ACIT, Bhubaneswar V. Baharat Carriers Ltd, Bhubaneswar

ITA 17/CTK/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4365 (ITAT-CUTTACK)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 07-01-2011
• Court: TRIBUNAL
• Department Lawyers: AGAINST
• Assessee Lawyers: ASSESSMENT YEAR S
• Keywords: Deemed dividend

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO. 17 AND 18/CTK/2011 C.O.NO.7 AND 8/CTK/2011 (FILED BY ASSESSEE) (ASSESSMENT YEA R S 2005 - 06 AND 2006 - 07) ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), BHUBANESWAR. VERSUS BHARAT CARR IERS LTD., S - 3/61, MANCHESWAR IN DUSRIAL ESTATE, BHUBANESWAR 751 010 PAN: AABCB 7622 H. (APPELLANT) (RESPONDENT) FOR THE APPELLANT: S MT. PARAMITA TRIPA THY, DR FOR THE RESPONDENT SHRI D.K.SETH, AR ORDER SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER : THE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IN DELETING THE ADDITION MADE BY THE ASSESSING OFFIC ER U/S.2(22)(E) OF THE INCOME - TAX ACT,196 FOR THE ASSESSMENT YEARS 2005 - 06 AND 2006 - 07 BESIDES AGITATING THE DELETION OF THE ADDITION OF 4,853 MADE ON ACCOUNT OF EPF OF 4,853 IN THE ASSESSMENT YEAR 2005 - 06. THE ASSESSEE HAS FILED THE CROSS OBJECTIONS SUPPORTING THE ORDERS OF THE LEARNED CIT(A) ON THE ABOVE ISSUES . 2. ISSUES BEING COMMON IN BOTH THE ASSESSMENT YEARS INSOFAR AS DELETION OF THE ADDITION MADE U/S.2(22)(E), THE APPEALS AS WELL AS THE CROSS OBJECTIONS WERE HEARD TOGETHER AND ARE NOW DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. BOTH PARTIES WERE HEARD REGARDING THE ISSUES RAISED IN BOTH THE APPEALS AND CROSS OBJECTIONS . 4. THE ISSUE, WHICH IS COMMON IN BOTH THE APPEALS OF THE REVENUE, IS AGAINST DELETION OF ADDITION MADE BY THE ASSESSING OFFICER U/S.2(22)(E) OF THE ACT. THE RELEVANT FACTS , IN BRIEF , ARE THAT THE ASSESSEE TOOK LOAN FROM THE FOLLOWING TWO PARTI ES. ITA NO.17 AND 18/CTK/2011 C.O.NO.7 AND 8/CTK/2011 2 ASSESSMENT YEAR NAME OF PARTIES FROM WHOM LOAN TAKEN AMOUNT 2005 - 06 SHREE BHARAT MOTORS LTD. 57,83,397 2006 - 07 1. SHREE BHARAT MOTORS LTD. 2. BHAART MOTORS LTD. 82,57,365 46,82,166 THE ASSESSING OFFICER FOUND THAT SHRI JAIPRAKASH DIDWANI A AND SHRI OMPRAKASH DIDWANIA ARE SHARE HOLDERS IN THE ASSESSE E - COMPANY HAVING SHARES OF 24.29% AND 26.89% RESPECTIVELY IN THE ASSESSMENT YEAR 2005 - 06 AND 23.33% AND 26.11% RESPECTIVELY IN THE ASSESSMENT YEAR 200 6 - 07 . THEY HAVE ALSO SUBSTANTIAL SHAR E HOLDI NGS IN THE LENDER COMPANIES I.E., SHREE BHARAT MOTORS LTD AND BHARAT MOTORS LTD. THEREFORE, THE ASSESSING OFFICER CAME TO CONCLUDE THAT THE AMOUNTS GIVEN BY THE ABOVE TWO COMPANIES TO THE ASSESSEE ARE NOTHING BUT DEEMED DIVIDEND ATTRACTING THE PROVISIONS C ONTAINED IN SECTION 2(22)(E) OF THE I.T.ACT. 5. AGGRIEVED, THE ASSESSEE PREFERRED APPEALS BEFORE THE CIT(A) AND THE LEARNED CIT(A) VERIFIED THE FACTUAL ASPECTS FOUND BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER AND RELYING ON THE DECISION OF ITAT,SPEC IAL BENCH, MUMBAI RENDERED IN THE CASE OF ACIT V. BHAUMIK COLOUR (P) LTD (118 ITD 1) AND ITAT, CUTTACK BENCH IN THE CASE OF HINDUSTAN AGENCIES V. ACIT IN ITA NO.95/CTK/2009 DT.31.3.2010 , THE LEARNED CIT(A) CAME TO THE CONCLUSION THAT THE ASSESSEE IS NOT A SHARE HOLDER IN THE LENDER COMPANIES BUT THERE ARE TWO SHARE HOLDERS COMMON TO THE ASSESSEE COMPANY AND THE LENDER COMPANIES AND AS PER THE RATIOS LAID DOWN BY THE ITAT,SPECIAL BENCH, MUMBAI AND ITAT, CUTTACK BENCH IN THEIR RESPECTIVE ORDERS, IT WAS FOUND BY THE LEARNED CIT(A) THAT THIS IS NOT SUFFICIENT TO INVOKE THE PROVISIONS OF SECTION 2(22)(E) SO AS TO TREAT THE LOANS IN QUESTION AS DEEMED DIVIDEND UNDER THAT SECTION, AS THE ASSESSEE COMPANY IS NOT A SHARE HOLDER IN THE LENDING COMPANY BUT ONLY ITA NO.17 AND 18/CTK/2011 C.O.NO.7 AND 8/CTK/2011 3 TWO S HARE HOLDERS OF THE ASSESSEE - COMPANY ARE HAVING SHARES IN THE LENDING COMPANY WHICH WILL NOT FALL WITHIN THE SCOPE OF SECTION 2(22)(E) OF THE I.T.ACT. THE RELEVANT PORTION OF THE IMPUGNED ORDER OF THE LEARNED CIT(A) FOR THE ASSESSMENT YEAR 2005 - 06 IN PARAG RAPH 8.16 AT PAGE 28, IS REPRODUCED AS UNDER: 8.16. TO SUM UP, THE SUBMISSION OF THE APPELLANT AND THE DECIDED COURT CASES CITED ABOVE CLEARLY ESTABLISH THAT THE AO HAS ERRONEOUSLY INVOKED THE PROVISION OF SECTION 2(22)(E ) OF THE ACT AND IN THE APPELLANT S CASE PROVISION OF SECTION 2(22)(E) IS NOT WARRANTED U NDER THE FACTS AND CIRCUMSTANCES OF THE CASE AS PER THE REASONS STATED ABOVE. IN VIEW OF THE CLEAR - CUT DECISION OF THE SPECIAL BENCH MUMBAI AND THE ITAT, CUTTACK BENCH, CUTTACK THAT DEEMED DIVIDEND CA N BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHARE HOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER, NO MERIT IS FOUND IN AOS ACTION IN BR INGING THE SUM OF 57,83,397 AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT AS THE APPELLANT COMPANY IS NOT A SHAREHOLDER OF SHREE BHARAT MOTORS LTD. (THE LENDER COMPANY). ACCORDINGLY, THE ADDITION OF RS.57,83,397/ - IS DELETED AND THIS GROUND OF APPEAL IS ALLOWED. ON THE VER Y SAME REASONING AS IN THE ASSESSMENT YEAR 2005 - 06, THE LEARNED CIT(A) ALSO DELETED THE ADDITIONS OF 24,10,265 AND 46,82,166 MADE U/S.2(22)(E) IN THE ASSESSMENT YEAR 2006 - 07. 6. DURING THE COURSE OF HEARING, THE LEARNED DR DID NOT DISPUTE THE ABOVE FAC TS BROUGHT ON RECORD BY THE LEARNED CIT(A) THAT THE ASSESSEE COMPANY IS NOT A SHARE HOLDER IN THE LENDING COMPANIES BUT THERE ARE TWO SHARE HOLDERS COMMON TO THE ASSESSEE COMPANY AND THE LENDER COMPANIES I.E., SHREE BHARAT MOTORS LTD AND BHARAT MOTORS LTD. SPECIAL BENCH MUMBAI IN THE CASE OF ACIT V. BHOUMIK COLOUR P. LTD (118 IYD 1) AND THE ITAT, CUTTACK BENCH, CUTTACK IN THE CASE OF HINDUSTAN AGENCIES V. ACIT IN ITA NO.95/CTK/2009 DT.31.3.2010 HAVE HELD THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HAND S OF A PERSON WHO IS A SHARE HOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER . THE LEARNED CIT(A) HAS FOLLOWED THESE DECISIONS AND DELETED THE IMPUGNED ADDITION AS THE ASSESSEE COMPANY ITA NO.17 AND 18/CTK/2011 C.O.NO.7 AND 8/CTK/2011 4 BEING NOT A SHARE HOLDER IN THE LE NDING COMPANIES. THIS ALSO FINDS SUPPORT FROM THE DECISIONS IN THE CASE OF MADURA COATS P. LTD. (274 ITR 609) AND IN THE CASE OF CIT V. HOTEL HILLTOP (313 ITR 116)(RAJ). THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE DECISION TAKEN BY THE LEARNED CIT(A) IN DELETING THE IMPUGNED ADDITION MADE U/S.2(22)(E) IN BOTH THE AYS UNDER CONSIDERATION, IS IN NO WAY INFIRM TO BE INTERFERED WITH. HENCE, THE SAME IS UPHELD FINDING THE ISSUE RAISED BY THE REVENUE IN THIS REGARD AS DEVOID OF MERITS. 7. NOW COMING TO ANOT HER ISSUE RAISED BY THE REVENUE IN THE APPEAL FOR THE ASSESSMENT YEAR 2005 - 06 AS TO THE DELETION OF ADDITION MADE ON ACCOUNT OF EPF OF 4,853 U/S.43B , WE FIND THAT THE LEARNED CIT(A) HAS DELETED THE SAID ADDITION ON THE FINDING THAT THE ASSESSEE DEDUCTED THE SHARE OF EMPLOYEES PROVIDENT FUND IN THE MONTH OF MARCH,2005 AND THE SAME WAS DEPOSITED ON 7.4.2005 VIDE CHALLAN NO.17/9 I.E., PRIOR TO THE DUE DATE UNDER THE RESPECTIVE ACT. THE LEARNED DR COULD NOT NEGATE SUCH FINDING OF FACT. SINCE THE AMOUNT IN QUESTION HAS BEEN DEPOSITED IN TIME ALLOWED UNDER THE CONCERNED ACT THE ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE FOR LEGA L SCRUTINY AND THEREFORE, IN OUR CONSIDERED VIEW, THE LEARNED CIT(A) HAS RIGHTLY DELETED THE SAID ADDITION. WE UPHOLD THE ORDER OF THE LEARNED CIT(A) IN THIS REGARD AND DISMISS THE GROUND RAISED BY THE REVENUE BEING DEVOID OF MERIT. 8. IN THE RESULT, THE A PPEALS OF THE REVENUE ARE DISMISSED. SINCE THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE IN SUPPORT OF THE ORDER OF THE LEARNED CIT(A) ON THE ISSUES RAISED BY THE REVENUE, THE SAME ARE ALLOWED. PRONOUNCED IN OPEN COURT ON DT. 30 TH JUNE, 2011 S D/ - S D/ - (K.K.GUPTA) ACCO UNTANT MEMBER (K.S.S.PRASAD RAO) JUDICIAL MEMBER DATE: 30 TH JUNE, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. ITA NO.17 AND 18/CTK/2011 C.O.NO.7 AND 8/CTK/2011 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT: ASST.COMMISSIONER OF INCOME - TAX, C IRCLE 2(1), BHUBANESWAR. 2. THE RESPONDENT: BHARAT CARRIERS LTD., S - 3/61, MANCHESWAR INDUSRIAL ESTATE, BHUBANESWAR 751 010 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.