DCIT, CHENNAI V. M/s. Pallava Minerals Ltd., CHENNAI

ITA 1659/CHNY/2009

• Counselvise Citation: 165921714 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-09-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 22-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N PRAKASH J
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI [BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER] I.T.A NO. 1659/MDS/2009 (ASSESSMENT YEAR : 1999-2000) THE DY. CIT COMPANY CIRCLE V(I) CHENNAI VS M/S PALLAVA MINERALS LTD 10, SRIRAM NAGAR NORTH STREET ALWARPET CHENNAI - 18 [PAN AAACP3626L] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.N.PRAKASH, JCIT/DR RESPONDENT BY : NONE DATE OF HEARING : 06-09-2011 DATE OF PRONOUNCEMENT : 15-09-2011 O R D E R PER HARI OM MARATHA, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE, FOR ASSESSMENT YEA R 1999-2000, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DAT ED 14.10.2008. DESPITE SERVICE OF NOTICE, NOBODY ATTENDED ON BEHAL F OF THE ASSESSEE- RESPONDENT. WE, THEREFORE, PROCEED TO DECIDE THE A PPEAL EX-PARTE. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPE AL: ITA 1659/09 :- 2 -: 1. THE ORDER OF THE LD. CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. 2.1 THE LD. CIT(A) ERRED IN HOLDING THAT ASSESSMENT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT TO THE TUNE OF ` 25.60 LAKHS IN THE HANDS OF THE ASSESSEE-COMPANY WAS NOT CALLED FOR, THEREBY, DELETING THE SAID ADDITION. 2.2 THE LD. CIT(A) FAILED TO APPRECIATE THAT PARA 1 0.3 OF THE EXPLANATORY NOTES TO THE FINANCE ACT, 1987 (CIRCULAR NO.495 DATED 22.9.87) LAYS DOWN THAT SUCH DIVIDEND HAS TO BE TAXED U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE-COMPANY ONLY. 2.3 THE LD. CIT(A) OUGHT TO HAVE NOTED THAT EXPLANATORY NOTES TO A FINANCE ACT ARE CONTEMPORANEA EXPOSITION AND THEY STAND ON A HIGHER PEDESTAL AND HENCE, THEY OUGHT TO HAVE BEEN FOLLOWED IN INTERPRETING A PROVISION OF A STATUTE. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE SET ASIDE AND THAT OF THE O RESTORED. 2. . BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT, THE ASSESS E E HAD A RUNNING ACCOUNT WITH ITS SISTER CONCERN NAME LY, PALLAVA GRANITE INDUSTRIES LIMITED. AS PER THE LEDGER ACCOUNT OF P ALLAVA GRANITE INDUSTRIES LIMITED, AS AVAI L AB LE IN THE BOOKS OF THE ASSESSEE-COMPANY, PALLAVA GRANITE INDUSTR I ES L I MITED, OW ED T O THE ASSESSEE COMPANY ` 1.05 CRORES AS THE OPENING BALANCE FOR THE P ER IOD U NDER CONSIDERATION. A SUM OF ` 69.51 LAKHS HAD BEEN TRANSFERRED BY T H E A S SE SSEE- C OMPANY TO PAL L AVA GRANITE INDUSTRIES LIMITED DURING THE YEAR. AGA I NST TH E S E ADVANCES, PURCHASES OF ` 1.26 C R ORES WERE MADE DURING THE ITA 1659/09 :- 3 -: YEAR. FUNDS AMOUNTING TO ` 75. 1 8 L A KHS WERE A L SO T RANSFER R ED FROM PAL L AVA GRAN I TE I NDUSTRIES L I MITED TO THE ASSESSEE-COMPA NY D UR I NG TH E Y E AR. A T T H E END OF THE PERIOD UNDER CONSIDERATION, THE CRED I T BALANCE I N T HE B O O KS O F T H E ASSESSEE COMPANY STANDING I N THE NAME OF PAL L AVA GRANITE I NDUSTR I E S L IMI T ED WAS ` 25,60,445. THE CREDIT BALANCE OUTSTANDING AT THE END OF THE YEAR WAS TREATED AS L OAN/ADVANCE RECEIVED BY THE ASSESSEE-COMPANY FROM THE SISTER CO NCERN AND WAS BROUGHT TO TAX AS A DEEMED DIVIDEND. ON APPEAL, TH E LD. CIT(A) HAS DELETED THE ADDITION AGAINST WHICH THE REVENUE IS A GGRIEVED AND IS IN SECOND APPEAL. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE LD.DR, WE HAVE FOUND THAT THE ASSESSEE-COMPANY IS NOT A SHAREHOLDE R IN THE SISTER CONCERN, PALLAVA GRANITE INDUSTRIES LTD FROM WHOM AMOUNTS HAVE BEEN RECEIVED. THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE A DEEMING PROVISION AND ARE, ACCORDINGLY, REQUIRED TO BE STRICTLY CONSTRUED. ANY RECEIPT BY A RELATED CONCERN IN WHI CH THE SHAREHOLDER HAS SUBSTANTIAL INTEREST IS ALSO DEEMED TO BE A REC EIPT BY THE SHAREHOLDER. BUT A DEEMED DIVIDEND, WHETHER ACTUAL OR DEEMED, CANNOT BE RECEIVED BY ANYONE OTHER THAN THE REGISTE RED SHAREHOLDER, SO DEEMED DIVIDEND IN ASSESSEES HANDS CANNOT BE TA XED U/S 2(22)(E) ITA 1659/09 :- 4 -: OF THE ACT . RECENTLY, WE HAVE DECIDED SIMILAR ISS UE IN THE CASE OF DY. CIT VS M/S ANAND TRANSPORT, IN I.T.A.NO. 1954/M DS/2010, VIDE ORDER DATED 7.9.2011, IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. BY RESPECTFULLY FOLLOWING THE ABOVE DECI SION, WE DISMISS THE APPEAL FILED BY THE REVENUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.2011. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER DATED: 15 TH SEPTEMBER, 2011 RD COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR