ACIT, CHENNAI V. Zenta Knowledge Services Pvt. Ltd., Mumbai

ITA 1510/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8816 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 26-05-2016
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS
• Assessee Lawyers: A SHAMINI CAS
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . , ! . # , $ % & [ BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NO.1510/MDS/2016 / ASSESSMENT YEAR : 2011-12 THE ASSTT. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 3(2) CHENNAI VS. M/S ZENTA KNOWLEDGE SERVICES PVT. LTD [NOW MERGED WITH ACCENTURE SERVICES P. LTD.] PLANT NO.3., GODREJ & BOYCE COMPLEX PHIROJSHAH NAGAR, VIKHROLI WEST OFF. LBS MARG, MUMBAI 400 079 [PAN AABCG 3742 P] ] ( '( / APPELLANT) ( )*'( /RESPONDENT) / APPELLANT BY : SHRI SHIVA SRINIVAS JCIT /RESPONDENT BY : SHRI ASHIK SHAH & A. SHAMINI, CAS / DATE OF HEARING : 08 - 08 - 2016 ! / DATE OF PRONOUNCEMENT : 10 - 08 - 2016 + / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-11, CHENN AI, DATED 29.2.2016 AND PERTAINS TO ASSESSMENT YEAR 2011-12. ITA NO.1510/16 :- 2 -: 2. THE REVENUE HAS TAKEN ALTOGETHER FOUR GROUNDS OF W HICH GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE REQUIRING NO SPECIFIC ADJUDICATION. 3. IN GROUND NO.2, THE REVENUES GRIEVANCE IS THAT THE CIT(A) DIRECTED EXCLUSION OF COMMUNICATION AND TRAVEL EXPE NDITURE WHICH WAS DEDUCTED FROM THE EXPORT TURNOVER, FROM THE TOTAL TURNOVER AS WELL, WHILE COMPUTING THE DEDUCTION UNDER SECTION 10A OF THE ACT. 4. WE FIND THAT THE CIT(A) HAD RELIED ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ITO VS SAK SOFT LTD, 3 0 SOT 55,. THE ISSUE HAD ALSO COME UP BEFORE THE KARNATAKA HIGH CO URT IN THE CASE OF CIT VS TATA ELXSI LTD., 349 ITR 98. THEIR LORDSH IPS HELD THAT ITEMS WHICH WERE EXCLUDED FROM THE EXPORT TURNOVER HAD TO BE DEDUCTED FROM THE TOTAL TURNOVER ALSO WHILE WORKING OUT THE DEDUCTION ALLOWABLE TO THE ASSESSEE U/S 10A OF THE ACT. IN SUCH CIRC UMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). GROUND NO.2 OF THE REVENUE STANDS DISMISSED. 5. IN GROUND NO.3, THE GRIEVANCE OF THE REVENUE IS THA T THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING O FFICER U/S 2(22)(E) OF THE ACT. ITA NO.1510/16 :- 3 -: 6. FACTS APROPOS ARE THAT THE ASSESSEE HAD AVAILED SH ORT TERM LOAN OF ` 2,70,00,000/- FROM M/S ZENTA PVT.LTD., A SUBSIDIAR Y COMPANY. THE SHARES OF M/S ZENTA PVT. LTD WERE HELD BY OUTSO URCING MAURITIUS 1 LTD AND OUTSOURCING MAURITIUS 2 LTD. OUT OF THESE, M/S OUTSOURCING MAURITIUS 1 LTD ALSO HELD 99% SHARES IN THE ASSESSE E-COMPANY. THE ASSESSING OFFICER WAS OF THE OPINION THAT THERE WE RE COMMON SHAREHOLDERS BETWEEN THE TWO COMPANIES AND THEREFOR E, THE LOAN OF ` 2,70,00,000/- HAD TO BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. ASSESSEES OBJECTION TO THE ABOVE PROPOS AL WAS BRUSHED ASIDE AND ADDITION OF ` 2,70,00,000/- WAS MADE U/S 2(22)(E) OF THE ACT. 7. AGGRIEVED, THE ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A). ARGUMENT OF THE ASSESSEE BEFORE THE CIT(A) WAS THA T SEC. 2(22)(E) OF THE ACT COULD BE FASTENED ONLY ON THE SHAREHOLDER WHO WAS THE REGISTERED AS WELL AS BENEFICIAL OWNERSHIP OF THE S HARES IN THE COMPANY WHICH HAD GIVEN THE LOAN. AS PER THE ASSESSEE, TH IS CONDITION WAS NOT SATISFIED. RELIANCE WAS PLACED ON THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS BHAUMIK COLOUR P. LTD, 118 ITD 1. THE CIT(A) WAS APPRECIATIVE OF THIS CONTENTION AND HE DELETED THE ADDITION OF ` 2,70,00,000/-. ITA NO.1510/16 :- 4 -: 8. NOW BEFORE US, STRONGLY ASSAILING THE ORDER OF THE CIT(A), SUBMITTED THAT SEC. 2(22)(E) OF THE ACT WOULD BE AT TRACTED EVEN IN CASE OF COMMON SHAREHOLDING. 9. PER CONTRA, THE LD. AR SUPPORTED THE ORDERS OF THE CIT(A). 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPU TE IN THIS CASE THAT ASSESSEE AS SUCH WAS NOT HOLDING ANY SHARES IN ZENT A PVT. LTD. THE REASON WHY SEC. 2(22)(E) OF THE ACT WAS INVOKED WAS EXISTENCE OF COMMON SHAREHOLDERS IN BOTH THE COMPANIES. IN OUR OPINION, THE SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR P. LTD. HAD CLEARLY HELD THAT DEEMING PROVISION 2(22)(E) OF THE ACT WOULD APPLY ONLY WHEN THE SHAREHOLDER TO WHOM LOAN WAS GIVEN WAS BOTH A R EGISTERED AS WELL AS BENEFICIAL SHAREHOLDER. THIS POSITION OF LAW HAS ALSO BEEN AFFIRMED BY THE DELHI HIGH COURT IN THE CASE OF CIT VS ANKIT ECH PVT. LTD 340 ITR 14. WE DO NOT FIND ANY REASON TO INTERFERE WITH TH E ORDER OF THE CIT(A) ON THIS ISSUE. 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. ITA NO.1510/16 :- 5 -: ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH AUGUST, 2016, AT CHENNAI. SD/- SD/- ( . # ) (G. PAVAN KUMAR) $ / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED: 10 TH AUGUST, 2016 RD %& '()( / COPY TO: 1 . / APPELLANT 4. * / CIT 2. / RESPONDENT 5. (+, - / DR 3. *./ / CIT(A) 6. ,01 / GF