DCIT, Madurai V. Yentop Manickam Edible Oils Pvt Ltd., Virudhunagar

ITA 1745/CHNY/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7990 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 10-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , . ! , ' !# $ [ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ] ./ I.T.A.NO.1745/MDS/2015 / ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 2 MADURAI VS. M/S YENTOP MANICKAM EDIBLE OILS PVT. LTD NO.123, KATCHERY ROAD VIRUDHUNAGAR 626 001 [PAN AAACY 1338 C ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.V. SREEKANTH, JCIT /RESPONDENT BY : SHRI S. SRIDHAR, ADVOCATE / DATE OF HEARING : 10 - 02 - 2016 / DATE OF PRONOUNCEMENT : 17 - 0 2 - 2016 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, MADURA I, DATED 15.5.2015 FOR ASSESSMENT YEAR 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. ITA NO.1745/15 :- 2 -: 2. THE CIT(A) HAS ERRED IN HOLDING THAT SINCE THE A SSESSEE COMPANY IS NOT A HOLDER IN THE LENDING COMPANY THE PROVISIONS OF SEC. 2(22)(E) -WOULD NOT BE APPLICABLE. 3. THE CIT(A) HAS NOT APPRECIATED THAT TWO DIRECT ORS OF THE ASSESSEE COMPANY VIZ. S/SHRI. M. NAGALINGAM AND N. JIKKI HOLDING 66.66A) (33.33% EACH) OF SHARES OF THE ASSESSEE COMPANY ALSO HELD 50% (25% EACH) OF SHARES OF LENDI NG COMPANY VIZ. M/S MANICKAVEL EDIBLE OILS (P) LIMITED . THEREFORE, IT IS VERY CLEAR THAT THE PROVISIONS OF SEC. 2(22)( ) ARE ATTRACTED IN THE ASSESSEE'S CASE. 4. THE CASE LAWS RELIED UPON BY THE CIT(A) LO HOLD THAT AS THE ASSESSEE IS NOT A SHARE HOLDER, DEEMED DIVIDEN D IS NOT TAXABLE IN HIS HAND, HAVE NOT REACHED FINALITY. 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSING OFFIC ER, ON VERIFICATION OF THE FINANCIAL STATEMENT OF THE ASSE SSEE-COMPANY, OBSERVED THAT THE ASSESSEE RECEIVED LOANS TO THE T UNE OF ` 72.55 CRORES FROM M/S MANICKAVEL EDIBLE OILS (P) LTD. IN WHICH TWO DIRECTORS OF THE ASSESSEE-COMPANY HAVE SUBSTANTIAL INTEREST. HOWEVER, M/S MANICKAVEL EDIBLE OILS (P) LTD. HAD ACCUMULATED PRO FIT OF ` 1,00,11,731/- AS ON 31.3.2009. ACCORDINGLY, THE AS SESSING OFFICER INVOKED THE PROVISIONS OF 2(22)(E) OF THE ACT BY T REATING IT AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. ON APPEAL, THE CIT(A) OBSERVED THAT THE ASSESSEE IS NOT A SHAREHOLDER IN THE LENDING COMPANY AND AS SUCH, THE PROVISIONS OF SEC. 2(22)(E ) OF THE ACT CANNOT BE APPLIED. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. THE ISSUE IN DISPUTE IS SQUAR ELY COVERED BY THE ITA NO.1745/15 :- 3 -: ORDER OF MUMBAI SPECIAL BENCH IN THE CASE OF ACIT V S BHAUMIK COLOUR (P) LTD, [2009] 118 ITD 1 WHEREIN HELD AS UNDER: SECTION 2(22) OF THE INCOME-TAX ACT, 1961 - DEEMED DIVIDEND - ASSESSMENT YEAR 1997-98 - WHETHER DEEMED DIVIDEND CAN BE ASSESSED ONLY IN HANDS OF A PERSON WHO IS A SHAREHO LDER OF LENDER COMPANY AND NOT IN HANDS OF A PERSON OTHER T HAN A SHAREHOLDER - HELD, YES - WHETHER EXPRESSION 'SHARE HOLDER' REFERRED TO IN SECTION 2(22)(E) REFERS TO BOTH A RE GISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER AND, THUS, I F A PERSON IS- A REGISTERED SHAREHOLDER BUT NOT BENEFICIAL SHAREHO LDER THEN PROVISIONS OF SECTION 2(22)(E) WOULD NOT APPLY AND SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGIST ERED SHAREHOLDER THEN ALSO PROVISIONS OF SECTION 2(22)(E ) WOULD NOT APPLY - HELD, YES - WHETHER DEEMING PROVISION OF SE CTION 2(22)(E) AS IT APPLIES TO CASE OF LOANS OR ADVANCES BY A COMPANY TO A CONCERN IN WHICH ITS SHAREHOLDER HAS S UBSTANTIAL INTEREST, IS BASED ON PRESUMPTION THAT LOAN OR ADVA NCES WOULD ULTIMATELY BE MADE AVAILABLE TO SHAREHOLDERS OF COM PANY GIVING LOAN OR ADVANCE, AND, THEREFORE, INTENTION OF LEGIS LATURE IS TO TAX DIVIDEND ONLY IN HANDS OF SHAREHOLDER AND NOT I N HANDS OF CONCERN - HELD, YES. 5. THERE IS NO DISPUTE THAT THE SHAREHOLDING PATTERN O F THE ASSESSEE-COMPANY IS AS FOLLOWS: SHAREHOLDERS BORROWER COMPANY YENTOP MANICKAM EDIBLE OILS PVT. LTD (YEMOPL) LENDER COMPANY MANICKAVEL EDIBLE OILS PVT. LTD (MEOPL) NO. OF SHARES % OF HOLDING N O. OF SHARES % OF HOLDING M. SAROJINIAMMAL 111000 33.33% 150000 M. NAGALINGAM 111000 33.33% 150000 25% N. MATHAVAN -- -- 150000 25% N. JAMUNA -- -- 150000 25% N. JIKKI 111000 33.33% 150000 25% 6. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH E ASSESSEE IS NOT BEING THE SHAREHOLDER IN THE LENDIN G COMPANY M/S MANICKAVEL EDIBLE OILS (P) LTD., THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT CANNOT BE APPLIED IN THE ASSESSEES CASE THOUG H IT HAS RECEIVED ITA NO.1745/15 :- 4 -: LOAN FROM THE SAID COMPANY. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS CONFIRME D. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH FEBRUARY, 2016, AT CHENNAI. SD/- SD/- ( . ! ) (G. PAVAN KUMAR) ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' / CHENNAI #$ / DATED: 17 TH FEBRUARY, 2016 RD $%&& '(&)( / COPY TO: & 1 . / APPELLANT 4. & * / CIT 2. / RESPONDENT 5. (+,& - / DR 3. & *&./ / CIT(A) 6. ,0&1 / GF