ITO, New Delhi V. M/s. M.Tech India Pvt. Ltd., New Delhi

ITA 1794/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3618 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 20-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S SAHOTA
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E: NEW DELHI BEFORE SHRI C.L.SETHI, JM & SHRI R.C. SHARMA, AM I.T. A. NO.1794/DEL OF 2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, M/S M.TECH INDIA LTD., WARD 6(1), NEW DELHI. VS C-58, KAILASH APARTMENT, KAILASH COLONY, NEW DELHI. PAN AAACM9794N APPELLANT RESPONDENT APPELLANT BY: SHRI G.S. SAHOTA, SR. DR RESPONDENT BY: NONE ORDER ER C.L. SETHI, JM: THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A ) DATED 2.2.2010 IN THE MATTER OF ASSESSMENT MADE BY THE AO U/S 143 (3) OF THE INCOME-TAX ACT, 1961 (THE ACT) FOR ASSTT. YEAR 2006-07. 2. THE ISSUE INVOLVED IN THIS APPEAL IS WITH REGARD TO QUESTION AS TO WHETHER THE SUM OF RS.19,66,546/- IS ASSESSABLE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE PRESENT ASS ESSEE. 2 3. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE AO THAT THE PRESENT ASSESSEE HAD RECEIVED THE SUM OF RS.1,0 6,00,000/- FROM M/S VIRAVIN SECURITIES P. LTD. (HEREINAFTER CALLED AS V SPL) AS UNSECURED LOAN. AS PER DETAILS FIELD BY THE ASSESSEE BEFORE THE AO, THE FOLLOWING POSITION WAS EMERGING: NAME OF THE COMPANY LOANS GIVEN/(TAKEN) ACCUMULATED PROFITS SHAREHOLDINGS OF SH. VIRENDER KR. CHOPRA SHAREHOLDINGS OF SH. RAVINDER KR. CHOPRA VSPL 1,06,00,000 19,66,566 50% 50% ASSESSEE (1,06,00,000) N.A. 29.7% 28% THE AO THEN TREATED THE SUM OF RS.19,66,566/-, BEIN G THE ACCUMULATED PROFIT IN THE HANDS OF VSPL AS DEEMED DIVIDEND ASSESSABLE IN THE HANDS OF THE ASSESSEE INASMUCH AS THE SHAREHOLDER OF VSPL, NAMEL Y, SHRI VIRENDER KUMAR CHOPRA AND SHRI RAVINDER KUMAR CHOPRA HAVING 50% SHAREHOLDING IN VSPL HAD ALSO SUBSTANTIAL INTEREST IN THE PRESEN T ASSESSEE TO THE EXTENT OF 29.7% AND 28% OF SHAREHOLDING. 4. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE CIT(A). 5. AFTER ANALYZING THE PROVISIONS OF SECTION 2(22)( E) READ WITH SECTION 2(32) AND FOLLOWING THE DECISION OF SPECIAL BENCH O F TRIBUNAL, MUMBAI, IN 3 THE CASE OF M/S BHAUMICK COLORS (P) LTD., 27 SOT 2 70 (MUM), THE LEARNED CIT(A) DELETED THE ADDITION BY CONCLUDING AS UNDER: 4.5 IN OTHER WORDS, THE HONBLE SPECIAL BENCH OF THE TRIBUNAL HAS NOT FOUND FAVOUR WITH THE SAID CIRCULAR NO.495 OF THE BOARD. TO PUT IT DIFFERENTLY, THE SAID CIRCULAR HAS BEEN CONSIDERED BY THE SPECIAL BENCH AND NOT FOUND TO BE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. AS SUCH, THE CASE WILL HAVE TO BE CONSIDERED WITHIN THE FRAMEWORK OF THE LAW LAID SOWN BY THE SPECIAL BENCH. IT IS OBSERVED THAT THE APPELLANT COMPANY IS NOT A SHAREHOLDER IN M/S VSPL FROM WHOM THE ADVANCE HAS BEEN TAKEN. THE AO HAS RECORDED THAT SH. VIRENDER KUMAR CHOPRA AND SHRI RAVINDER KUMAR CHOPRA HAD A SUBSTANTIAL INTEREST IN BOTH THE COMPANIES BY VIRTUE OF HOLDING MORE THAN 20% SHARES IN BOTH COMPANIES. HENCE, THE AO TREATED THIS RECEIPT AS DEEMED DIVIDEND U/S 2(22)(E) AND BROUGHT IT TO TAX. HOWEVER, THE AO HAS NOT MADE OUT A CASE THAT APPELLANT COMPANY. M/S M. TECH INDIA (P) LTD. WAS THE REGISTERED SHAREHOLDER IN M/S VSPL NOR HAS IT BEEN HELD THAT THE APPELLANT COMPANY WAS A BENEFICIAL SHAREHOLDER. THUS, FOLLOWING THE DECISION IN ACIT VS BHAUMIK COLOURS (P) LTD. (SUPRA), THE PROVISIONS OF SECTION 2(22)(E) CANNOT BE INVOKED IN THIS CASE. IT MAY BE MENTIONED THAT THE DECISION OF THE SPECIAL BENCH IS BINDING ON ME AS HELD BY THE DELHI HIGH COURT IN NOKIA CORPORATION VS DIT (INTERNATIONAL TAXATION) (2007) 292 ITR 22 (DEL). AS SUCH, THE ADDITION OF RS.19,66,566/- IS DIRECTED TO BE DELETED. 6. HENCE, THE DEPARTMENT IS IN APPEAL. 4 7. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULL Y PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 8. IN THE PRESENT CASE, IT IS ADMITTED POSITION THA T ASSESSEE COMPANY IS NOT A SHAREHOLDER OF M/S VSPL FROM WHOM THE ASSESSE E HAS TAKEN THE ADVANCES OF RS.1,06,00,000/-. THEREFORE, IN THE LI GHT OF THE DECISION OF SPECIAL BENCH, THE DEEMED DIVIDEND WITHIN THE MEANI NG OF SECTION 2(22)(E) IS NOT ASSESSABLE IN THE HANDS OF PRESENT ASSESSEE. THE HONBLE SPECIAL BENCH HAS LAID DOWN THAT DEEMED DIVIDEND CAN BE ASS ESSED ONLY IN THE HANDS OF A PERSON, WHO IS A SHAREHOLDER OF THE LENDER COM PANY, AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER. IT HAS BEEN FURTHER LAID DOWN THEREIN THAT THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND A BENEF ICIAL SHAREHOLDER. THUS, IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BE NEFICIAL SHAREHOLDER THEN THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. SIMILARLY, IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHO LDER, THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY IN THAT CASE. IN T HE PRESENT CASE, THE ASSESSEE COMPANY IS NEITHER A SHAREHOLDER NOR BENEFICIAL SHA REHOLDER OF VSPL. SHAREHOLDERS IN BOTH THE COMPANIES ARE SHRI VIRENDE R KUMAR CHOPRA AND SHRI RAVINDER KUMAR CHOPRA. IT IS ALTOGETHER A DIF FERENT MATTER TO CONSIDER AS TO WHETHER THIS AMOUNT CAN BE ASSESSED IN THE HA NDS OF SHRI VIRENDER 5 KUMAR CHOPRA AND SHRI RAVINDER KUMAR CHOPRA BUT THE ISSUE IS SETTLED THAT DEEMED DIVIDEND, IN THE PRESENT CASE, U/S 2(22)(E) IS NOT ASSESSABLE IN THE HANDS OF THE PRESENT ASSESSEE COMPANY IN THE LIGHT OF THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CASE OF M/S BHAUMICK COLORS (P ) LTD. (SUPRA). WE, THEREFORE, UPHOLD THE ORDER OF CIT(A), AND REJECT T HE GROUND RAISED BY THE REVENUE. 9. IN THE RESULT, THE APPEAL FIELD BY THE REVENUE I S DISMISSED. 10. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 25 TH JUNE, 2010. (R.C. SHARMA) (C.L. SETHI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 25 TH JUNE, 2010 VIJAY COPY TO: 1. APPELLANT. 2. RESPONDENT. 3. CIT 4. CIT(A)-IX, NEW DELHI 5. DR ASSISTANT REGISTRAR