SHANKAR SHARMA, MUMBAI V. ITO 4(1)(1), MUMBAI

ITA 1412/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83868 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 22-09-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 17-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIVEK A PERAMPURNA
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.1412 /MUM/2011 ( / ASSESSMENT YEAR : 2006-2007 SHRI SHANKAR SHARMA, # 2, CRESCENT CHAMBERS, 4 TH FLOOR, TAMARIND LANE, FORT, MUMBAI 400 001. / VS. INCOME TAX OFFICER - WARD 4(1)(1), ROOM NO. 636, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 20. ./ PAN : AMGPS 6103 C ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI SATISH R. MODY R E SPONDENT BY : SHRI VIVEK A. PERAMPURNA / DATE OF HEARING : 22-09-2014 / DATE OF PRONOUNCEMENT :22-09-2014 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS IS AN APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) -8, MUMBAI DATED 09-12-2010 FOR THE A.Y. 2006-07 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 . 2. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED FOR TA XING THE AMOUNT RECEIVED FROM M/S FIRST GLOBAL STOCK BROKING PVT. LTD. AS DE EMED DIVIDEND U/S 2(22)(E) OF THE ACT. ITA 1412/M/11 2 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED TH E RECORDS. THE FACTS IN BRIEF ARE THAT THE ASSESSEE AND HIS PROPRIETARY CONCERN HAD RECEIVED A LOAN OF RS. 1,09,906/- AND RS. 7,12,241/- FROM M/S FIRST GLOBAL STOCK BROKING PVT. LTD. (HEREINAFTER REFERRED TO AS COMPANY) IN W HICH THE ASSESSEE WAS A SHARE HOLDER AND DIRECTOR HOLDING 24.38% OF VOTING RIGHT WITH 1950100 SHARES. A.O. REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE LOAN RECEIVED BE NOT TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AS THE SHARE HOLDER WAS HOLDING MORE THAN 10% OF THE SHARES IN THE COMPANY IN WHICH THE PUBLIC WERE NOT SUBSTANTIALLY INTERESTED. REJECTING THE A SSESSEES SUBMISSION THAT ONE OF THE PURPOSES OF THE COMPANY WAS TO UNDERTAKE THE BUSINESS OF FINANCING ALONG WITH STOCK BROKING AS IT WAS ALSO E NGAGED IN THE BUSINESS OF CLIENT FUNDING AND IT COULD NOT HAVE THOUGHT OF DIS TURBING DIVIDEND TO THE SHARE HOLDERS AT A TIME WHEN ITS OWN BUSINESS WAS S HUT, THE A.O. MADE ADDITION OF RS. 6,47,029/- AS PER SECTION 2(22)(E) OF THE ACT BEING THE AMOUNT WITHDRAWN DURING THE YEAR, RECORDING A FINDING THAT NO INCOME HAD BEEN EARNED BY THE COMPANY FROM BUSINESS OF CLIENT FUNDI NG OR THE COMPANYS ACCOUNT DID NOT REFLECT ANY INTEREST CHARGED OR REC OVERED FROM THE LOAN PARTIES, REJECTING THE ASSESSEES CLAIM THAT LENDIN G WAS SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY. THE A.O. FURTHER REJECTED THE APPELLANTS CONTENTION THAT THE COMPANY WAS NBFC FOR THE REASON THAT THE R BI CIRCULAR ON WHICH RELIANCE WAS PLACED BY THE ASSESSEE PERTAINS TO FOR EIGN INVESTMENT. BY THE IMPUGNED ORDER, THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FO UND THAT THE ASSESSEE WAS IN RECEIPT OF LOAN FROM A PRIVATE LIMITED COMPA NY IN WHICH THE ASSESSEE WAS HOLDING MORE THAN 10% OF SHARE HOLDING. CONTENT ION OF THE LD. COUNSEL FOR THE ASSESSEE WAS THAT SINCE THE ASSESSEE COMPAN Y WAS ENGAGED IN THE BUSINESS OF MONEY LENDING, THEREFORE, THE ADVANCE G IVEN BY SUCH COMPANY DO NOT COME WITHIN THE PURVIEW SECTION 2(22)(E) OF THE ACT. HOWEVER, IT IS CLEAR ITA 1412/M/11 3 FROM THE FINDINGS RECORDED BY THE A.O. THAT AGAINST THE AMOUNT GIVEN AS A LOAN TO THE ASSESSEE, NO INTEREST INCOME HAD BEEN E ARNED BY THE COMPANY. EVEN IN RESPECT OF OTHER ADVANCES, NO INTEREST INCO ME WAS SHOWN OR RECOVERED FROM THE PARTIES. WE FIND THAT SINCE NO INTEREST I NCOME WAS EARNED BY THE COMPANY ON SUCH ADVANCES, THE LOANS GIVEN BY SUCH C OMPANY CANNOT BE TREATED AS OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE A.O. TAXING SUCH RECEIPT OF LOAN AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND SEPTEMBER, 2014. !' # $% &! ' 22-09-2014 ( ) SD/- SD/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 22-09-2014 [ .6../ RK , SR. PS ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. 7 () / THE CIT(A) 8,, MUMBAI 4. 7 / CIT -4, MUMBAI 5. :;( 66<= , <= , $ 5 / DR, ITAT, MUMBAI H BENCH 6. (?@ A / GUARD FILE. ' / BY ORDER, : 6 //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI