The Dy. Commr. Of Income Tax, Cir.-1(2), RAJKOT-GUJARAT V. M/s Entrack Organic Haus Pvt. Ltd., RAJKOT-GUJARAT

ITA 182/RJT/2016

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 1603 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 19-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 2(22)(e); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (THROUGH VIRTUAL COURT) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI T. R. SENTHIL KUMAR, JUDICIAL MEMBER I.T.A. No.182/Rjt/2016 (Assessment Year: 2012-13) DCIT Circle-1(2), Rajkot Vs. M/s. Entrack Organic Haus Pvt. Ltd., 414, Star Plaza, Jasani Road, Rajkot [PAN No.AACCE4696H] (Appellant) .. (Respondent) Appellant by : None Respondent by : Shri Sanjeev Jain, CIT DR Date of Hearing 18/05/2022 Date of Pronouncement 20/05/2022 O R D E R PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER: This is an appeal filed by the Revenue against the order dated 21.03.2016 passed by the Commissioner of Income Tax (Appeals)-2, Rajkot (in short “CIT(A)”) relating to the Assessment Year 2012-13 against the assessment order dated 26.03.2015 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The solitary ground raised by the Revenue is that the Ld. CIT(A) erred in law in deleting addition of Rs. 10,58,50,000/- made by the AO under Section 2(22)(e) of the Act. - 2 - ITA No.182/Rjt/2016 DCIT vs. M/s. Entrack Organic Haus Pvt. Ltd. Asst.Year – 2012-13 3. The brief facts of the case is this that the assessee is engaged in manufacturing, trading import and export of high end Organic vegetarian foods. For the A.Y. 2012-13 the assessee filed its return of income on 29.09.2012 declaring a loss of Rs. (-)6,88,53,879/-. The return was processed under Section 143(1) and then taken for scrutiny assessment. During the course of assessment the AO found that the assessee has received loan from Entrack International Pvt. Ltd. one of the shareholder of the assessee Shri Dilip R Doshi has holding shares in assessee company of 98.76% and in Entrack International Trading Pvt. Ltd.59.17% of the shares. The loan has accepted by the assessee company from Entrack International Trading Pvt. Ltd. was Rs. 10,58,50,000/-. The assessee claimed before the AO the loan is nothing but inter corporate deposit from the sister concern since the assessee cannot deposit these monies in bank deposits, when the sister concerns is badly in need of money. The AO rejected the contention of the assessee and treated the inter corporate deposit as loan and consequently treated as deemed dividend under Section 2(22)(e) of the Act and accordingly computed tax thereon. 4. Aggrieved against the same the assessee filed an appeal before the Ld. CIT(A). The assessee submitted before the Ld. CIT(A) that the assessee company has accepted inter corporate deposit of Rs. 10.58 crores from Entrack International Pvt. Ltd. (EIPL). EIPL was interested in placing the surplus fund with the assessee company as banker would not interest in taking short-term deposit. The assessee company furnished the share holding pattern of EIPL, from the - 3 - ITA No.182/Rjt/2016 DCIT vs. M/s. Entrack Organic Haus Pvt. Ltd. Asst.Year – 2012-13 verification of the share holding pattern of the lender company, it is found that the assessee company did not hold any shares in the EIPL. Thus, to attract the provisions of deemed dividend it is pre-requisite that the assessee company should be a registered shareholder of the lender company. Therefore, the provisions of Section 2(22)(e) is not attracted. Thus, the AO erred in making addition under Section 2(22)(e) which is against the law. The assessee also relied upon the Jurisdictional High Court judgment in the case CIT vs. Daisy Packers Pvt. Ltd., reported in (2014) 220 taxmann 331 wherein it was clearly held that if the assessee company does not hold the share in other company from which it had received deposit, then it cannot be treated to be a deemed dividend under Section 2(22)(e) of the Act. The assessee also relied upon various case laws of the High Courts and Ahmedabad Tribunal in this connection. The Ld. CIT(A) after considering the above submissions of the assessee and on verification of records, found that the assessee is not holding any shares in EIPL. Hence, the question of invoking under Section 2(22)(e) does not arise and respectfully following the Gujarat High Court judgment in the case of CIT vs. Daisy Packers Pvt. Ltd. (supra). The Ld. CIT(A) deleted the addition made by the AO and allowing the grounds raised by the assessee. 5. Aggrieved against the same the Revenue is in appeal before us raising that the CIT(A) erred in deleting the addition of Rs. 10,58,50,000/- made by the AO under Section 2(22)(e) of the Act. The Ld. D.R. appearing for the Revenue could not contravent that the - 4 - ITA No.182/Rjt/2016 DCIT vs. M/s. Entrack Organic Haus Pvt. Ltd. Asst.Year – 2012-13 assessee herein hold any shares in EIPL and also conceded that the provisions of Section 2(22)(e) cannot be invoked in the present case. Recording the both submissions, we hereby reject the grounds of appeal raised by the Revenue. We also find that this issue has attained finality by the Hon’ble Supreme Court of India in the case of the CIT vs. Madhur Housing Development & Co., reported in (2018) 93 taxmann.com 502 (SC) which reads as under: “where loans and advances are given in normal course of business and transaction in question benefits both payer and payee companies, provisions of section 2(22)(e) cannot be invoked - Whether judgment of High Court was to be agreed with - Held, yes [Para 10] [In favour of assessee]” 6. In the result, the appeal filed by the Revenue is hereby dismissed. Order pronounced in the Court on 20 th May, 2022 at Ahmedabad. Sd/- (WASEEM AHMED) ACCOUNTANT MEMBER Sd/- (T.R. SENTHIL KUMAR) JUDICIAL MEMBER Ahmedabad, dated 20/05/2022 Tanmay TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त)अपील (/ The CIT(A)- 5. वभागीय त न ध ,आयकर अपील(य अ धकरण,राजोकट/DR,ITAT, Ahmedabad, 6. गाड. फाईल /Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot