ACIT, New Delhi V. M/s. Pronto Motors, New Delhi

ITA 1536/DEL/2009

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0626 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 13-01-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI DELHI BENCH F, NEW DELHI DELHI BENCH F, NEW DELHI DELHI BENCH F, NEW DELHI BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND BEFORE SHRI G.E.VEERABHADRAPPA, VICE PRESIDENT AND SHRI C.L.SETHI, JUDICIAL MEMBER SHRI C.L.SETHI, JUDICIAL MEMBER SHRI C.L.SETHI, JUDICIAL MEMBER SHRI C.L.SETHI, JUDICIAL MEMBER ITA NO.1536/DEL/2009 ITA NO.1536/DEL/2009 ITA NO.1536/DEL/2009 ITA NO.1536/DEL/2009 ASSESSMENT YEAR : 2005 ASSESSMENT YEAR : 2005 ASSESSMENT YEAR : 2005 ASSESSMENT YEAR : 2005- -- -06 0606 06 ASSISTANT COMMISSIONER OF VS. M/S PRONTO MOTORS, INCOME TAX, 134/4, LALA LAJPAT RAI MARG, CIRCLE-23(1), KAILASH COLONY, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.K.LAL, SR.DR. RESPONDENT BY : NONE. ORDER ORDER ORDER ORDER PER C.L.SETHI, JM: PER C.L.SETHI, JM: PER C.L.SETHI, JM: PER C.L.SETHI, JM: THE ONLY GROUND RAISED IN THIS APPEAL FILED BY THE R EVENUE DIRECTED AGAINST THE ORDER DATED 3.3.2009 PASSED BY LE ARNED CIT(A) FOR THE ASSESSMENT YEAR 2005-06 IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING T HE ADDITION OF RS.1,09,53,780/- MADE UNDER SECTION 2(22) (E) OF THE IT ACT. 2. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER ISSUED A NOTICE TO THE ASSESSEE AS TO WHY THE UNSECURED LOA N STANDING IN THE NAME OF M/S KEVIN INDUSTRIES LTD. IS NOT TO BE T REATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. THE ASSESSING OFFICERS SHOW CAUSE NOTICE READS AS UNDER:- ITA-1536/DEL/2009 2 IN CONNECTION WITH THE ASSESSMENT PROCEEDINGS FOR AY 2005-06, IT IS DE FROM THE FORM NO.3CD REPORT THAT YOU HAVE TAKEN A LOAN FROM KEVIN INDUSTRIES LTD. AMOUNTIN G TO RS.202081000/- OUT OF WHICH YOU HAVE PAID BACK RS.6106448/- AND THE NET OUTSTANDING AMOUNT AS REFLECT ED IN THE BALANCE SHEET FROM KEVIN IDUSTRIES LTD. UNDER THE HEAD UNSECURED LOANS IS RS.15974552/-. ON THE ENQUIR IES MADE FROM CIRCLE-5(1), NEW DELHI WHERE THE RETURN O F KEVIN INDUSTRIES LTD. (PAN AAACA4341D) 134/15, LALA LAJPAT RAI ROAD, KAILASH COLONY, NEW DELHI IT HAS COME TO THE N OTICE THAT SHRI SATPAL SINGH BHANDARI S/O LATE SH.BHAGAT S INGH, WHO HAS A SHARE OF MORE THAN 10% IN M/S KEVIN INDUSTRIE S LTD. AT THE SAME TIME WHO ALSO AS A 50% SHARE IN THE PARTNERSHIP FIRM M/S PRONOTO MOTORS. FROM THE BALANC E SHEET OF KEVIN INDUSTRIES LTD. IT IS SEEN THAT THE COMPA NY HAS RESERVES AND SURPLUS AMOUNTING TO RS.10953/80.28. 3. AFTER CONSIDERING THE ASSESSEE!REPLY AND THE FACTS OF THE CASE, ASSESSIG OFFICER TREATED THE OUTSTANDING AMOUNT OF LOAN UANDING IN THE NAME OF M/S KEVIN INDUSTHES LTD. TO BE A DEEMED D IVIDEND WITHIN THE MEANIG OF SECTION 2(22)(E) OF THE ACT AND ADDE D THE AMOUNT OF ` 1,09,5,780/- ON THAT ACCOUNT TO THE TOTAL INCOME O F THE ASSESSEE. BEING AGGRIEVED, THE ASSESSEE PREFERDD AN APPEAL BEFOR E THE CIT(A). 4. AFTER CONSIDERING THE ASSESSEES SUBMISSION AND THE DECISI ON OF ITAT SPECIAL BENCH MUMBAI IN THE CASE OF ACIT VS. BHA UMIK COLOURS (P) LTD. (2009) 27 SOT 270 (MUM-SB), THE LEARNED CIT( A) DELETED THE ADDITION BY CONCLUDING AND OBSERVING AS UNDER:- 11. IN OTHER WORDS, THE HON'BLE SPECIAL BENCH OF TH E TRIBUNAL HAS NOT FOUND FAVOUR WITH THE SAID CIRCULAR NO.475 OF THE BOARD. TO PUT IT DIFFERENTLY, THE SAID CIRCU LAR HAS BEEN CONSIDERED BY THE SPECIAL BENCH AND NOT FOUND I N ACCORDANCE WITH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. AS SUCH, WE WILL HAVE TO CONSIDER THE CASE WITHIN THE FRAMEWORK OF THE LAW LAID DOWN BY THE SPECIAL BENCH . IN THE CASE IN HAND, I HAVE ALREADY GIVE A FINDING THA T THE IMPUGNED AMOUNT IS NOTHIG BUT A LOAN GIVEN TO THE ASSESSEE. HOWEVER, IT IS _BSERVED THAT THE ASSESSEE ITA-1536/DEL/2009 3 CONCERN IS NOT A SHAREHOLDER IN M/S KEVIN INDUSTRIES LT D., FROM WHOM THE LOAN HAS BEE TAKE. THE AO HAS CLEARL Y RECORDED THAT SHRI SATPAL SINGH BHANDARI HAD MORE T HAN 10% OF THE SHAREHOLDIG IN M/S KEVIN INDUSTRIES LTD., WHILE AT THE SAME TIME HE HAD 50% OF SHARES IN THE ASSESSEE FIRM. SIMILAR WAS THE CASE OF SMT.HARBANS KAUR. IT IS NOT THE CASE OF ASSESSING OFFICER THAT THE ASSESSEE FIRM, M/S PRONTO MOTORS WAS THE REGISTERED SHAREHOLDER OF M/S KEVI N INDUSTRIES LTD., NOR IS IT THE CASE OF LD.AO THAT THE A SSESSEE FIRM WAS A BENEFICIAL SHAREHOLDER. THUS, GOING BY THE DECISION IN ACIT V. BHAUMIK COLOURS (P) LTD. (SUPRA), THE PROVISIONS OF SEC. 2(22)(E) CANNOT BE INVOKED IN THIS C ASE. IT MAY BE MENTIONED THAT THE DECISION OF THE SPECIAL BENCH IS BINDING ON ME AS HELD BY THE DELHI HIGH COURT IN N OKIA CORPORATION V. DIT(INTERNATIONAL TAXATION) [2007] 2 92 ITR 22 (DELHI). AS SUCH, THE ADDITION OF RS.1,09,53,780/- IS DELETED. 5. HENCE, THE DEPARTMENT IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LEARNED DR. NONE FOR THE ASSESSEE WAS PRESENT. THE ISSUE INVOLVED IN THIS APPEAL IS NOW SQUARE LY COVERED BY THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOURS (P) LTD. (SUPRA) WHERE IT HAS BEEN HELD THAT THE DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WH O IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HAN DS OF A PERSON OTHER THAN A SHAREHOLDER, AND THE EXPRESSION SHAREHOLD ER REFERS BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER; I F A PERSON IS A REGISTERED SHAREHOLDER BUT NOT A BENEFICIAL SHAREHOLDE R, THEN THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY; SIMILAR LY, IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDE R ALSO, THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. IN TH E PRESENT CASE, THE PRESENT ASSESSEE IS NOT A SHAREHOLDER IN M/S KEVIN INDUSTRI ES LTD. FROM WHOM THE LOAN HAS BEEN TAKEN. SHAREHOLDERS OF M/S KE VIN INDUSTRIES LTD. ARE THE PARTNERS OF THE ASSESSEE FIRM NAMELY SHRI S ATPAL SINGH BHANDARI AND SMT.HARBANS KAUR. IT IS NOT THE CASE OF THE ASSESSING ITA-1536/DEL/2009 4 OFFICER THAT THE PRESENT ASSESSEE FIRM IS THE SHAREHOLDER OF M/S KEVIN INDUSTRIES LTD. THUS, APPLYING THE PROPOSITIONS LAID DO WN BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOURS (P) LTD. (SUPRA), WE UPHOLD THE ORDER OF CIT(A) IN DELETING T HE ADDITION. THE ORDER OF LEARNED CIT(A) IS THUS UPHELD. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 14 TH JANUARY, 2011. SD/- SD/- (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (G.E.VEERABHADRAPPA) (C.L.SETHI) (C.L.SETHI) (C.L.SETHI) (C.L.SETHI) VIC VICVIC VICE PRESIDENT E PRESIDENT E PRESIDENT E PRESIDENT JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER DATED : 14.01.2011 VK. COPY FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT. ASSISTANT REGISTRAR