Asstt.Commissioner of Income Tax ,Circle-7, Nagpur V. M/s Anuadit Ferroserve Products Pvt .Ltd, Nagpur

ITA 173/NAG/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93416 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 25-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D RAVI KUMAR
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

1 ITA NO. 173/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 173 /NAG/2013 ASSESSMENT YEAR : 200 7 - 08 . ASSTT. . COMMISSIONER OF INCOME - TAX, M/S ANUADIT FERROSEREVE CIRCLE - 7, NAGPUR. V/S. PRODUCTS PVT. LTD., M - 22, MIDC, HING NA INDUSTRIAL ESTATE, NAGPUR - 440016. PAN AABCA 3817B APPELLANT. RESPONDENT. APPELLANT BY : SHRI D. RAVI KUMAR. RESPONDENT BY : SHRI K.P. DEWANI. DATE OF HEARING - 30 - 04 - 2015 DATE OF PRONOUNCEMENT 26 TH JUNE, 2015. O R D E R PER SHRI MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE REVENUE ARISING FROM THE ORDER OF LEARNED CIT(APPEALS) - 19, MUMBAI (CAMP OFFICE NAGPUR), DATED 13 - 02 - 2013. THE GROUNDS R AISED BY THE REVENUE ARE REPRODUCED BELOW : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) ERRED IN DELETING ADDITION OF ` .21,47,668/ - AS DEEMED DIVIDEND U/S 2(22)(E) OF THE IT ACT. 2 ITA NO. 173/NAG/2013 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) WAS CORRECT IN LAW AND ON FACTS IN HOLDING THAT DEEMED DIVIDEND SHOULD BE TAXED IN THE HANDS OF SHAREHOLDERS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT( A) WAS CORRECT IN LAW AND ON FACTS IN HOLDING THAT DEEMED DIVIDEND CANNOT BE TAXED IN THE HANDS OF A NON - SHARE HOLDER. 2. FACTS IN BRIEF AS EMERGED FROM THE CO RRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) DATED 30 TH DEC., 2008 WERE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING IN COAL ETC. THE ASSES SING OFFICER HAS INVESTIGATED A BOUT THE SHAREHOLDING PATTERN AND THE POSITION OF THE LOANS AS REFLECTED IN THE BALANCE SHEET. FACTS IN THIS REGARD, AS MENTIONED IN THE ASSESSMENT OR DER WERE AS UNDER : DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH COPY OF LEDGER ACCOUNTS OF TWO PARTIES NAMELY M/S AMBA FERRO CARBONS PVT. LTD. AND M/S MINERAL PULVERISING MILLS PVT. LTD. AND WHOSE NAMES APPEARED IN THE LIST OF CREDITORS FOR EXPENSES WITH CREDIT BALANCE OF ` .29,38,710/ - AND 4,85,267/ - RESPECTIVELY AS ON 31/03/2006 . M/S AMBA FERRO CARBONS PVT. LTD. AND M/S MINERAL PULVERISING MILLS PVT. LTD. ARE SISTER CONCERNS OF THE ASSESSEE AND ARE COMPANIES I N WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. IT IS ALSO PERTINENT TO NOTE THAT SHRI DEEPAK CHOWDHARY WHO HOLDS 76.66% OF THE SHARE HOLDING OF THE ASSESSEE COMPANY, HOLDS 43.85% OF THE SHARE HOLDING OF AMBA FERRO CARBONS PVT. LTD. AND 79.32% OF THE SHARE HOLDING OF MINERAL PULVARISING MILLS PVT. LTD. FURTHER, AS PER THE BALANCE SHEET FOR THE YEAR ENDED 31/03/2006, M/S AMBA FERRO CARBONS PVT. LTD. HAS RESERVES AND SURPLUS AMOUNTING TO ` .1,15,08,389/ - AND M/S MINERAL PULVARISING MILLS PVT. LTD. HAS RESERVES AND SURPLUS (EXCLUDING CAPITAL RESERVES) AMOUNTING TO ` .3,73,03,318/ - . 3 ITA NO. 173/NAG/2013 THE ASSESSING OFFICER HAS NOTED FROM THE ACCOUNTS OF M/S AMBA FERRO CARBONS P. LTD. AND M/S MINERAL PULVARISI NG MILLS PVT. LTD. THAT THERE WERE CERTAIN TR ANSACTIONS AMONG THE SAID TWO COMPANIES. HE HAS MENTIONED THAT THERE WAS A COMMON PERSON, NAMELY, SHRI DEEPAK CHOUDHARY WHO WAS HOLDING SHARES IN BOTH THE SAID TWO COMPANIES. IT HAS ALSO BEEN NOTED THAT SHRI DEE PAK CHOUDHARY WAS HOLDING 76.66% SHARES OF THE ASSESSEE COMPANY. BECAUSE OF THE SAID COMMON THREAD THE ASSESSING OFFICER W A S OF THE OPINION THAT IN THE ACCOUNT OF M/S AMBA FERRO CARBONS P. LTD. IN THE BOOKS OF THE ASSESSEE COMPANY THERE WAS AN OPENING CRED IT BALANCE OF ` .10,33,705/ - . THERE WAS SALES AND MISCELLANEOUS INCOME WHICH WAS DEBITED TO THE ACCOUNT OF AMBA FERRO CARBONS P. LTD. AS AGAINST THAT, THE COMPANY HAD RECEIVED AN AMOUNT OF ` .16,62,401/ - FROM AMBA FERRO CARBONS P. LTD. AFTER A DETAILED DISCU SSION THE CONCLUSION OF THE ASSESSING OFFICER WAS THAT THERE WAS NO SATISFACTORY EXPLANATION AS TO WHY FRESH CREDIT TO THE TUNE OF ` .16,62,401/ - WAS REQUIRED. THEREFORE, HE HAS HELD THAT THE SAID AMOUNT RECEIVED BY THE ASSESSEE FROM M/S AMBA FERRO CARBONS P. LTD. WAS IN THE NATURE OF DEEMED DIVIDEND AS PER SECTION 2(22)(E) OF I.T. ACT. 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, LEARNED CIT(APPEALS) HAS DISCUSSED THE FACTS OF THE CASE AND THEREAFTER FOLLOWING THE DECISION OF UNIVE RSAL MEDICARE P. LTD. 324 ITR 563 (BOM.) HELD THAT SINCE THE ASSESSEE WAS NOT A SHARE HOLDER IN EITHER OF THE TWO ASSOCIATED COMPANIES, THE AMOUNT IN QUESTION COULD NOT BE ASSESSED IN THE HANDS OF THE ASSESSEE UNDER SECTION 2(22)(E) OF THE ACT. 4 ITA NO. 173/NAG/2013 4. WITH THI S BRIEF FACTUAL BACKGROUND WE HAVE HEARD BOTH THE SIDES. SINCE THE REVENUE DEPARTMENT HAS FAILED TO ESTABLISH THAT THE ASSESSEE COMPANY WAS HAVING THE SHARE HOLDING IN ANY OF THE TWO SAID COMPANIES, HENCE IT WAS NOT LEGALLY JUSTIFIED TO SAY THAT THE ASSESS EE WAS HAVING SUBSTANTIAL INTEREST. FOR THE PURPOSE OF INVOCATION OF SECTION 2(22)(E) IT IS NECESSARY THAT THE PAYMENT BY WAY OF LOAN OR ADVANCE OUGHT TO BE TO A SHARE HOLDER. IN THIS CASE THE ADMITTED FACTUAL POSITION WAS THAT THE ASSESSEE WAS NOT HAVIN G SHARES OF THE SAID COMPANIES. THEREFORE, THE ASSESSEE CANNOT BE HELD AS SHARE HOLDER AND HENCE THERE WAS NO SUBSTANTIAL INTEREST OF THE ASSESSEE IN THE SAID COMPANIES. FOR THIS LEGAL PROPOSITION RELIANCE IS PLACED ON CIT V/S. IMPACT CONTAINERS PVT. LT D. 367 ITR 346 AND CIT V/S. UNIVERSAL MEDICARE (P) LTD. 324 ITR 263. 5. APART FROM THE ABOVE TWO DECISIONS, NOW BEFORE US A LATEST DECISION OF ITAT, NAGPUR BENCH, NAGPUR PRONOUNCED IN THE CASE OF ACIT V/S. M/S HIMALAYA BUILDERS & ERECTORS BEARING ITA NOS. 375&376/NAG/2012 DATED 10 TH APRIL, 2015 HAS BEEN CITED WHEREIN A FINDING WAS GIVEN THAT IN A SITUATION WHEN ADMITTEDLY THERE WAS NO SHARE HOLDING THEN THERE WAS NO JUSTIFIABLE REASON TO INVOKE THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT. IN SUCH CI RCUMSTANCES, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE HEREBY CONFIRM THE FINDINGS OF THE LEARNED CIT(APPEALS) AND DISMISS THE GROUNDS OF THE REVENUE. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JUNE, 2015. SD/ - SD/ - ( SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEMBER. 5 ITA NO. 173/NAG/2013 NAGPUR, DATED: 26 TH JUNE, 2015. COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, NAGPUR WAKODE