M/s. Govind Implex Pvt.Ltd, Jammu V. The Dy.Commissioner of Income-tax, Jammu

ITA 184/ASR/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85939 (ITAT-AMRITSAR)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-03-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Keywords: Corroborative evidences; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D.JAIN, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.184(ASR)/2014 ASSESSMENT YEAR:2008-09 PAN :AAACG5794Q M/S.GOVIND IMPEX PVT. LTD., VS. DY. COMMR. OF INCOM E TAX, 29, CHURCH LANE, CIRCLE-2, RESIDENCY ROAD, JAMMU. JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY:SH. PADAM BAHL, CA RESPONDENT BY:SH.TARSEM LAL, DR DATE OF HEARING:17/03/2015 DATE OF PRONOUNCEMENT:17/03/2015 ORDER PER A.D.JAIN, JM: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2 008-09 AGAINST THE ORDER DATED 27.01.2014, PASSED BY THE CIT(A), JAMMU , TAKING THE FOLLOWING GROUNDS: 1. THAT LD. CIT(A), JAMMU HAS GROSSLY ERRED IN NOT ALLOWING DEDUCTION ON ACCOUNT OF FOLLOWING EXPENSES: I) SALARIES 3,35,800/- II) STAFF WELARE 38,418/- III) LEGAL & PROF. CHARGES 5,57,815/- ITA NO. 184(ASR)/2014 2 2. THAT LD. CIT(A), JAMMU HAS GROSSLY ERRED IN CONFIRM ING THE ACTION OF THE AO IN MAKING ADDITION OF RS.3,99,499/- U/S 2 (22)E) OF THE INCOME TAX ACT, IN RESPECT OF ADVANCES RECEIVED AT RS.1,14,446/- ON GOOD FAITH CONSTRUCTIONS PVT. LTD. AND AT RS.2,8 5,053/- TO HEALTHY HOLDINGS PVT. LTD. 3. THAT LD. CIT(A), JAMMU HAS FAILED TO APPRECIATE THA T THESE ADVANCES WERE IN THE NATURE OF INTER CORPORATE DEPO SITS AND WERE REIMBURSEMENT OF EXPENSES AND WERE NOT COVERED U/S 2(22)(E) OF THE ACT. 2. AN APPLICATION FOR SEEKING ADMISSION OF THE ADDI TIONAL GROUND OF APPEAL HAS ALSO BEEN FILED, WHICH GROUND IS AS UNDE R: THAT BOTH THE AO AND CIT(A) HAVE GROSSLY ERRED IN NOT APPRECIATING THAT DEEMED DIVIDEND U/S 2(22)(E) CAN BE ASSESSED O NLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPAN Y AND IN THE HANDS OF THE BORROWING CONCERN IN WHICH SUCH SHAREHOLDER IS MEMBER HAVING SUBSTANTIAL INTEREST. 3. THE LD. DR OBJECTED TO THE ADMISSION OF THE ADDI TIONAL GROUND. 4. FINDING THAT AS THE ADDITIONAL GROUND IS A LEGAL GROUND, FOR WHICH ALL THE FACTS ARE ON RECORD AND FOR WHICH, NO FRESH MAT ERIAL IS REQUIRED TO BE BROUGHT, THIS GROUND IS ADMITTED. 5. THE MERITS OF THE ORIGINAL GROUNDS HAVE BEEN ARG UED BY BOTH THE PARTIES, BESIDES ARGUING THOSE OF THE ADDITIONAL GR OUND. HOWEVER, THE ADDITIONAL GROUND PERTAINS TO A LEGAL ISSUE AND WE ARE TAKING UP THE ADDITIONAL GROUND FIRST. 6. THE FACTS ARE THAT THE AO MADE ADDITION OF RS.1, 14,446/- U/S 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE ON THE GROU ND THAT IT HAD RECEIVED ITA NO. 184(ASR)/2014 3 AMOUNTS OF RS.51,945/-, RS.50,000/- AND RS.12,501/- FROM GOODFAITH CONSTRUCTION PVT. LTD., A COMPANY HAVING COMMON S HARE HOLDING WITH THE SHARE HOLDERS OF ASSESSEE COMPANY. THE ASSESSEE EXP LAINED THAT THE AMOUNTS DID NOT REPRESENT ANY LOANS OR ADVANCES. THESE WE RE IN FACT REIMBURSEMENT OF PROPERTY TAX TO MCD & TRAVELING EXPENSES PAID BY THE ASSESSEE COMPANY ON ITS BEHALF. SIMILARLY, THE AO MADE AN ADDITION O F RS.2,85,053/- U/S 2(22)(E) ON THE GROUND THAT IT HAD RECEIVED AMOUNTS OF RS.75,000/-, RS.1,753/-, RS.80,000/-, RS.80,000/-, RS.28,300/- A ND RS.20,000/- ON DIFFERENT DATES FROM M/S. HEALTHY HOARDINGS PVT. LT D., A COMPANY HAVING SHAREHOLDERS WITH THE ASSESSEE COMPANY. THE ASSESSE E EXPLAINED THAT THESE AMOUNTS REPRESENTED REIMBURSEMENT OF EXPENSE ON ACC OUNT OF INCOME TAX, LEGAL EXPENSES, MDC ETC., PAID BY THE ASSESSEE. THE AO REJECTED THE CONTENTION OF THE ASSESSEE COMPANY AND TREATED THES E REIMBURSEMENT OF EXPENSES AS LOANS & ADVANCES WITHIN THE MEANING O F SEC. 2(22)(E) OF THE INCOME TAX ACT, 1961. 7. THE LD. CIT(A) CONFIRMED THE ASSESSMENT ORDER OB SERVING THAT: REGARDING ADDITION ON ACCOUNT OF DEEMED DIVIDEND FO R RS.1,14,446/- AND RS.2,85,053/-, THE APPELLANT STATED THAT THESE AMOUNTS ARE NOT LOAN OR ADVANCES BUT THESE WERE REIMBURSEMENT OF CE RTAIN EXPENDITURES LIKE PROPERTY TAX TO MCD, TRAVELING EX PENSES AND LEGAL EXPENSES ETC. THE AO HAS REJECTED THE CONTENTION OF THE APPELLANT AND TREATED THESE AMOUNTS AS LOAN AND ADVANCES WITHIN M EANING OF SECTION 2(22)(E). THE ARGUMENTS OF THE APPELLANT IS THAT TH E APPELLANT COMPANY INCRRED THESE EXPENSES ON BEHALF OF M/S. HE ALTHY HOARDINGS ITA NO. 184(ASR)/2014 4 PVT. LTD AND M/S. GOOD FAITH CONSTRUCTION LTD. COMP ANY HAVING COMMON SHARE HOLDING OF THE APPELLANT COMPANY COUL D NOT GIVE ANY SUPPORTING EVIDENCE IN SUPPORT OF THE ASSERTIONS MA DE AND THEREFORE CANNOT BE ACCEPTED. 8. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED T HAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT DEEMED DIVIDEND CANNOT BE ASSESSED IN THE HANDS OF SOMEONE NOT A SHAREHOLDER OF THE LENDER COMPANY; TH AT THE ASSESSEE IS NOT A SHAREHOLDER IN EITHER M/S. GOOD FAITH CONSTRUCTION PVT. LTD., OR IN M/S. HEALTHY HOLDINGS PVT. LTD. RELIANCE HAS BEEN PLACE D ON THE FOLLOWING DECISIONS: I) ACIT VS. BRITTO AMUSEMENT PVT. LTD., 360 ITR 544 (BOM.) II) CIT VS. GOPAL CLOTHING CO., 350 ITR 67 (DELH I) III) SATISH KUMAR AGGARWAL & CO. VS. DCIT, HOSHIARPUR C IRCLE, HOSHIARPUR., ORDER DATED 15.10.2012 PASSED IN ITA NO.148 & 250(ASR)/2011 FOR THE AY 2007-08 (ITAT, AMRITSAR BE NCH). 9. COPIES OF THESE DECISIONS HAVE BEEN PLACED ON RE CORD. 10. THE LD. DR, ON THE OTHER HAND, HAS SUBMITTED TH AT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE AMPLY CLEAR AND TH EY WERE RIGHTLY INVOKED TO MAKE THE ADDITION IN QUESTION. 11. HAVING HEARD BOTH THE PARTIES ON THIS ISSUE AND HAVING PERUSED THE MATERIAL BROUGHT ON RECORD, WE FIND THAT INDEED,S T HE ASSESSEE IS NOT A ITA NO. 184(ASR)/2014 5 SHAREHOLDER IN EITHER M/S. GOOD FAITH CONSTRUCTION PVT. LTD., OR M/S. HEALTHY HOLDINGS PVT. LTD. 12. IN BRITTO AMUSEMENT PVT. LTD. (SUPRA), IT WA S HELD BY THE HONBLE BOMBAY HIGH COURT THAT THE TRIBUNAL NOTED THAT THE PAYMENT SHOULD BE MADE TO A SHAREHOLDER BEING A PERSON WHO IS THE BEN EFICIAL HOLDER OF SHARES AND WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY, I.E., A SHAREHOLDING WHICH CARRIES NOT LESS THAN 10 PERCENT; AND THAT THIS POS ITION WAS APPLICABLE ONLY TO THE FACTS OF THAT CASE AND THE FINDING OF THE TRIBU NAL DID NOT STAND DISPUTED BY THE REVENUE. THE FINDINGS OF THE TRIBUNAL WERE, THUS, UPHELD. 13. CIT VS. UNIVERSAL MEDICAL PVT. LTD., (2010 32 4 ITR 263 (BOM.), WAS FOLLOWED TO HOLD THAT IN SUCH FACTS, THE QUESTI ON OF INCLUDING THE DISPUTED AMOUNT AS DEEMED DIVIDEND IN TERMS OF SECT ION 2(22)(E) OF THE ACT DID NOT ARISE AT ALL. 14. IN GOPAL CLOTHING CO. PVT. LTD. (SUPRA), IT W AS HELD THAT TO ATTRACT SECTION 2(22)(E) OF THE ACT, PAYMENT MUST BE MADE T O A PERSON WHO IS A REGISTERED HOLDER OF SHARES AND SHAREHOLDERS ALONE; AND THAT THE FACT THAT THE SHAREHOLDERS OF THE ASSESSEE COMPANY WERE ALSO SHA REHOLDERS OF THE COMPANY WHICH HAD GIVEN LOAN/ADVANCES, WAS NOT SUFF ICIENT AND DID NOT MEET THE REQUIREMENT OF SECTION 2(22)(E) OF THE ACT . ITA NO. 184(ASR)/2014 6 15. CIT VS. ANKITECH PRIVATE LIMITED, (242 CTR 12 9 (DEL) WAS RELIED ON IN GOPAL CLOTHING (SUPRA). 16. IN SATISH KUMAR AGGARWAL & CO. MUKERIAN (SUPR A), FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN TH E CASE OF ACIT VS. BHAUMIC COLOUR PVT. LTD., 313 ITR (AT) 146 (MUM.) AND THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT V S. HOTEL HILLTOP, 313 ITR 116 (RAJ.), IT WAS HELD AS FOLLOWS: WHEN A SHAREHOLDER RECEIVES LOAN FROM A COMPANY IN THE ORDINARY COURSE OF ASSESSEES BUSINESS, THE SAID TRANSACTION IS EXEMPT FROM THE PURVIEW OF DEEMED DIVIDEND AS PER THE CLAUSE (II) O F SECTION 2(22)(E). EVEN OTHERWISE, IT IS SEEN THAT THE SPECIAL BENCH OF THE ITAT HAVE HELD IN THE CASE OF ACIT VS. BHAUMIC COLOUR PVT. LT D. THAT SECTION 2(22)(E) WOULD NOT BE APPLICABLE IN THE CASE OF A F IRM IN WHICH THE SHARE HOLDERS OF THE COMPANY WERE PARTNERS, EVEN WH EN LOAN OR ADVANCE WAS GIVEN BY THE COMPANY TO THE SAID FIRM. THE HONBLE RAJASTHAN HIGH COURT HAVE ALSO TAKEN THE SAME VIEW IN THE CASE OF CIT VS. HOTEL HILLTOP REPORTED AT 313 ITR 116 (RAJ. ). THE JURISDICTIONAL TRIBUNAL HAVE UPHELD THIS VIEW IN TH EIR DECISION IN THE CASE OF DCIT, CIRCLE-1, JALANDHAR VS. THE MERCHANTS IN ITA NO.331(ASR)/2009 DATED 26.08.2009. THUS, AS PER THE DECISION OF THE JURISDICTIONAL TRIBUNAL IN THE CASE OF DCIT, CIRCLE -1, JALANDHAR VS. THE MERCHANTS(SUPRA) ADDITION U/S 2(22)(E) CANNOT B E MADE IN THE CASE OF A FIRM. HENCE, BOTH THE REASONS THAT THE M ONEY WAS RECEIVED BY THE ASSESSEE FIRM FROM M/S. SATISH AGGARWAL ROAD CONSTRUCTION CO. PVT. LTD. IN THE COURSE OF ORDINARY BUSINESS OF LENDING BY THAT COMPANY AND BECAUSE SECTION 2(22)(E) IS NOT APPLICA BLE IN THE CASE OF A FIRM, THE ADDITION MADE BY THE AO U/S 2(22)(E) H AS RIGHTLY BEEN DELETED. 13.1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE D ISCUSSED ABOVE, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AN D THE SAME IS ACCORDINGLY UPHELD. THUS, ALL THE GROUNDS OF THE RE VENUE ARE DISMISSED. ITA NO. 184(ASR)/2014 7 17. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE BY THE DEPARTMENT. THEREFORE, FOLLOWING THE RATIO OF THE A BOVE CASES, SINCE THE ASSESSEE IS NEITHER A SHAREHOLDER IN M/S. GOOD FAIT H CONSTRUCTION PVT. LTD. OR IN M/S. HEALTH HOLDINGS PVT. LTD., FROM WHOM THE MONEY HAD COME, THE GRIEVANCE OF THE ASSESSEE BY WAY OF THE ADDITIONAL GROUND IS ACCEPTED AND WE HOLD THAT NO ADDITION WAS CALLED FOR UNDER THE PROV ISIONS OF SECTION 2(22)(E) OF THE ACT. 18. FROM THE ABOVE DISCUSSION, NOTHING ELSE REMAINS TO BE ADJUDICATED AND THEREFORE, WE ARE NOT GOING INTO ANY OTHER GROUND T AKEN BY THE ASSESSEE. 19. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17TH MARCH, 2015. SD/- SD/- (B.P. JAIN) (A.D.JAIN) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 17TH MARCH, 2015 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. GOVIND IMPEX PVT. LTD. JAMMU. 2. THE DCIT, CIR.2, JAMMU. 3. THE CIT(A), JAMMU. 4. THE CIT, JAMMU. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR. ITA NO. 184(ASR)/2014 8