Kamla Bahal and Co., V. ITO ward-5(1),

ITA 1830/DEL/2003

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0196 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 11-03-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 16-04-2003
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAOREM
• Assessee Lawyers: J P CHAWLA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES I: NEW DELHI BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NOS.1829 & 1830/DEL/2003 ASSESSMENT YEARS: 1993-94 & 1996-97 M/S KAMLA BHEL & CO. (P) LTD., VS. INCOME TAX OFF ICER, 8, SCINDIA HOUSE, NEW DELHI. WARD 5(1), 413, C.R .BLDG., AAACK0081C NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. J.P. CHAWLA, CA RESPONDENT BY : BANITA DEVI NAOREM, SR. DR ORDER PER I.P. BANSAL, J.M. BOTH THESE APPEALS ARE FILED BY THE ASSESSEE. TH EY ARE DIRECTED AGAINST TWO SEPARATE ORDERS PASSED BY LD. CIT(A) DA TED 11.12.2002 FOR ASSESSMENT YEARS 1993-94 & 1996-97. IN BOTH THE AP PEALS ASSESSEE HAS RAISED COMMON ISSUES BY WAY OF FIVE DIFFERENT GROUN DS WHICH INCLUDES THE ISSUE REGARDING VALIDITY OR OTHERWISE OF REASSESSME NT PROCEEDINGS. DURING THE COURSE OF HEARING, LD. AR DID NOT PRESS THE GRO UNDS OTHER THAN GROUNDS RELATING TO ADDITION MADE ON ACCOUNT OF DEEMED DIVI DEND ASSESSED U/S 2(22)(E) OF INCOME TAX ACT,1961 (ACT). THEREFORE, THIS GROUND RELATED TO BOTH THE YEARS IS REPRODUCED BELOW: - ITA NOS. 1829 & 1830/D/03 2 GROUNDS FOR A.Y. 1993-94 : - 2 (A). THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND UNDER THE PROVISIONS OF THE LAW, THE COMMISSIONER HAS ERRED I N SUSTAINING AN ADDITION OF RS. 75,000/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT. (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND UNDER THE PROVISIONS OF LAW, THE COMMISSIONER HAS ERRED IN SU STAINING AN ADDITION IN THE HANDS OF THE COMPANY ON ACCOUNT OF DEEMED DIVID END WHEN IT DOES NOT HOLD ANY SHARE IN M/S PREM NATH MOTORS LTD. GROUNDS OF A.Y. 1996-97 : - 2 (A). THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND UNDER THE PROVISIONS OF THE LAW, THE COMMISSIONER HAS ERRED I N SUSTAINING AN ADDITION OF RS. 57,000/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME TAX ACT. (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND UNDER THE PROVISIONS OF LAW, THE COMMISSIONER HAS ERRED IN SU STAINING AN ADDITION IN THE HANDS OF THE COMPANY ON ACCOUNT OF DEEMED DIVID END WHEN IT DOES NOT HOLD ANY SHARE IN M/S PREM NATH MOTORS LTD. 2. PROVISIONS OF SEC. 2(22)(E) WERE APPLIED BY THE DEPARTMENT ON ACCOUNT OF RECEIPT OF LOAN BY THE ASSESSEE FROM ITS SISTER CONCERN NAMELY M/S PREM NATH MOTORS LTD. IT HAS BEEN THE CONTENTI ON OF ASSESSEE BEFORE LD. CIT(A) THAT ITS ACCOUNT WITH M/S PREM NATH MOTO RS LTD. IS A RUNNING ACCOUNT AND THE PAYMENTS BY M/S PREM NATH MOTORS LT D. TO THE ASSESSEE COMPANY ARE ON ACCOUNT OF PURCHASE OF PETROL AND LU BRICANT IN RESPECT OF WHICH PAYMENTS WERE RECEIVED BY THE ASSESSEE ON AD- HOC BASIS AND IT WAS CONTENDED THAT IT IS NOT IN THE SHAPE OF LOAN BUT I T IS A RUNNING ACCOUNT FOR ITA NOS. 1829 & 1830/D/03 3 PURCHASE OF PETROL. HOWEVER, SUCH SUBMISSION OF TH E ASSESSEE HAS BEEN REJECTED. MOREOVER, IT IS SEEN THAT IN THE GROUNDS OF APPEAL FILED BEFORE LD. CIT(A), ONE OF THE GROUND OBJECTING THE APPLICATION OF SEC.2(22)(E) WAS THAT ASSESSEE COMPANY DOES NOT HOLD ANY SHARE IN M/S PRE M NATH MOTORS LTD. THE GROUNDS RAISED BY THE ASSESSEE BEFORE CIT(A) WI TH RESPECT TO SUCH ADDITION AS TAKEN FOR A.Y. 1993-94 IS AS UNDER: - 2(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND UNDER THE PROVISIONS OF THE LAW, THE AO HAS ERR ED IN MAKING AN ADDITION OF RS.75,000/- AS DEEMED DIVIDEN D U/S 2(22)(E) OF THE I.T. ACT. (B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND UNDER THE PROVISIONS OF LAW, THE AO HAS ERRED I N MAKING AN ADDITION IN THE HANDS OF THE COMPANY ON ACCOUNT OF DEEMED DIVIDEND WHEN IT DOES NOT HOLD ANY SHARE IN M/S PREM NATH MOTORS LTD. 3. AFTER NARRATING THE FACTS, LD. AR SUBMITTED THAT FOR A.Y. 1990-91 SIMILAR ADDITION WAS MADE BY THE DEPARTMENT, WHEREB Y AN AMOUNT OF RS. 1,08,225/- WAS ADDED ON ACCOUNT OF DEEMED DIVIDEND IN THE SIMILAR CIRCUMSTANCES AND THE TRIBUNAL VIDE ITS ORDER DATED 16.2.05 IN ITA NO. 2162 HAD RESTORED THE MATTER BACK TO THE FILE OF LD. CIT (A). HE IN THIS REGARD REFERS TO THE ORDER OF THE TRIBUNAL, COPY OF WHICH IS PLACED AT PAGES 19 TO 21 OF THE PAPER BOOK. HE FURTHER INVITED OUR ATTENTIO N TOWARDS COPY OF ORDER OF CIT(A) PASSED IN PURSUANCE OF AFOREMENTIONED ORDER OF ITAT WHICH IS AN ORDER DATED 28 TH JULY, 2006 AND COPY OF ORDER OF CIT(A) IS PLACED A T PAGES ITA NOS. 1829 & 1830/D/03 4 22 TO 25 OF THE PAPER BOOK, WHEREIN THE ADDITION MA DE WAS DELETED, FOLLOWING HIS ORDER FOR A.Y. 1994-95. 4. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT IT HAS BEEN THE CONTENTION OF ASSESSEE THAT ASSESSEE COMPANY DOES NOT HOLD ANY SH ARE IN M/S PREM NATH MOTORS LTD. AND, THEREFORE, PROVISIONS OF SEC. 2(22)(E) COULD NOT BE APPLIED. HE SUBMITTED THAT HE IS MAKING A STATEME NT AT BAR THAT ASSESSEE COMPANY DOES NOT HOLD ANY SHARE IN M/S PREM NATH MO TORS LTD. THUS, HE PLEADED THAT ACCORDING TO THE DECISION OF SPL. BENC H IN THE CASE OF ACIT VS. BHAUMIK COLORS PVT. LTD. 118 ITD 1 (MUM.) (SB), PRO VISIONS OF SEC. 2(22)(E) COULD NOT BE APPLIED UNLESS THE PERSON TO WHOM THE PAYMENT IS MADE IS A REGISTERED SHAREHOLDER AS WELL AS BENEFICIAL SHAREH OLDER. ABSENCE OF ANY OF THEM WILL RENDER THE SEC. 2(22)(E) IN APPLICABLE. THEREFORE, HE PLEADED THAT ADDITION HAS WRONGLY BEEN SUSTAINED WITH RESPECT TO BOTH THE YEARS AND SHOULD BE DELETED. 5. ON THE OTHER HAND, RELYING UPON THE ORDER OF CIT (A), IT WAS PLEADED BY LD. DR THAT ADDITION HAS RIGHTLY BEEN SUSTAINED. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS IN THE LIGHT OF MATERIAL PLACED BEFORE US. AS PER GROUNDS OF APPEA L TAKEN BY THE ASSESSEE BEFORE LD. CIT(A), IT WAS CLEARLY STATED THAT ASSES SEE COMPANY IS NOT A SHAREHOLDER OF M/S PREM NATH MOTORS LTD. LD. COUN SEL OF THE ASSESSEE HAS ALSO STATED AT BAR THAT THIS FACTUAL ASPECT IS CORRECT. IF IT IS SO, THEN ITA NOS. 1829 & 1830/D/03 5 APPLYING THE RATIO OF AFOREMENTIONED DECISION OF SP L. BENCH, ADDITION CANNOT BE MADE AS ACCORDING TO THE SAID DECISION THE EXPRE SSION SHAREHOLDER REFER TO IN SEC. 2(22)(E) REFERS TO BOTH A REGISTER ED SHAREHOLDER AND BENEFICIAL SHAREHOLDER AND THUS, IF A PERSON IS A R EGISTERED SHAREHOLDER BUT NOT BENEFICIAL SHAREHOLDER THEN PROVISIONS OF SEC. 2(22)(E) WOULD NOT BE APPLICABLE AND SIMILARLY IF A PERSON IS A BENEFICIA L SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO PROVISIONS OF SEC. 2(22)(E) ARE NOT APPLICABLE. THEREFORE, THE ASSESSEE NOT BEING THE REGISTERED SHAREHOLDER OF M/S PREM NATH MOTORS LTD., SEC. 2(22)(E) COULD NOT BE APPLIED TO THE AMOUNTS RECEIVED BY THE ASSESSEE COMPANY FROM M/S P REM NATH MOTORS LTD. THUS, THE ADDITION IN BOTH THE YEARS IS DELET ED THE ABOVE STATED GROUND NO. 2 IN BOTH THE APPEALS IS ALLOWED. 7. THE OTHER GROUND, AS ALREADY STATED, WERE NOT PR ESSED BY LD. AR, HENCE, THOSE GROUNDS ARE DISMISSED. 8. IN THE RESULT, THE APPEALS ARE PARTLY ALLOWED IN THE MANNER AFORESAID. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 11.3.2011 SD/- SD/- (SHAMIM YAHYA) (I.P. BANSAL) ACCOUNTANT MEMBE R JUDICIAL MEMBER * KAVITA DATED: 11.3.11 ITA NOS. 1829 & 1830/D/03 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT