Ashiyana Holdings Pvt.Ltd, Pune V. Income-tax Officer, Ward - 1(1), Pune

ITA 1678/PUN/2017

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8874 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 29-04-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 04-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VITTHAL BHOSALE
• Assessee Lawyers: N O N E
• Keywords: Deemed dividend
• Section: 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUNE (THROUGH VIRTUAL COURT) BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI S.S. VISWANETHRA RAVI, J UDICIAL MEMBER . / ITA NO . 1678 /PUN/201 7 / ASSESSMENT YEAR : 20 14 - 15 ASHIYANA HOLDINGS PVT. LTD., CITY S. NO. 1073, PLOT NO. 425, SUB PLOT 9, BHOSALE MYSTIQA APT., SHIVAJINAGAR, BHAMBURDA, PUNE 411016 PAN : AABCA5756F ...... / APPELLANT / V/S. THE INCOME TAX OFFICER, WARD 1(1), PUNE / RESPONDENT ASSESSEE BY : N O N E REVENUE BY : SHRI VITTHAL BHOSALE / DATE OF HEARING : 23 - 07 - 2021 / DATE OF PRONOUNCEMENT : 02 - 0 8 - 2021 / ORDER PER S.S. VISWANETHRA RAVI, JM : THIS APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 05 - 04 - 2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 1 , PUNE [CIT(A)] FOR ASSESSMENT YEAR 20 14 - 15. 2 ITA NO .1678/PUN/2017, A.Y. 2014 - 15 2. WE FIND NO REPRESENTATION ON BEHALF OF THE ASSESSEE NOR ANY APPLICATION FILED SEEKING ADJOURNMENT. THE ASSESSEE CALLED ABSENT AND SET EX - PARTE. THEREFORE, WE PROCEED TO HEAR THE LD. DR AND PASS ORDER BASING ON THE MATERIAL AVAILABLE ON RECORD. 3. THE ASSESSEE RAISED 3 GROUNDS OF APPEAL AMONGST WHICH THE ONLY ISSUE EMANATES FOR OUR CONSIDERATION IS AS TO WHETHER THE CIT(A) JUSTIFIED IN CONFIRMING THE ADDITION MADE BY THE AO U/S. 2(22)(E) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. DURIN G THE YEAR UNDER CONSIDERATION , THE AO FOUND PANDIT AUTOMOTIVE PVT. LTD. (IN SHORT PAPL) HAD ADVANCED LOANS AND ADVANCES FOR A SUM OF RS.4,11,42,307/ - TO ASHOK AUTOMOTIVE SALES AND SERVICES PVT. LTD. (IN SHORT AASSPL). THE AO ASKED THE ASSESSEE WHY TH E PROVISIONS OF SECTION 2(22)(E) OF THE ACT INVOKED AS THE ASSESSEE COMPANY BEING COMMON SIGNIFICANT AND BENEFICIARY SHARE HOLDER IN PANDIT AUTOMOTIVE PVT. LTD. AND ASHOK AUTOMOTIVE SALES AND SERVICES PVT. LTD. THE ASSESSEE FILED ITS SUBMISSIONS WHICH ARE REPRODUCED BY THE AO FROM PAGE NOS. 3 TO 7. THE AO FOUND SUCH SUBMISSIONS AS NOT ACCEPTABLE AND TREATED THE ABOVE SAID AMOUNT AS DEEMED DIVIDEND IN TERMS OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND ADDED THE SAID SUM TO THE TOTAL INCOME OF THE ASSES SEE U/S. 143(3) OF THE ACT VIDE ITS ORDER DATED 30 - 11 - 2016. THE CIT(A) CONFIRMED THE ORDER OF AO. 5. BEFORE US, THE LD. DR, SHRI VITTHAL BHOSALE SUBMITS THAT THE ASSESSEE COMPANY IS A HOLDING COMPANY OF PANDIT AUTOMOTIVE LTD. AND ASHOK AUTOMOTIVE SALES AND SERVICES PVT. LTD. THE ASSESSEE HAS SHARE HOLDING OF 50% IN PANDIT AUTOMOTIVE LTD. AND 92.16% IN ASHOK AUTOMOTIVE SALES AND 3 ITA NO .1678/PUN/2017, A.Y. 2014 - 15 SERVICES PVT. LTD. AND ARGUED THAT THE ASSESSEE IS A COMMON SIGNIFICANT AND BENEFICIARY SHARE HOLDER IN PANDIT AUTOMOTIVE LTD. AND ASHOK AUTOMOTIVE SALES AND SERVICES PVT. LTD. FURTHER, HE SUBMITS THAT THE ASSESSEE VIDE ITS SUBMISSIONS DATED 11 - 11 - 2016 STATED THAT THE PANDIT AUTOMOTIVE LTD. IS AN AUTHORIZED TATA VEHICLES DEALER AND AS PER CONDITIONS PUT IN BY TATA MOTORS LTD. A DEALER IS BOUND TO HAVE ADEQUATE FACILITIES FOR VEHICLE SERVICING. THE SAID SERVICE FACILITIES WERE MADE AVAILABLE TO PANDIT AUTOMOTIVE PVT. LTD. BY ASHOK AUTOMOTIVE SALES AND SERVICES PVT. LTD. THERE WAS A FORMAL BUSINESS AGREEMENT BETWEEN THE PAPL AND AASSPL. THE AASSPL WAS RUNNING INTO LOSS FROM A.YS. 2009 - 10 TO 2013 - 14. THE PAPL HAD TO EXTEND SOME FINANCIAL SUPPORT TO AASSPL TO KEEP IT GOING IN ORDER TO CONTINUE ITS TATA DEALERSHIP BUSINESS SMOOTH . HE ARGUED THE PAPL IS A PVT. LTD. COMPANY IN WHICH PUBLIC ARE NOT SUBSTANTIALLY INTERESTED AND PAPL HAS GIVEN LOAN TO AASSPL IN WHICH THE ASSESSEE IS A COMMON SIGNIFICANT AND BENEFICIARY SHAREHOLDER IN BOTH THE COMPANIES. HE SUBMITS THAT AS PER BALANCE SHEET AS ON 31 - 03 - 2014 OF PAPL IS HAVING RESERVE AND SURPLUS OF RS.40,36,82,371/ - AND IS A SIGNIFICANT AND BENEFICIARY COMPANY AND ANY BENEFITS WHICH WERE PASSED BY PAPL TO AASSPL IS GOING TO GIVE BENEFITS TO THE ASSESSEE COMPANY. THE ADVANCEMENT OF LOAN RS.4,11,42,307/ - IS AMPLY CLEAR TO BENEFIT TO THE ASSESSEE COMPANY AND THE AO RIGH TLY HELD THE SAME AS DEEMED DIVIDEND IN TERMS OF SECTION 2(22)(E) OF THE ACT. THE CIT(A) ALSO CONSIDERED THE ISSUE IN DETAIL AND HELD THAT THE SAID AMOUNT CANNOT BE TREATED AS COMMERCIAL TRANSACTION AND SUPPORT ITSELF IS IN THE NATURE OF LOAN. THE LD. DR ARGUED THAT BENEFIT OF PASSING OF LOAN FROM PAPL TO AASSPL ULTIMATELY REACHED THE ASSESSEE COMPANY BY VIRTUE OF BEING COMMON SIGNIFICANT AND BENEFICIARY SHAREHOLDER AND SUPPORTED THE ORDER OF CIT(A). 4 ITA NO .1678/PUN/2017, A.Y. 2014 - 15 6. HEARD LD. DR AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT AS FACTS EMANATING FROM THE RECORDS THAT THE ASSESSEE COMPANY HAS 50% SHAREHOLDING IN PAPL AND 92.16% IN AASSPL. IT IS ALSO NOT DISPUTED DURING THE YEAR UNDER CONSIDERATION THE PAPL MADE LOAN OF RS.4,11,42,307/ - TO AASSPL. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE IS A COMMON SIGNIFICANT AND BENEFICIARY SHAREHOLDER IN BOTH THE ABOVE ENTITIES. AS PER SUBMISSIONS MADE BY THE ASSESSEE BEFORE THE AO, WE NOTE THAT THE PAPL IS THE AUTHORIZED DEALER TO TATA VEHICLES AND HAVING SERVICE F ACILITIES IS ESSENTIAL FOR THE BUSINESS OF PAPL. TO AVAIL SUCH SERVICE FACILITIES PAPL HAS ENTERED INTO FORMAL BUSINESS AGREEMENT WITH AASSPL. IT IS ALSO NOTED THE SAID AMOUNT WAS ADVANCED TO AASSPL ON THE BASIS OF ITS LO SSES FROM F.Y. 2008 - 09 (A.Y. 2009 - 10) ONWARDS. IT WAS CONTENDED BY THE ASSESSEE THAT THE PAPL HAD TO EXTEND SUM FINANCIAL SUPPORT TO AASSPL TO KEEP THE BUSINESS GOING AND IN ORDER TO CONTINUE PAPL DEALERSHIP BUSINESS SMOOTHLY WITH THE TATA MOTORS. THE CASE OF THE AO WAS THAT THE ASSESSE E IS A COMMON SIGNIFICANT AND BENEFICIARY SHAREHOLDER IN BOTH THE ENTITIES I.E. PAPL AND AASSPL, THEREFORE, THE SAID LOAN WAS REACHED THE HANDS OF THE ASSESSEE BEING A VIRTUE OF COMMON SHAREHOLDER. THE CIT(A) ALSO CONFIRMED THAT THE BENEFIT OF PASSING OF LOAN FROM PAPL WITH ULTIMATELY REACHED THE HANDS OF ASSESSEE AND REJECTED THE CLAIM OF ASSESSEE HAS NO ROLE IN INDEPENDENT COMMERCIAL ROLE OF TWO SUBSIDIARIES. WE NOTE THAT ADMITTEDLY THERE IS NO DISPUTE AS THE FACTS EMANATING FROM RECORDS THE PAPL ADVANCE D TO AASSPL AND IN WHICH THE ASSESSEE IS A COMMON SIGNIFICANT AND BENEFICIARY SHAREHOLDER. IT IS AMPLY CLEAR THE LOAN OF ABOVE SAID AMOUNT HAS BEEN REACHED TO THE AASSPL BUT NOT THE ASSESSEE COMPANY. THE ASSESSEE COMPANY BEING MAJOR SHAREHOLDER WE CANNOT SAY THE LOAN ADVANCED TO PAPL REACHED THE HANDS OF THE ASSESSEE. THEREFORE, IN OUR OPINION, THE ADDITION MADE BY THE AO AS CONFIRMED BY THE CIT(A) IS NOT 5 ITA NO .1678/PUN/2017, A.Y. 2014 - 15 JUSTIFIED, IF AT ALL ANY ADDITION TO BE MADE U/S. 2(22)(E) OF THE ACT IT SHOULD BE IN THE HANDS OF A ASSPL AS LOAN AMOUNT REACHED THE HANDS OF SAID ENTITY BUT NOT THE ASSESSEE. THEREFORE, THE INVOCATION OF PROVISIONS U/S. 2(22)(E) OF THE ACT TREATING AN AMOUNT OF RS.4,11,42,307/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIABLE. HENCE, THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND AUGUST, 202 1 . SD/ - SD/ - ( R.S. SYAL ) ( S.S. VISWANETHRA RAVI ) VICE PRESIDENT JUDICIAL MEMBER / PUNE; / DATED : 02 ND AUGUST, 202 1 . RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A) - 1, PUNE 4. THE PR. CIT - 1 , PUNE 5. , , , / DR, ITAT, B BENCH, PUNE. 6. / GUARD FILE. // // TRUE COPY// / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE