L.Suryanarayanamoorthy, CHENNAI V. DCIT Corporate Circle 1, Coimbatore

ITA 1510/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6237 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 12-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN IRS
• Assessee Lawyers: T N SEETHARAMAN
• Keywords: Deemed dividend
• Section: 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A (SMC) BENCH : CHENNAI . , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT M EMBER ] ./I.T.A. NO. 1510/MDS/2017 / ASSESSMENT YEAR : 2011-2012. SHRI. L. SURYANARAYANAMOORTHY, 49, RUKKAMMAL STREET, THUDIYALUR, COIMBATORE 641 034. [PAN AUUPS 8446A] VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1, COIMBATORE. ( !' / APPELLANT) ( #$!' /RESPONDENT) / APPELLANT BY : SHRI. T.N. SEETHARAMAN, ADV. /RESPONDENT BY : SHRI. B. SAGADEVAN, IRS, JCIT. /DATE OF HEARING : 29-08-2017 !' /DATE OF PRONOUNCEMENT : 30-08-2017 % / O R D E R ASSESSEE IN THIS APPEAL IS AGGRIEVED ON AN ADDITIO N OF ?20,39,185/-, AS DEEMED DIVIDEND U/S. 2(22)(E) OF T HE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WHICH WAS CONFIRME D BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE THROUGH HIS ORDER DATED 28.03.2017. ITA NO.1510/MDS/2017. :- 2 -: 2. FACTS APROPOS ARE THAT ASSESSEE IS A DIRECTOR OF A COMPANY CALLED M/S. CHROMA PRINT (INDIA) PVT. LTD. HE HAD FILED HIS RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR DISCLOSING AN INCOME OF ?13.21,161/-. ORIGINAL ASSESSMENT WHICH WAS COMPL ETED U/S. 143(1) OF THE ACT, WAS LATER REOPENED BY ISSUING NOTICE U /S. 148 OF THE ACT ON 29.03.2016. DURING THE COURSE OF RE-ASSESSMENT PROC EEDINGS, LD. ASSESSING OFFICER NOTED THAT ASSESSEE HAD 20% OF T HE EQUITY SHARES IN M/S. CHROMA PRINT (INDIA) PRIVATE LIMITED. AS PER T HE LD. ASSESSING OFFICER, CURRENT ACCOUNT OF THE ASSESSEE WITH THE S AID COMPANY REFLECTED WITHDRAWALS BY HIM OVER AND ABOVE THE CRE DIT BALANCES THEREIN. THUS, AS PER THE LD. ASSESSING OFFICER S EC. 2(22)(E) OF THE ACT STOOD ATTRACTED. AGGREGATE AMOUNTS RECEIVED BY THE ASSESSEE FROM THE SAID COMPANY IN EXCESS OF THE CREDIT BALA NCE CAME TO ?20,39,185/-. SAID COMPANY HAD RESERVES AND SURPLU S IN EXCESS OF THIS AMOUNT. THE ASSESSMENT WAS THEREAFTER COMPLETE D BY MAKING AN ADDITION OF ?20,39,185/- TO THE RETURNED INCOME. 3. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). CONTENTION OF THE ASSESSEE BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) WAS THAT HE WAS THE MANAGING DIRECTOR OF M/S. CHROMA PRINT INDIA PR IVATE LIMITED AND HAD GIVEN PERSONAL ASSETS AS COLLATERAL FOR THE PU RPOSE OF LOAN RAISED ITA NO.1510/MDS/2017. :- 3 -: BY THE SAID COMPANY FROM THE BANK IN ADDITION TO A PERSON GUARANTEE. RELYING ON THE JUDGMENT OF HONBLE CALCUTTA HIGH CO URT IN THE CASE OF PRADIP KUMAR MALHOTRA VS. CIT 338 ITR 538 ASSESSEE ARGUED THAT, HE HAVING OFFERED HIS PERSONAL ASSETS AS COLLATERAL WI TH THE BANK, FOR ENABLING THE COMPANY TO TAKE A LOAN, THERE WAS A QU ID-PRO- QUO. CONTENTION OF THE ASSESSEE WAS THAT THE AMOUNT RECE IVED BY HIM FROM THE COMPANY WAS NOT GRATUITOUS BUT IN LIEU OF THE PERSONAL GUARANTEE GIVEN BY HIM FOR THE LOAN RAISED BY THE COMPANY FR OM THE BANK. 4. HOWEVER, LD. COMMISSIONER OF INCOME TAX (APPEALS) W AS NOT IMPRESSED BY THE ABOVE ARGUMENTS. ACCORDING TO HIM , THERE WAS NO RESOLUTION PASSED BY THE BOARD OF DIRECTORS OF M/S. CHROMA PRINT INDIA PVT. LIMITED WHICH COULD SHOW THAT MONEY PAID BY THE SAID COMPANY TO THE ASSESSEE WAS IN CONSIDERATION OF HIS PERSONA L GUARANTEE FOR THE LOAN AND IMMOVABLE PROPERTY BEING GIVEN AS COLLATER AL. THOUGH THE ASSESSEE RELIED ON A LETTER ISSUED BY THE STATE BA NK OF INDIA, WHEREIN TERMS AND CONDITIONS MENTIONED, DEPOSITS OF PERSON AL PROPERTIES AND PERSONAL GUARANTEE IN FAVOUR OF THE SAID BANK, FOR THE CREDIT LIMIT SANCTIONED TO THE SAID COMPANY, THIS WAS NOT ACCEPT ED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), FOR WANT OF RESOLUTION FROM THE SAID COMPANY. HE THUS HELD THAT FACTS OF THE A SSESSEES CASE WERE DIFFERENT FROM THOSE IN THE CASE OF PRADIP KUMAR MA LHOTRA (SUPRA) ITA NO.1510/MDS/2017. :- 4 -: DECIDED BY THE HONBLE CALCUTTA HIGH COURT. HE CON FIRMED THE ADDITION MADE BY THE LD. ASSESSING OFFICER. 5. NOW BEFORE ME, LD. AUTHORISED REPRESENTATIVE STRON GLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES ONCE AGAIN PLACED STRONG RELIANCE ON THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA (SUPRA). AS PER LD. AUTHORISED REPRESENTATIVE WHEN A LOAN OR ADVANCE GIVEN TO A SHAREHOLDER AS A CONSEQUENCE OF A CONSIDERATION WHICH WAS BENEFICIAL TO A COMPANY REC EIVED FROM SUCH SHARE HOLDER, SUCH ADVANCE OR LOAN COULD NOT BE SAI D TO BE DEEMED DIVIDEND. RELIANCE WAS ALSO PLACED ON THE DECISION OF CO-ORDINATE BENCH IN THE CASE OF ACIT VS. SMT. G. SREEVIDYA (2012) 138 ITD 427 . AS PER THE LD. AUTHORISED REPRESENTATIVE IN THE AB OVE DECISION, CO- ORDINATE BENCH HAD HELD THAT EVERY PAYMENT MADE BY A COMPANY TO ITS SHAREHOLDER COULD BE LOAN/ADVANCE, WOULD NOT BE CONSIDERED AS DEEMED DIVIDEND WHEN THE SHAREHOLDER CONCERNED HAD OFFERED PERSONAL GUARANTEE AND COLLATERAL SECURITY FOR THE BENEFIT OF THE COMPANY. RELIANCE WAS ALSO PLACED ON THE DECISION O F CO-ORDINATE BENCH IN THE CASE OF ACIT VS. SHRI RAVIKANT CHOUDHARY IN ITA NO.768/MDS/2012 AND C.O.NO.93/MDS/2012, DATED 17.12 .2012 . AS PER LD. AUTHORISED REPRESENTATIVE, CO-ORDINATE BENCH H AD CONSIDERED AN ISSUE WHERE LOAN WAS TAKEN BY A SHAREHOLDER WHO HAD SHAREHOLDING IN ITA NO.1510/MDS/2017. :- 5 -: EXCESS OF 10%, WHERE SUCH SHAREHOLDER HAD FURNISHED A BANK GUARANTEE FOR THE COMPANY. AS PER THE LD. AUTHORISE D REPRESENTATIVE CO-ORDINATE BENCH HAD HELD THAT FURNISHING OF BANK GUARANTEE BY A SHAREHOLDER TO SECURE A LOAN TAKEN BY THE COMPANY, FROM A BANK, WAS GOOD ENOUGH TO EXEMPT THE LOANS TAKEN BY THE SH AREHOLDER FROM THE COMPANY OUT OF THE PREVIEW OF SEC. 2(22) (E) OF THE ACT. 6. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTING THE ORDERS OF THE AUTHORITIES BELOW SUBM ITTED THAT IN ALL THE CASES RELIED ON BY THE LD. AUTHORISED REPRESENTATIV E, THERE WAS A CLEAR QUID-PRO-QUO. ACCORDING TO HIM, IN ALL THESE CASES THERE WAS A PRE- CONDITION OF LOANS BEING GIVEN TO THE CONCERNED ASS ESSEES. AS PER LD. DEPARTMENTAL REPRESENTATIVE THIS CONDITION DID NOT APPEAR IN ASSESSEES CASE HERE. FURTHER, ACCORDING TO HIM, T HERE WAS NO BOARD RESOLUTION WHICH COULD SHOW THAT ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE WAS IN CONSIDERATION FOR THE GUARANTEE OFFERED BY THE ASSESSEE TO THE COMPANY. RELIANCE WAS ALSO PLACED ON THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF DIPESH LALCHAND SHAH VS. ACIT (2016) 68 TAXMANN.COM 151 . 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPU TE REGARDING ITA NO.1510/MDS/2017. :- 6 -: QUANTUM OF THE AMOUNT CONSIDERED FOR ADDITION U/S. 2(22) (E) OF THE ACT. ONLY ARGUMENT OF THE ASSESSEE IS THAT HE HAD GIVEN PERSONAL GUARANTEE AS WELL AS HIS PERSONAL ASSETS AS COLLAT ERAL FOR THE PURPOSE OF LOANS RAISED BY THE COMPANY. AS PER THE ASSESSEE THE ADVANCE RECEIVED BY HIM FROM THE SAID COMPANY WAY IN CONSID ERATION OF THESE BENEFITS GIVEN BY HIM TO THE SAID COMPANY. IN SUPP ORT OF THIS CONTENTION, ASSESSEE HAS PLACED ON RECORD A SANCTIO N LETTER DATED 28.06.2008 ISSUED BY THE STATE BANK OF INDIA TO M/S . CHROMA PRINT INDIA P. LTD. AT PAGE NO.2 OF THIS SANCTION LETTER , IT IS CLEARLY STATED THAT SHRI. L. SURYANARAYA MOORTHY, THE ASSESSEE HA D GIVEN A PERSONAL GUARANTEE FOR THE LOAN. HOWEVER, THE COLLATERAL OF FERED WAS NOT BY SHRI. L. SURYANARAYA MOORTHY BUT BY SHRI. R.LAKSHM INARAYANA MOORTHY. THUS WHAT ASSESSEE OFFERED IN THE BANK WA S HIS PERSONAL GUARANTEE FOR THE LOAN TAKEN BY M/S. CHROMA PRINT INDIA P. LTD. CLAIM OF THE ASSESSEE IS THAT ADVANCE OF ?20,39,185 /- RECEIVED BY HIM FROM M/S. CHROMA PRINT INDIA P. LTD WAS IN CONSIDER ATION OF SUCH PERSONAL GUARANTEE. RELIANCE HAS BEEN PLACED ON THE JUDGMENT OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF PRADIP KUMAR MALHOTRA . IN THE SAID CASE, THE CONCERNED ASSESSEE HAD LET OUT H IS PROPERTY TO A COMPANY IN WHICH HE WAS HAVING SUBSTANTIAL SHAREHOL DING. THEREAFTER HE ALLOWED THE SAID PROPERTY TO BE GIVEN AS COLLATE RAL SECURITY TO M/S. VIJAYA BANK FOR A LOAN TAKEN BY THAT COMPANY FROM THE BANK. THE ITA NO.1510/MDS/2017. :- 7 -: BOARD OF DIRECTORS OF THE SAID COMPANY HAD PASSED A RESOLUTION AUTHORIZING THE ASSESSEE TO TAKE AN INTEREST FREE D EPOSIT OF ?50,00,000/- AS AND WHEN REQUIRED, FOR MAKING AVAIL ABLE HIS PROPERTY TO BE GIVEN AS COLLATERAL SECURITY TO THE BANK. HOW EVER, THE FACT SCENARIO BEFORE ME IS ENTIRELY DIFFERENT. THERE IS NO PROPERTY OF THE ASSESSEE OFFERED AS COLLATERAL SECURITY. WHAT WA S GIVEN WAS ONLY A PERSONAL GUARANTEE. THERE WAS ALSO NO RESOLUTION O F BOARD OF DIRECTORS OF M/S. CHROMA PRINT INDIA P. LTD. WHEREI N IT HAD AUTHORIZED ASSESSEE TO TAKE ADVANCE. IN MY OPINION THE CASE O F PRADIP KUMAR MALHOTRA HAS NO APPLICABILITY HERE. 8. COMING TO THE DECISION OF CO-ORDINATE IN THE CASE OF SMT. G. SREEVIDYA (SUPRA) AGAIN RELIED ON BY THE LD. AUTHOR ISED REPRESENTATIVE, SUBMISSION OF THE ASSESSEES COUNSEL APPEARING IN T HAT CASE, WAS THAT AMOUNTS WERE ADVANCED TO THE CONCERNED ASSESSEE BY THE COMPANY AS A PRECONDITION FOR GIVING BANK GUARANTEE AND COLLATERAL SECURITY FOR THE FUNDING OF THE CONCERNED COMPANY. HERE ON THE OTHER HAND, ASSESSEE HAD NEITHER GIVEN A BANK GUARANTEE NOR A C OLLATERAL SECURITY FOR THE LOANS RAISED BY M/S. CHROMA PRINT INDIA P. LTD. SIMILAR IS THE CASE OF SHRI. RAVIKANT CHOUDHARY (SUPRA) AGAIN DEC IDED BY THE CO- ORDINATE BENCH. WHAT WAS PROVIDED BY THE CONCERNED ASSESSEE WAS A BANK GUARANTEE FOR THE LOANS RAISED BY THE COMPANY. IN MY OPINION, A ITA NO.1510/MDS/2017. :- 8 -: PERSONAL GUARANTEE AND A BANK GUARANTEE STANDS POL ES APART. FURTHER, QUID-PRO- QUO WHICH HAS BEEN SOUGHT TO BE CANVASSED AS THE REASON FOR RECEIVING THE ADVANCE HAS NOT BEEN FACT UALLY ESTABLISHED. THERE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE WA S GIVEN THE ADVANCE BY THE COMPANY AS A PRE-CONDITION FOR GIV ING HIS PERSONAL GUARANTEE FOR THE LOAN RAISED BY THE COMPANY FROM ITS BANKER. IN SUCH CIRCUMSTANCES, I AM OF THE OPINION THAT LOANS TAKEN BY THE ASSESSEE FROM M/S. CHROMA PRINT INDIA P. LTD WAS RI GHTLY CONSIDERED AS DEEMED DIVIDED U/S. 2(22) (E) OF THE ACT. I DO NO T FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DI SMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 30 TH DAY OF AUGUST, 2017, AT CHENNAI. SD/- ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 30TH AUGUST, 2017 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,- / CIT(A) 5. )./ 0 / DR 2. / RESPONDENT 4. + / CIT 6. /12 / GF