John Oil & Gas Limited, Mehsana V. The ACIT.,Cent.Circle-2(2), Ahmedabad

ITA 1609/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9339 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MAURYA
• Assessee Lawyers: S N DIVETIA
• Keywords: Deemed dividend
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 1609/AHD/2012 (ASSESSMENT YEAR: 2009-10) JOHN OIL & GAS LIMITED 220, GIDC, MEHSANA V/S A.C.I.T., CENTRAL CIRCLE- 2(2), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACJ4867 D APPELLANT BY : SHRI S. N. DIVETIA, AR RESPONDENT BY : SHRI R.P. MAURYA, SR. D.R. ( )/ ORDER DATE OF HEARING : 24 -02-201 6 DATE OF PRONOUNCEMENT :26 -02-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-III, AHMEDABAD DATED 14.06.2012 PERTAINING T O A.Y. 2009-10. ITA NO. 1069 /AHD/2012 . A.Y. 2009-10 2 2. THE GRIEVANCE OF THE ASSESSEE IS TWO-FOLD; FIRSTLY, THE ASSESSEE IS AGGRIEVED BY THE ADDITION OF RS. 72,17,909/- MADE U /S. 2(22)(E) OF THE ACT AND SECONDLY, BY THE ADDITION OF RS. 7,22,234/- MADE U/S. 14A OF THE ACT. AT THE VERY OUTSET, THE LD. COUNSEL FOR TH E ASSESSEE STATED THAT DUE TO THE SMALLNESS OF THE AMOUNT INVOLVED IN THE ADDITION U/S. 14A, HE IS NOT PRESSING THIS ISSUE. THE ADDITION MADE U/ S. 14A IS ACCORDINGLY CONFIRMED. 3. THE SURVIVING GRIEVANCE OF THE ASSESSEE RELATES TO THE ADDITION MADE U/S. 2(22)(E) OF THE ACT ON ACCOUNT OF DEEMED DIVID END. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O FOUND TH AT THE ASSESSEE HAS RECEIVED RS. 2,90,30,000/- FROM JOHN ENGG. PVT. LTD . ON FURTHER PROBE, THE A.O FOUND THAT SHRI MAHESH N. VYAS HOLDS 46.5% SHARES IN THE ASSESSEE COMPANY. HE ALSO HOLDS 28% SHARES IN JOHN ENGG. PVT. LTD. THE A.O WAS OF THE FIRM BELIEF THAT PROVISIONS OF S ECTION 2(22)(E) OF THE ACT SQUARELY APPLY. THEREFORE THE AMOUNT OF RS. 2,90,30,000/- HAS TO BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF TH E ASSESSEE COMPANY, SINCE THE ACCUMULATED PROFITS OF JOHN ENGG . PVT. LTD. AS ON 31.03.2009 WAS AT RS. 77,12,141/-. THE A.O COMPUTED THE DEEMED DIVIDEND BY COMPUTING THE ACCUMULATED PROFIT UP TO THE DATE OF GRANTING OF LOAN AND MADE ADDITION OF RS. 72,17,909 /-. 4. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND STRONGLY CLAIMED THAT THE TRANSACTION WITH JOHN ENGG. PVT. LTD. WAS NOTHING BUT A BUSINESS TRANSACTION AND, THEREFORE, PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE ON THE FACTS OF THE CASE. IT WAS ALS O BROUGHT TO THE NOTICE OF THE LD. CIT(A) THAT THE ASSESSEE COMPANY HAS ALSO PAID INTEREST ON THE FUNDS BORROWED FROM JEPL. AFTER CON SIDERING THE FACTS AND THE SUBMISSIONS, THE LD. CIT(A) COULD NOT ACCEP T THE CONTENTION OF ITA NO. 1069 /AHD/2012 . A.Y. 2009-10 3 THE ASSESSEE THAT IT WAS A BUSINESS TRANSACTION AND CONFIRMED THE ADDITION. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. THE L D. COUNSEL FOR THE ASSESSEE ONCE AGAIN STRONGLY CONTENDED THAT THE TRA NSACTION OF THE ASSESSEE WITH JOHN ENGG. PVT. LTD. IS NOTHING BUT A FINANCIAL TRANSACTION. IT WAS EXPLAINED THAT THE AMOUNT TAKEN FROM JEPL WAS UTILIZED FOR THE REPAYMENT OF LOAN TAKEN FROM OUTSI DERS. STRONG RELIANCE WAS PLACED ON THE DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AMBASSADOR TRAVELS PVT. LTD. 318 ITR 476 AND ALSO ON THE DECISION OF THE HONBLE HIGH COURT OF GUJARAT I N THE CASE OF SHRIPAD CONCRETE (P.) LTD. 215 TAXMAN.COM 143. IT IS THE SA Y OF THE LD. COUNSEL THAT THE ASSESSEE HAS SUCCESSIVELY PROVED T HAT IT IS A BUSINESS TRANSACTION AND, THEREFORE THE SAME CANNOT BE TREAT ED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. PER CONTRA, THE LD. D.R. SUPPORTED THE FINDINGS OF THE REVENUE AUTHORITIES. 6. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW AND WITH THE ASSISTANCE OF THE LD . COUNSEL, WE HAVE GONE THROUGH THE RELATED DOCUMENTARY EVIDENCES BROU GHT ON RECORD AND REFERRED TO. THERE IS NO DISPUTE IN SO FAR AS T HE SUBSTANTIAL SHARE HOLDING OF THE ASSESSEE IS CONCERNED. 7. A CLOSE PERUSAL OF THE DETAILS OF THE TRANSACTION B ETWEEN THE TWO SHOW THAT THE TRANSACTIONS WERE ENTERED INTO THE NORMAL COURSE OF BUSINESS AND THE ASSESSEE HAS UTILIZED THE MONEY FOR THE REP AYMENT OF ITS BORROWINGS. THERE IS NO DISPUTE THAT IT IS A FINANC IAL TRANSACTION, THE RATIO LAID DOWN BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AMBASSADOR TRAVELS PVT. LTD. (SUPRA) SQUARELY APPLY WHEREIN THE ITA NO. 1069 /AHD/2012 . A.Y. 2009-10 4 HONBLE HIGH COURT HAS LAID DOWN THE RATIO THAT THE FINANCIAL TRANSACTIONS IN ANY CIRCUMSTANCES COULD NOT BE TREA TED AS LOANS OR ADVANCES AND THEREFORE SECTION 2(22)(E) IS NOT APPL ICABLE. A SIMILAR VIEW HAS TAKEN BY THE HON'BLE HIGH COURT OF DELHI I N THE CASE OF CIT VS RAJ KUMAR 318 ITR 462 WHEREIN IT WAS HELD THAT THE TRADE ADVANCES GIVEN TO THE ASSESSEE BY THE COMPANY COULD NOT BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. ONCE AGAIN, THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS CREATIVE DYEING & P RINTING PVT. LTD. 318 ITR 476 HAS REITERATED WHAT HAS BEEN HELD IN THE CASE OF AMBASSADOR TRAVELS PVT. LTD. AND RAJ KUMAR (SUPRA). IN THIS CASE ALSO, THE HON'BLE HIGH COURT DISMISSED THE APPEAL OF THE REVENUE HOLDING THAT THE AMOUNT ADVANCED FOR BUSINESS TRANSACTION BETWEEN THE ASSESSEE COMPANY AND ITS SISTER CONCERN DID NOT FALL WITHIN THE DEFINITION OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. RESPECTFULLY FOLLOWING THE DECISIONS OF THE HON'BLE HIGH COURT (SUPRA) IN THE LIGHT OF THE TRANSACTIONS IN THE CASE IN HAND, WE HAVE NO HESITATION TO HOLD THAT THE TRANSACTIONS WERE DONE IN THE NORMAL COURSE OF BUSINESS AND THEREFORE ARE OUTSIDE THE AMBIT OF THE PROVISIONS OF SEC. 2(22)(E ) OF THE ACT. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ENTIRE ADDITION OF RS. 72,17,909/-. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 - 02 - 2016. SD/ SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY