The ACIT,(OSD) Range-1, Ahmedabad V. M/s. Casil Health Products Ltd., Ahmedabad

ITA 1707/AHD/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8357 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 11-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1707/AHD/2015 ( / ASSESSMENT YEAR : 2004-05) THE DCIT (OSD) RANGE-1 AHMEDABAD / VS. M/S.CASIL HEALTH PRODUCTS LTD. 708, CADILA CORPORATE CAMPUS SARKHEJ DHOLKA HIGHWAY BHAT, AHMEDABAD-382 210 # ./ ./ PAN/GIR NO. : AACCB 7385 C ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI MUDIT NAGPAL, SR.DR '#& )( / RESPONDENT BY : SHRI S.N.SOPARKAR WITH SHRI PARIN SHAH, ARS *+ ), / DATE OF HEARING 11/10/2017 -./0 ), / DATE OF PRONOUNCEMENT 16/ 10 /2017 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED A GAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-1, AHMED ABAD [CIT(A) IN SHORT] DATED 03/03/2015 IN THE MATTER OF ASSESSMEN T ORDER DATED ITA NO. 1707/AH D/2015 DCIT VS. CASIL HEALTH PRODUCTS LTD. ASST.YEAR 2004-05 - 2 - 30/12/2011 PASSED BY THE AO S.143(3) RWS 147 OF THE ACT RELEVANT TO ASSESSMENT YEAR (AY) 2004-05. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER:- THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY DELETIN G THE ADDITION OF RS.1,99,78,921/- TOWARDS DEEMED DIVIDEND U/S.2(2 2)(E) DESPITE THE FACT THAT THE ADVANCE GIVEN BY CADILA PHARMACEU TICALS LTD. TO ASS COMPANY IS COVERED BY DEFINITION OF DEEMED DIVI DEND AND SUCH A LOAN IS REQUIRED TO BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESS ING OFFICER TO THE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS F AILED TO DISCLOSE HIS TRUE INCOME/BOOK PROFIT. 3. THE LD.SENIOR COUNSEL FOR THE ASSESSEE AT THE O UTSET SUBMITTED THAT THE ISSUE INVOLVED IN THE REVENUES APPEAL IS NO LONGER RES ITEGRA . IDENTICAL ISSUE CAME UP FOR DETERMINATION IN ASSESS EES OWN CASE RELEVANT TO AY 2006-07 IN ITA NO.1429/AHD/2014 ORDER DATED 1 5/05/2017 WHEREIN THE ORDER OF THE CIT(A) THAT THE LOANS/ADVA NCES RECEIVED BY THE ASSESSEE DOES NOT FALL WITHIN THE PURVIEW UNDER S .2(22)(E) OF THE ACT AND THUS NOT SUSCEPTIBLE TO TAX WAS APPROVED BY THE CO ORDINATE BENCH. 4. THE LD.DR RELIED UPON THE ORDER OF THE AO. ITA NO. 1707/AH D/2015 DCIT VS. CASIL HEALTH PRODUCTS LTD. ASST.YEAR 2004-05 - 3 - 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE T AXABILITY OF LOANS/ADVANCES RECEIVED BY THE ASSESSEE UNDER S.2(2 2)(E) OF THE ACT IS THE SUBJECT MATTER OF CONTROVERSY IN THE PRESENT APPEAL . WE NOTE THE PLEA ON BEHALF OF THE ASSESSEE THAT IT IS NOT THE SHAREHOLD ER OF THE LENDER-COMPANY PER SE . IT IS WELL SETTLED THAT THE RECOURSE UNDER S.2(2 2)(E) CAN BE TAKEN ONLY IN THE HANDS OF SHAREHOLDER OF LENDER-COMPANY AND NOT IN THE HANDS OF A MERE RECIPIENT LOANS/ADVANCES. THE RELEVANT O PERATIVE PARA OF THE TRIBUNAL ORDER (BOTH OF US ARE PARTY TO THE AFORESA ID DECISION) DEALING WITH THE ISSUE IN ASSESSEES OWN CASE IS REPRODUCED HEREUNDER FOR THE SAKE OF READY REFERENCE. 6. THE SHORT CONTROVERSY IN THE PRESENT CASE IS WH ETHER THE ASSESSEE- COMPANY CAN BE TAXED TOWARDS THE LOANS/ADVANCES REC EIVED FROM THE LENDER BY VIRTUE OF DEEMING FICTION UNDER S.2(22)(E) OF THE A CT WHERE THE ASSESSEE- COMPANY ITSELF IS NOT A SHAREHOLDER OF THE LENDING COMPANY, NOTWITHSTANDING THE FACT THAT BOTH THE COMPANIES (LENDER-COMPANY AN D ASSESSEE-COMPANY) HAD COMMON SHAREHOLDERS HAVING SUBSTANTIAL INTEREST IN BOTH THE COMPANIES. 6.1 AS OBSERVED BY THE HONBLE SUPREME COURT IN THE CASE OF GOPAL AND SONS (HUF) VS. CIT (SUPREME COURT) IN CIVIL APPEAL NO. 12274 OF 2016 ARISING OUT OF SLP (C) NO. 22059 OF 2015, SECTION 2 (22)(E) OF THE ACT CREATES A FICTION THEREBY BRINGING ANY AMOUNT PAID OTHERWISE THAN AS A DIVIDEND INTO THE NET OF DIVIDEND UNDER CERTAIN CIRCUMSTANCES. IT GI VES AN ARTIFICIAL DEFINITION OF DIVIDEND. IT DOES NOT TAKE INTO ACCOUNT THAT DIV IDEND WHICH IS ACTUALLY DECLARED OR RECEIVED. THE DIVIDEND TAKEN NOTE OF B Y THIS PROVISION IS A DEEMED DIVIDEND AND NOT A REAL DIVIDEND. LOANS OR ADVANC ES GIVEN BY COMPANY TO ITS SHAREHOLDER IS ACTUALLY NOT A DIVIDEND. IN FACT, S UCH A LOAN TO A SHAREHOLDER ITA NO. 1707/AH D/2015 DCIT VS. CASIL HEALTH PRODUCTS LTD. ASST.YEAR 2004-05 - 4 - HAS TO BE RETURNED BY THE SHAREHOLDER TO THE COMPAN Y. IT DOES NOT BECOME INCOME OF THE SHAREHOLDER. NOTWITHSTANDING THE SAM E, FOR CERTAIN PURPOSE, THE LEGISLATURE DEEMED SUCH A LOAN/ADVANCE AS OF DIVI DEND AND MADE IT TAXABLE AT THE HANDS OF THE SAID SHAREHOLDER. IT IS THEREF ORE OSTENSIBLE THAT SUCH A PROVISION WHICH IS A DEEMING PROVISION AND FICTIONA LLY CREATES CERTAIN KIND OF RECEIPTS AS DIVIDENDS IS TO BE GIVEN STRICT INTERPR ETATION. IT FOLLOWS THAT UNLESS ALL THE CONDITIONS CONTAINED IN THE SAID PROVISION ARE FULFILLED THE RECEIPT CANNOT BE DEEMED AS DIVIDEND. 6.2. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE-CO MPANY IS NOT A SHAREHOLDER PER SE IN THE LENDER COMPANY OF THE ACT. WE NOT E THAT THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE ON THE GROUND THAT THE DEEMED INCOME CAN BE TAXED ONLY IN THE HANDS OF SHAREHOLDER OF THE LENDI NG COMPANY NOTWITHSTANDING THE FACT THAT BOTH THE LENDER-COMPANY AS WELL AS TH E ASSESSEE-COMPANY HAS COMMON SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN B OTH THE COMPANIES. FOR THIS PROPOSITION, THE CIT(A) RELIED UPON CERTAIN JU DICIAL PRECEDENTS AS NOTED IN THE OPERATIVE PARA QUOTED ABOVE. 6.3. WE FIND THAT THE LEGAL FICTION IN SECTION 2(22 )(E) ENLARGES THE DEFINITION OF DIVIDEND BUT DOES NOT EXTEND TO OR BROADEN THE C ONCEPT OF A SHAREHOLDER. AS THE ASSESSEE IS NOT A SHAREHOLDER OF THE LENDER- COMPANY, THE RECEIPT IS NOT SUSCEPTIBLE TO TAX UNDER S.2(22)(E) IN ITS HANDS IN VIEW OF LONG LINE OF JUDICIAL PRECEDENTS INCLUDING BAUMIK COLOUR PVT.LTD. 313 ITR 146 (BOM)[SB] APPROVED IN UNIVERSAL OF MEDICARE 324 363 (BOM) AND CIT VS. IMPACT CONTAINERS (P) LTD. (2014) 367 ITR 346 (BOM). IN V IEW OF THE JUDICIAL PRECEDENTS GOVERNING THE ISSUE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ITA NO. 1707/AH D/2015 DCIT VS. CASIL HEALTH PRODUCTS LTD. ASST.YEAR 2004-05 - 5 - 6. IN CONSONANCE WITH THE AFORESAID ORDER, WE DO NO T FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 16 / 1 0 /201 7 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 16/ 10 /2017 4..*,.*../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-1, AHMEDABAD 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 11.10.17 (DICTATION-PAD 4- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 12.10.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.16.10.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 16.10.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER