE ASSESSING OFFICER MADE ADDITION OF ` 19,21,741/- U/S 2(22)(E) OF THE I.T. ACT OBSERVING, INTER ALIA, THAT M/S. KMB E XPORT (P)LTD. AND M/S. SPRY SPACE SOLUTION (P) LTD. WERE CLOSELY HELD COMP ANIES HAVING ACCUMULATED PROFITS OF ` 58,14,076/- AND ` 27,10,931/- AS ON 31.3.2006; THAT THEY HAD GIVEN A LOAN TO THE ASSESSEE CONCERN; THAT SUNIL BHALLA WAS HAVING A SUBSTANTIAL INTEREST IN THE ASSESSEE CONCERN/COMPA NY AND THE ASSESSEE COMPANY HAD SHOWN THE AMOUNTS RECEIVED FROM M/S. K. M.B. EXPORTS(P)LTD. AND M/S. SPRY SPACE SOLUTIONS (P)LTD. AS UNSECURED LOANS RECEIVED, IN ITS BALANCE SHEET; THAT THESE PAYMENTS WERE NOT BY WAY OF ANY AMOUNT DECLARED OR DISTRIBUTED BY WAY OF DIVIDEND AS CONTEMPLATED I N SECTION 115-O OF THE ACT AND WERE NOT EXEMPT U/S 10(34) OF THE ACT. 3. THE LD. CIT(A) CONFIRMED THE ASSESSMENT ORDER. ITA 1372(DEL)2010 3 4. THE LEARNED COUNSEL FOR THE ASSESSEE HAS CONTEND ED THAT THE TRIBUNAL, IN THE EARLIER YEAR, VIDE ORDER DATED 4.12.09 (COPY AT PAGES 12 TO 16 OF THE ASSESSEES PAPER BOOK) IN ITA NO. 3593(DEL)09, ASSE SSMENT YEAR 2005-06, HAS REMANDED THE MATTER TO THE AO, TO BE DECIDED AF RESH IN THE LIGHT OF THE SPECIAL BENCH DECISION OF THE MUMBAI BENCH OF THE T RIBUNAL IN ACIT V. BHAUMIK COLOUR PVT. LTD., 27 SOT 270 (MUMBAI). IT HAS BEEN CONTENDED THAT THE MATTER MAY BE SIMILARLY REMITTED TO THE FI LE OF THE AO FOR THE YEAR UNDER CONSIDERATION ALSO. 5. THE LEARNED DR, ON THE OTHER HAND, HAS STRONGLY RELIED ON THE IMPUGNED ORDER. 6. IT IS SEEN, THAT THE TRIBUNAL, FOR ASSESSMENT YE AR 2005-06, HAS REMITTED THE MATTER TO THE FILE OF THE AO BY OBSERVING AS FO LLOWS:- 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT LIST O F SHAREHOLDERS OF THESE TWO COMPANIES IS NOT AVAILABLE ON RECORD AND THERE IS NO MENTION IN THE ASSESSMENT ORDER OR IN THE ORDER OF LD. CIT(A) AS TO WHETHER THE ASSESSEE COMPANY IS ALSO HOLDING SHARES IN THESE TWO COMPANIES. IN THE CASE OF BHOMIC COLOUR (SUPRA), I T WAS HELD BY SPECIAL BENCH OF THE TRIBUNAL THAT IN ORDER TO MAKE ADDITION U/S 2(22)(E) AS DEEMED DIVIDEND, IT IS NECESSARY THAT T HE ASSESSEE SHOULD BE FOUND AS A REGISTERED SHAREHOLDER AS WELL AS BEN EFICIAL SHAREHOLDER OF THE COMPANY FROM WHICH THE AMOUNT IN QUESTION WA S RECEIVED BY THE ASSESSEE. SINCE THE ASPECT IS NOT CLEAR AND T HIS JUDGMENT OF THE SPECIAL BENCH OF THE TRIBUNAL WAS NOT AVAILABLE BEF ORE THE AUTHORITIES BELOW, WE ARE IN AGREEMENT WITH THE LD. AR OF THE A SSESSEE THAT THIS MATTER SHOULD GO BACK TO THE FILE OF THE AO FOR A F RESH DECISION AND ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A ) ON THIS ISSUE AND RESTORE THIS MATTER BACK TO THE FILE OF THE AO FOR A FRESH DECISION IN THE ITA 1372(DEL)2010 4 LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE T RIBUNAL RENDERED IN THE CASE OF BHOMIC COLOUR (SUPRA). THE ASSESSEE S HOULD FURNISH THE LIST OF SHAREHOLDERS OF THESE TWO COMPANIES DURING THE RELEVANT PERIOD AND THEREAFTER THE AO SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNI TY OF BEING HEARD TO THE ASSESSEE. 7. THE SITUATION REMAINS THE SAME FOR THE YEAR UNDE R CONSIDERATION ALSO. IT IS NOT KNOWN AS TO WHETHER THE ASSESSEE COMPANY IS ALSO HOLDING SHARES IN M/S. K.M.B. EXPORTS(P)LTD. AND M/S. SPRY SPACE SOLU TIONS (P)LTD., FOR WHOM, THE AMOUNTS WERE RECEIVED, AS PER BHAUMIK CO LOUR (SUPRA) THE ASSESSEE NEEDS TO BE REGISTERED SHAREHOLDER AS WEL L AS BENEFICIAL SHAREHOLDER OF THE GIVER COMPANY. ACCORDINGLY, AS FOR ASSESSM ENT YEAR 2005-06, THE ISSUE IS REMITTED TO THE FILE OF THE AO TO BE DECID ED AFRESH IN ACCORDANCE WITH LAW, IN THE LIGHT OF BHAUMIK COLOUR (SUPRA), KEEPING IN VIEW THE TRIBUNAL DECISION (SUPRA) FOR ASSESSMENT YEAR 2005- 06. 8. IN THE RESULT, FOR STATISTICAL PURPOSES, THE APP EAL OF THE ASSESSEE IS TREATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.09.2011. SD/- SD/- (G.E. VEERABHADRAPPA) (A.D. JAIN) VICE PRESIDENT JUDICIAL MEMBER DATED: 23.09.2011 *RM ITA 1372(DEL)2010 5 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR