R.Iyyammal, CHENNAI V. DCIT, Coimbatore

ITA 1755/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7877 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 10-06-2016
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTHJCIT
• Assessee Lawyers: R KUMAR
• Keywords: Deemed dividend
• Section: 147

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C /SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ./ I.T.A.NO.1754 /MDS./2016 ( / ASSESSMENT YEAR :2009-10) SHRI K.R.KAMALAKANNAN, PROP. M/S.K.K.INDUSTRIES, S.F.NO.330/2B2, KALAPATTI, SITRA ROAD, COIMBATORE 641 035. VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1, COIMBATORE. PAN ABIPK 0752 G ( / APPELLANT ) ( / RESPONDENT ) ./ I.T.A.NO.1755 /MDS./2016 ( / ASSESSMENT YEAR :2009-10) SMT.R.IYYAMMAL, S.F.NO.330/2B2, KALAPATTI, SITRA ROAD, COIMBATORE 641 035. VS. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1, COIMBATORE. PAN AARPR 1767 N ( / APPELLANT ) ( / RESPONDENT ) ITA NO.1755 & 1754/MDS/2016 2 ! ' # / APPELLANT BY : MR.R.KUMAR, ADVOCATE $% ! ' # / RESPONDENT BY : MR.A.V.SREEKANTH,JCIT, D.R & ' ' ( ) / DATE OF HEARING : 07.12.2016 *+ ' ( ) /DATE OF PRONOUNCEMENT : 07.12.2016 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THESE TWO APPEALS ARE FILED BY THE DIFFERENT ASSESSEE S ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE COMM ISSIONER OF INCOME-TAX (APPEALS)-1, COIMBATORE DATED 22.03.2016 FOR ASSESS MENT YEAR 2009-10. SINCE ISSUES INVOLVED IN THESE TWO APPEALS ARE COMMO N IN NATURE, THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPO SED OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BOTH THE ASSESSEES IN THEIR APPEAL RAISED THE F OLLOWING COMMON GROUNDS FOR ADJUDICATION. 1. THE IMPUGNED ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND THE FACTS AND CIRCUMSTANCES OF T HE CASE. 2. THE COMMISSIONER (APPEALS) ERRED IN NOT ACCEPTIN G THE OBJECTION RAISED TO THE REOPENING OF THE ASSESSMENT INVOKING SECTION 147 OF THE ACT. ITA NO.1755 & 1754/MDS/2016 3 3. THE COMMISSIONER (APPEALS) ERRED IN NOT SEEING T HAT NO TANAGIBLE MATERIAL HAD COME INTO THE POSSESSION OF THE ASSES SING OFFICER TO JUSTIFY THE REOPENING OF THE ASSESSMENT WHICH IS PE RSE INVALID. 4. THE COMMISSIONER (APPEALS) ERRED IN SUSTAINING T HE ASSESSMENT OF RS.14,70,000/- AS DEEMED DIVIDEND U/S 2 (22) (E) OF THE ACT. 5. THE ASSESSING OFFICER /COMMISSIONER (APPEALS) ER RED IN NOT APPRECIATING THAT MONEY WAS ADVANCED BY THE COMPANY SHARP INFO SOLUTIONS PVT.LTD., (OF WHICH THE APPELLANT IS A D IRECTOR HAVING SUNSTANTIAL INTEREST) TO R.I FOUNDATION (AOP IN WHI CH THE APPELLANT IS A MEMBER) FOR CONSTRUCTION OF A BUILDING TO HOUSE THE MEDICAL TRANSCRIPTION BUSINESS OF THE COMPANY , WHICH IS P URELY A BUSINESS PURPOSE OF THE COMPANY. 6. THE AUTHORITIES BELOW FAILED TO SEE THAT DUE TO UNFORESEEN DEVELOPMENTS, FINDING THAT ESTABLISHING A SOFTWARE TECHNOLOGY FACILITY BY SHARP INFO SOLUTIONS PVT.LTD.,WAS NOT FEASIBLE , R.L. FOUNDATION USED THE CONSTRUCTED BUILDING FOR ESTABLISHING A SC HOOL IN THE NAME OF ANAN KIDS ACADEMY WHICH STATED FUNCTIONING FROM 0 1.06.2009. 7. THE ASSESSING OFFICER /COMMISSIONER (APPEALS) ER RED IN RELYING ON THE JUDGEMENT OF THE HONBLE MADRAS HIGH COURT (DT.SEP. 4,2002) IN CIT VS P.K.ABUBUCKER (2003) 259 ITR 507 (MAD) A DECISION R ENDERED ON THE FACTS OF THAT CASE AND IS DISTINGUISHABLE. 8. THE APPELLANT IS ADVISED TO SUBMIT THAT IN A SUB SEQUENT JUDGMENT (DT. APRIL 16, 2014) IN CIT VS MADURAI CHETTIYAR KARTHIK EYAN REPORTED IN ITA NO.1755 & 1754/MDS/2016 4 (2014) 45 TAXMANN.COM 274 (MADRAS) THE HONBLE MADR AS HIGH COURT ON FACTS SIMILAR TO THOSE OBTAINING IN THE PRESENT APPELLANTS CASE HAS HELD THAT: WHERE THE ASSESSEE, THE MANAGING DIRECTO R OF THE COMPANY HAVING A SUBSTANTIAL SHAREHOLDING AND CARRYING ON B USINESS AS A PROPRIETARY CONCERN HAD EXECUTED WORK FOR THE COMPA NY BY WAY OF CONSTRUCTION OF BUILDINGS THAT THE SAID TRANSACTION BEING IN THE NATURE OF A SIMPLE BUSINESS TRANSACTION IN RESPECT OF MONE Y ADVANCED BY THE COMPANY TO THE PROPRIETARY CONCERN THERE WAS NO JUS TIFIABLE GROUND TO BRING THE CASE OF THE ASSESSEE WITHIN THE DEFINITIO N OF DEEMED DIVIDEND U/S 2(22) (E) OF THE ACT. 9. THE APPELLANT DENIES THAT THE MONEYS ADVANCED BY SHARP INFO SOLUTIONS PVT.LTD., TO R.I.FOUNDATION IS NOT A LO AN OR ADVANCE AS ENVISAGED U/S 2(22) (E) OF THE ACT ASSESSABLE AS D EEMED DIVIDEND IN THE HANDS OF THE APPELLANT. 10. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING THE APPELLANT PRAYS THAT THE HONBLE TRIBUN AL MAY BE PLEASED TO DELETE THE ADDITION OF RS.14,70,000/-- ALLOW THI S APPEAL AND RENDER JUSTICE. 2.1 GROUND NO.1 IS TOO GENERAL, DOES NOT REQUIRE ADJUDI CATION. AT THE TIME OF HEARING, THE LD. A.R OF THE ASSESSEE TO BOTH THE ASSESSEES DID NOT PRESS GROUND NOS.2 & 3. ACCORDIN GLY, GROUND NOS. 2 & 3 ARE DISMISSED AS NOT PRESSED. ITA NO.1755 & 1754/MDS/2016 5 2.1 IN GROUND NOS.4 TO 10 RAISED BY THE TWO ASSES SEES ARE WITH REGARD TO APPLICABILITY OF SEC.2(22)(E) OF THE ACT ON THE AMOUNT TRANSFERRED TO THE ASSESSEE FROM M/S.SHARP INFO SOL UTIONS PVT. LTD., WHEREIN THE ASSESSEE IS A MEMBER OF THAT AOP I.E. M /S.R.I. FOUNDATION. 2.2 IN THE YEAR UNDER CONSIDERATION, THERE WAS A T RANSFER OF SUM OF ` 49 LAKHS FROM M/S.SHARP INFO SOLUTIONS PVT. LTD., T O THE AOP M/S.R.I. FOUNDATION WHERE THE ASSESSEE IS A MEMBER OF AOP. T HE LD.A.R SUBMITTED THAT THE ASSESSEE HAS NOT DERIVED ANY BEN EFIT FROM THIS TRANSFER OF FUND TO M/S.R.I. FOUNDATION AND THE AMO UNT HAS BEEN GIVEN TO M/S.R.I. FOUNDATION FOR THE PURPOSE OF CON STRUCTION OF BUILDING OWNED BY M/S.R.I. FOUNDATION AND THIS IS A COMMERCIAL TRANSACTION BETWEEN M/S.SHARP INFO SOLUTIONS PVT. L TD., AND M/S.R.I. FOUNDATION AND IT CANNOT BE CONSIDERED IN THE HANDS OF THE ASSESSEE, THOUGH THE ASSESSEE WAS SHARE HOLDER IN M/S.SHARP I NFO SOLUTIONS PVT. LTD. ON THE OTHER HAND LD.D.R SUBMITTED THAT T HE ASSESSEE IS A BENEFICIAL OWNER. BEING SO, PROVISIONS OF THE SECTI ON 2(22)(E) IS APPLICABLE WHERE THE SHAREHOLDER BENEFITTED FROM TH E TRANSACTION ITA NO.1755 & 1754/MDS/2016 6 BETWEEN TWO CONCERNS WHEREIN THE ASSESSEE HAS REQUI SITE INTEREST. THE LD.D.R RELIED ON THE ORDER OF LOWER AUTHORITIES . 3. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE AMOUNT HAS BEEN TRANSFER RED FROM M/S.SHARP INFO SOLUTIONS PVT. LTD., TO M/S.R.I. FOU NDATION AND WHEREIN THE ASSESSEE IS A MEMBER OF THAT A.O.P M/S. R.I. FOUNDATION. IF THE ASSESSEE USED THE M/S.R.I. FOUNDATION AS A C ONDUIT TO GET TRANSFER THE SAID AMOUNT IN HIS FAVOUR, THEN PROVIS IONS OF THE SECTION 2(22)(E) OF THE ACT IS APPLICABLE. FOR THIS PURPOS E, ONE HAS TO SEE THAT STATEMENT OF ACCOUNT OF ASSESSEE WITH M/S.R.I. FOUNDATION AND TO DECIDE WHETHER THE ASSESSEE DERIVED BENEFIT OR N OT. IF THE AMOUNT LEGITMATELY TRANSFERRED FROM M/S.SHARP INFO SOLUTIO NS PVT. LTD., TO THE ASSESSEES ACCOUNT, THEN PROVISIONS OF THE SECTION 2(22)(E) IS APPLICABLE. WITH THIS OBSERVATION, WE REMIT THIS I SSUE TO THE FILE OF AO FOR FRESH CONSIDERATION. 4. SINCE THE APPEAL OF THE ANOTHER ASSESSEE IN ITA NO.1755/MDS./16 HAVING SIMILAR FACTS, THIS APPEAL IS ALSO ADJUDICATED IN THE SAME LINE AND REMITTED TO THE FILE OF AO FOR FRESH CONSIDERATION. ITA NO.1755 & 1754/MDS/2016 7 5. IN THE RESULT, BOTH THE APPEALS OF DIFFERENT AS SESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 7 TH DECEMBER, 2016 AT CHENNAI. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 07 TH DECEMBER, 2016 . K S SUNDARAM. , ' $(-. /.( / COPY TO: 1 . ! / APPELLANT 3. & 0( () / CIT(A) 5. .3 4 $(5 / DR 2. $% ! / RESPONDENT 4. & 0( / CIT 6. 4 6 7 ' / GF