ACIT, CHENNAI V. Tallboy Stationery Private Limited, CHENNAI

ITA 18/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9688 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MSVM PRASAD
• Assessee Lawyers: G BASKAR
• Keywords: Deemed dividend; Commercial expediency
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . . . , . , % BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NOS.17 TO 19/MDS/2016 ( / ASSESSMENT YEARS: 2009-10, 2006-07 & 2012-13) THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-3(1), NEW BLOCK, 4 TH FLOOR, CHENNAI-600 034. VS M/S. TALLBOY STATIONERY PVT. LTD. NEW NO.130, OLD NO.34, NELSON MANICKAM ROAD, AMINJIKARAI, CHENNAI-29. PAN: AACCT3483H ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. M.S.V.M. PRASAD, CIT DR /RESPONDENT BY : MR. G.BASKAR, ADVOCATE /DATE OF HEARING : 16 TH FEBRUARY, 2016 /DATE OF PRONOUNCEMENT : 13 TH APRIL, 2016 / O R D E R PER A. MOHAN ALANKAMONY, AM:- THESE THREE APPEALS ARE FILED BY THE REVENUE AGGRIEVED BY THE SEPARATE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI AL L DATED 12.10.2015 IN ITA NOS. 403, 402 & 426/2014-15 - CIT(A)-11 PASSED UNDER SECTION 143(3) R.W.S. 147 & 250(6) OF THE ACT. 2. THE ONLY COMMON GROUND RAISED BY THE REVENUE IN THESE THREE APPEALS IS THAT THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDI TION 2 ITA NOS.17 TO 19 /MDS/2016 MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 2(22)(E) OF THE ACT BY HOLDING THAT LOANS/ADVANCES RECEIVED FROM ITS SISTER CONCERN CANNOT BE TREATED AS DEEMED DIVIDEND EVEN THOUGH THE SHAREHOLDERS OF THE ASSESSEE COMPANY ARE ALSO HOLDING BENEFICIAL OWNERSHIP WITH MORE THAN 20% OF THE SHARES IN THE COMPANY FROM WHICH LOAN WAS RECEIVED. 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE CHENNAI BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2010-11 HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESS EE IN ITA NO.562/MDS/2015 DATED 29.09.2015. HE FURTHER SUBMIT TED THAT THE HONBLE TRIBUNAL WHILE DECIDING THE CASE H AD ALSO CONSIDERED THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE CIT VS. PRINTWAVE SERVICES P.LTD REPORTED IN ( @)!%) 373 ITR 0665. HE THEREFORE PLEADED THAT ALL THE TH REE APPEALS FILED BY THE REVENUE ON THE IDENTICAL ISSUE MAY ALSO BE HELD IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY T HE APPEALS OF THE REVENUE MAY BE DISMISSED. 3 ITA NOS.17 TO 19 /MDS/2016 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON THE O THER HAND, VEHEMENTLY ARGUED IN SUPPORT OF THE ORDERS OF THE LEARNED ASSESSING OFFICER; HOWEVER HE COULD NOT CON TROVERT TO THE SUBMISSIONS MADE BY THE THE LEARNED AUTHORIZED REPRESENTATIVE. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE MATERIALS AVAILABLE ON RECORD. IN ALL THE THREE ASSESSMENT YEARS, THE ISSUE IS WITH RESPECT TO THE APPLICABILITY OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN REGARD TO THE RECEIPT OF LOAN BY THE ASSESSEE COMPA NY FROM ITS SISTER CONCERN NAMELY M/S. CHENNAI MICRO PRINT PVT. LTD., WHICH HAD ACCUMULATED PROFITS AND COMMON SHAREHOLDE RS. AS POINTED OUT BY THE LEARNED AUTHORIZED REPRESENTA TIVE THIS IDENTICAL ISSUE WAS DECIDED BY THIS BENCH OF THE TR IBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 201 0-11 VIDE ORDER DATED 29.09.2015 IN ITA NO.562/MDS/2015 WHEREIN IT WAS HELD AS FOLLOWS:- 4.1 GROUND NO.1 - DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. 4 ITA NOS.17 TO 19 /MDS/2016 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT W AS NOTICED BY THE LD. ASSESSING OFFICER THAT THE ASSES SEE HAS BORROWED A SUM OF ` 15,24,414/- FROM ITS GROUP COMPANY M/S.CHENNAI MICRO PRINT P. LTD., DURING THE RELEVAN T PREVIOUS YEAR. IT WAS ALSO NOTICED THAT THE ASSESSEE COMPANY HAD ACCUMULATED PROFIT OF ` 7,98,61,378/- AS ON 31.03.2009. FURTHER THE INDIVIDUALS MR.S.RAMU AND MR.V.RAMESH H AD THE FOLLOWING SHAREHOLDING IN THE ASSESSEE COMPANY AND M/S.CHENNAI MICRO PRINT P. LTD., ON THE END OF THE RELEVANT PREVIOUS YEAR:- SINCE MR.S.RAMU AND MR.V.RAMESH TOGETHER HAD 100% HOLDING IN THE ASSESSEE COMPANY AND IN THE COMPANY FROM WHICH THE ASSESSEE COMPANY HAD BORROWED FUNDS AND FURTHER THE LENDER COMPANY HAD RESERVES MORE TH AN THE AMOUNT ADVANCED TO THE ASSESSEE COMPANY, THE LD . ASSESSING OFFICER OPINED THAT THE PROVISIONS OF SEC TION 2(22)(E) OF THE ACT WOULD BE ATTRACTED AND ACCORDIN GLY ADDED ` 15,24,414/- TO THE INCOME OF THE ASSESSEE AS DEEMED DIVIDEND BEING THE AMOUNT BORROWED BY THE ASSESSEE COMPANY. 4.2 ON APPEAL THE LD. CIT (A) REJECTING THE ARGUM ENTS OF THE LD. A.R THAT, THE AMOUNT BORROWED WAS DUE TO COMMERCIAL EXPEDIENCY, CONFIRMED THE ORDER OF THE L D. ASSESSING OFFICER AGREEING WITH HIS VIEW. 4.3. BEFORE US, THE LD. A.R. POINTED OUT THAT THE ASSESSEE COMPANY WAS NOT THE BENEFICIAL OR REGISTER ED SHARE OWNER OF THE SHARES IN THE COMPANY FROM WHICH THE ASSESSEE HAD BORROWED FUNDS AND THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED. HE FURTHER RELIED ON THE CASE ACIT VS. BHA UMIK COLOUR PVT LTD., REPORTED IN 27 SOT 270(MUM. SB) AN D ALSO THE DECISION OF JURISDICTIONAL MADRAS HIGH COU RT IN THE CASE OF CIT VS. PRINTWAVE SERVICES P. LTD REPOR TED IN (2015) 373 ITR 0665. LD. D.R ON THE OTHER HAND, AR GUED IN SUPPORT OF THE ORDERS OF THE REVENUE. SL.NO. NAME NO. OF SHARES IN M/S.TALLBOY STATIONERY P. LTD AS ON 31.3.2010 % NO. OF SHARES IN M/S.CHENNAI MICRO PRINT P. LTD. AS ON 31.3.2010 % 1 S.RAMU 480000 50% 498500 50% 2 V.RAMESH 480000 50% 498500 50% 5 ITA NOS.17 TO 19 /MDS/2016 4.4 WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS E VIDENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE COMPAN Y IS NOT THE BENEFICIAL OR REGISTERED OWNER OF THE SHARE S IN THE COMPANY FROM WHICH IT HAD BORROWED FUNDS. FURTHER, AS POINTED OUT BY THE LD. A.R. THE DECISIONS RELIED BY HIM (SUPRA) IS SQUARELY APPLICABLE TO THE CASE OF THE A SSESSEE. IN BOTH THE AFORESAID DECISIONS, IT HAS BEEN CATEGO RICALLY HELD THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED, IF THE ASSESSEE IS NOT THE BENEFICIAL O R REGISTERED OWNER OF THE SHARES IN THE COMPANY FROM WHICH THE ASSESSEE HAD BORROWED. THEREFORE, RESPECTIVELY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONA L HIGH COURT AND THE DECISION OF THE TRIBUNAL WE HEREBY DI RECT THE LD. ASSESSING OFFICER TO DELETE THE ADDITION OF ` 15,24,414/- MADE BY INVOKING THE PROVISIONS OF SECT ION 2(22)(E) OF THE ACT AS DEEMED DIVIDEND. ACCORDINGL Y THIS GROUND IS DECIDED IN FAVOUR OF THE ASSESSEE. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THIS IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL FOR T HE ASSESSMENT YEAR 2012-13 VIDE HIS ORDER DATED 12.10. 2015 IN ITA NO.426/2014-15. THE LEARNED COMMISSIONER OF IN COME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2006-07 & 200 9-10 HAS ALSO DECIDED THE IDENTICAL ISSUE IN FAVOUR OF T HE ASSESSEE BY FOLLOWING THE DECISIONS OF VARIOUS HIGHER JUDICI ARIES. IN THIS SITUATION, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDERS OF THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) IN ALL THE ABOVE MENTIONED APPEALS. ACCORDINGLY THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 6 ITA NOS.17 TO 19 /MDS/2016 7. IN THE RESULT, ALL THE THREE APPEALS OF THE REVE NUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 13 TH APRIL, 2016 SD/- SD/- ( . . . ) ( . ) (N.R.S.GANESAN) ( A.M OHAN ALANKAMONY ) # % / JUDICIAL MEMBER % / ACCOUNTANT MEMBER # /CHENNAI, ( /DATED 13 TH APRIL, 2016 SOMU *+ ,+ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. - () /CIT(A) 4. - /CIT 5. + 1 /DR 6. /GF