DCIT, CC-XIII, Kolkata, Kolkata V. M/s. Raghav Mercantile Pvt. Ltd., Kolkata

ITA 1830/KOL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9261 (ITAT-KOLKATA)
• Duration Of Justice: 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-03-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 24-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P P SARKAR
• Keywords: Deemed dividend
• Section: 2(22)(e)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH-A: KO LKATA ( ) . . , , . . , ,) [BEFORE HONBLE SHRI B.R. MITTAL, J.M. & HONBLE SH RI C.D. RAO, A.M] ! ! ! ! /I.T.A. NO. 1830/KOL./2010 '# '# '# '# $% $% $% $% /ASSESSMENT YEAR : 2007-2008 DEPUTY COMMISSIONER OF INCOME TAX, -VS.- M/S. R AGHAV MERCANTILE PVT. LTD., CENTRAL CIRCLE-XIII, KOLKATA KOLKATA (PAN : AABCR 2734 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.P. SARKAR, D.R. RESPONDENT BY : SHRI RAVI TULSIYAN, A.R. ' ' ' ' /O R D E R PER SHRI B. R. MITTAL, JUDICIAL MEMBER / . . , : THE DEPARTMENT HAS FILED THIS APPEAL FOR THE ASSES SMENT YEAR 2007-08 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS), CENTRA L-II, KOLKATA DATED 07.06.2010 ON THE FOLLOWING GROUNDS :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A.) HAS ERRED IN ALLOWING THE APPEAL OF THE ASS ESSEE BY DELETING THE ADDITION OF RS.13,05,621/- MADE BY THE AO ON ACCOUN T OF DEEMED DIVIDEND UNDER SECTION. 2(22)(E) OF THE ACT BY HOLDING THAT LOAN ADVANCED BY HRRFMPL TO THE ASSESSEE-COMPANY CANNOT BE DEEMED AS DIVIDEND AS THERE IS NO FINDING THAT THE ASSESSEE-COMPANY HOLDS MORE THAN 20% SHARES OF HRRFMPL, WITHOUT CONSIDERING THE FACT THAT THE A O HAD GIVEN A FINDING THAT SHRI ASHOK KUMAR SABOO, A DIRECTOR, WA S HAVING MORE THAN 20% SHARE HAVING SUBSTANTIAL INTEREST IN BOTH HRRFM PL AND THE ASSESSEE-COMPANY (RMPL) AND THE PROVISION OF SECTIO N 2(22)(E) CLEARLY STIPULATES THAT ANY PAYMENT BY A COMPANY TO ANY CON CERN IN WHICH SUCH SHAREHOLDER HAS A SUBSTANTIAL INTEREST WILL BE IN T HE NATURE OF DEEMED DIVIDEND TO THE EXTENT OF ACCUMULATED PROFIT AS PRE SCRIBED. ITA NO.1830/KOL.2010 2 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 3. DURING THE COURSE OF HEARING, THE LD. DEPARTMENT AL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER AND WHEREAS THE LD. AUTHORIZE D REPRESENTATIVE OF THE ASSESSEE SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (AP PEALS) AND SUBMITTED THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF CIT VS.- BHAUMIK COLOUR PVT. LIMITED [313 ITR 146 (AT)] AND SUBMITTED THAT THE LD. CIT(APPEALS) HAS DELETED THE ADDITION BY FOLLOWING THE AFORESAID ORD ER. 4. WE OBSERVE THAT THE ASSESSING OFFICER TREATED TH E LOAN/ ADVANCE OF RS.13,05,621/- AS DEEMED DIVIDEND INCOME UNDER SECTION 2(22)(E) OF TH E INCOME TAX ACT IN THE HANDS OF THE ASSESSEE ON THE GROUND THAT ONE SHRI ASHOK KUMAR SA BOO WAS A COMMON DIRECTOR IN THE LENDER COMPANY AS WELL AS THE BORROWER COMPANY. HOWEVER, T HE LD. CIT(APPEALS) HAS ACCEPTED THE CONTENTION OF THE LD. A.R. THAT THE PROVISIONS OF S ECTION 2(22)(E) OF THE ACT WILL NOT APPLY IN THE CASE OF THE ASSESSEE AS THE ASSESSEE-COMPANY IS NOT THE SHAREHOLDER OF THE LENDER COMPANY. THAT DIVIDEND INCOME COULD BE ASSESSED ONLY IN THE HANDS OF THE PERSON, WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTH ER THAN THE SHAREHOLDER AND IN SUPPORT THEREOF RELIED ON THE DECISION OF THE HONBLE ITAT, SPECIAL BENCH, MUMBAI IN THE CASE OF BHAUMIK COLOUR PVT. LTD. (SUPRA). DURING THE COURSE OF HEARING, THE LD. D.R. HAS NOT BROUGHT ANY MATERIAL ON RECORD THAT THE ASSESSEE-COMPANY WA S THE SHAREHOLDER OF THE LENDER COMPANY, NAMELY HIGH RISE ROLLER FLOUR MILLS (PVT.) LTD. IN VIEW OF THE ABOVE, WE HOLD THAT THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(APPEALS) TO D ELETE THE ADDITION MADE BY THE ASSESSING OFFICER AS PER PROVISIONS OF SECTION 2(22)(E) OF TH E INCOME TAX ACT. THEREFORE, WE UPHOLD HIS ORDER AND REJECT THE GROUNDS OF APPEAL TAKEN BY THE DEPARTMENT. 5. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18.03. 2011. SD/- SD/- [C. D. RAO ( . . )] [ B.R . MITTAL / . . ] ACCOUNTANT MEMBER/ JUDICIAL MEMBER/ ] DATED : 18/ 03/ 2011 ITA NO.1830/KOL.2010 3 COPY OF THE ORDER FORWARDED TO: 1. M/S. RAGHAV MERCANTILE PVT. LTD., 40, STRAND ROAD, 4 TH FLOOR, KOLKATA-1. 2 DCIT, CC-XIII, KOLKATA, 18, RABINDRA SARANI, KOLKAT A-1. 3. CIT(A)- ,KOLKATA 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (TRUE COPY) BY ORDER ASSISTANT REGISTRAR I.T.A.T., KOLKATA. LAHA, SR. P.S.