ASIP Private Limited , Hyderabad V. Dy. Commissioner of Income Tax , Circle-1(1), Hyderabad

ITA 1869/Hyd/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5277 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB-B
• Next Hearing Date: 20-09-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 11-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROHIT MUJUMDAR SRIKANTH
• Keywords: Deemed dividend
• Section: 143(3); 2(22)(e)

Judgement Text

ITA NO.1869/HYD/2018 1 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD (THROUGH VIDEO CONFERENCING) BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1869/HYD/2018 ASSESSMENT YEAR: 2013-14 M/S. ASIP PRIVATE LIMITED, PLOT NO.473, ROAD NO.87, JUBILE HILLS, HYDERABAD 500 033. PAN : AAFCA4682E VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1 (1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI A. SRINIVAS. AR REVENUE BY : SHRI ROHIT MUJUMDAR FOR SRIKANTH DR. DATE OF HEARING: 20/09/2021 DATE OF PRONOUNCEMENT: 24/09/2021 O R D E R PER BENCH : THIS ASSESSEES APPEAL FOR AY.2013-14 ARISES FROM T HE CIT(A)-1, HYDERABADS ORDER DATED 22.06.2018 PASSED IN CASE NO.0067/CIT(A)-1/HYD/2016-17/2018-19 INVOLVING PROC EEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. 2. COMING TO THE ASSESSEES SOLE SUBSTANTIVE GRIEVA NCE THAT BOTH THE LEARNED LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN MAKING SECTION 2(22)(E) DEEMED DIVIDEND AD DITION OF RS.1,44,22,000/-, WE NOTE THAT THE CIT(A)S DETAILE D DISCUSSION TO THIS EFFECT READS AS UNDER : ITA NO.1869/HYD/2018 2 5.3 THE SUBMISSIONS OF THE APPELLANT AND THE ASSESS MENT ORDER HAVE BEEN CAREFULLY CONSIDERED. THE APPELLANT HAS TAKEN INTEREST FREE LOAN FROM ITS RELATED COMPANY WHERE IT IS SUBSTANTIALLY RELAT ED IN SHAREHOLDING. THE ASSESSING OFFICER HAS RAISED THE ISSUE OF DEEMED DI VIDEND IN THIS CASE. THE ASSESSING OFFICER FOUND THAT APPELLANT RECEIVED RS.L,44,22,000/- FROM M/S. ANANDSHEEL HYDRAULICS PVT LTD AND SHOULD HAVE BEEN TERMED AS DIVIDEND. THE APPELLANT HAS RAISED THE ISSUE THA T THE APPELLANT IS NOT A REGISTERED SHAREHOLDER BUT HOLDING SHARE. THIS IT SELF, CLARIFIES THE ISSUE THAT THE APPELLANT COMPANY IS HAVING COMMON SHAREHO LDING WITH THE M/S. ANANDSHEEL HYDRAULICS PVT LIMITED. MORE IMPORTANT THAT THE SHAREHOLDERS SRI V.S. RAJESH REDDY AND SRI V.S. ANAND REDDY ARE PROMOTERS OF BOTH THE COMPANIES, I.E., M/S. ANANDSHEE L HYDRAULICS PVT LTD AND M/S. ASIP PRIVATE LIMITED (APPELLANT COMPAN Y). HENCE, THE ASSESSING OFFICER IS CORRECTLY INVOKED THE PROV ISIONS OF SECTION 2(2)( E) WHERE THE APPELLANT IS NOT-PAYING INTEREST AND HAS MAJORITY SHARES. IT IS PERTINENT POINT OUT, THE JUDICIAL JUDGMENT IN THE CASE OF M/S.BHAUMIK COLOUR PVT LTD AND M/S. ANKITECH PRIVAT E LIMITED. THE ISSUE WHETHER DEEMED DIVIDEND IS TAXABLE IN THE HAN DS OF THE CONCERN IN WHICH THE SHAREHOLDERS OF THE LENDER COMPANY HAS SU BSTANTIAL INTEREST OR IN THE HANDS OF SUCH COMMON SHAREHOLDER HAS BEEN A MATTER OF DEBATE BEFORE THE COURTS. THE SPECIAL BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S.BHAUMIK COLOUR (P) LTD HELD THAT IN THE ABSE NCE OF INDICATION IN SECTION 2(22)(E) OF THE ACT TO EXTEND THE LEGAL FIC TION TO A CASE OF LOAN OR ADVANCE TO A NON-FICTION TO A CASE OF LOAN OR ADVAN CE TO A NON- SHAREHOLDER, LOAN OR ADVANCE CANNOT BE TAXED AS DEE MED DIVIDEND IN THE HANDS OF SUCH NON-SHAREHOLDER. THE DECISION OF THE SPECIAL BENCH HAS BEEN AFFIRMED BY THE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE (P) LTD AND THE DELHI HIGH COURT IN THE CA SE OF M/S. ANKITECH PRIVATE LIMITED. HOWEVER, THE SUPREME COURT PUT AT REST THIS CONTROVERSY IN THE CASE OF M/S. ANKITECH PRIVATE LIMITED AND HE LD THAT DEEMED DIVIDEND IS NOT TAXABLE IN THE HANDS OF A LOAN RECI PIENT CONCERN, IF SUCH CONCERN IS NOT A SHAREHOLDER OF THE LENDER COMPANY. IT IS TAXABLE IN THE HANDS OF COMMON SHAREHOLDERS HAVING SUBSTANTIAL INT EREST IN BOTH THE ENTRIES. THE SUPREME COURT DECISION HAS PROVIDED CL ARITY ON THE ISSUE. IN LIGHT OF THE ABOVE, THE ADDITION MADE BY THE ASSESS ING OFFICER IS UPHELD. I FEEL THE ASSESSING OFFICER IS CORRECT IN INVOKING S ECTION 2(22)(E). 3. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO R IVAL PLEADINGS AGAINST AND IN SUPPORT OF THE IMPUGNED DE EMED DIVIDEND ADDITION AND FIND NO REASON TO EXPRESS OUR AGREEMEN T WITH EITHER ONE OF THEM IN ENTIRETY. WE ARE INFORMED DURING TH E COURSE OF HEARING THAT HONBLE APEX COURT ITSELF HAS REFERRED THE INSTANT ISSUE OF APPLICABILITY OF THE IMPUGNED DEEMING FICTION IN A CASE INVOLVING COMMON SHAREHOLDERS IN NATIONAL TRAVEL SERVICES VS . CIT (2018) ITA NO.1869/HYD/2018 3 401 ITR 154 (SC) THEREBY DOUBTING THE CORRECTNESS OF CIT VS. ANKITECH PVT. LTD AND CIT VS. MADHUR HOUSING AND D EVELOPMENT COMPANY (2018) 401 ITR 152 (SC). THERE IS FURTHER NO QUARREL BETWEEN THE PARTIES THAT THE FOREGOING HONBLE LAR GER BENCH IS YET TO DECIDE THE INSTANT ISSUE. WE THEREFORE DEEM IT APPROPRIATE TO RESTORE THE ASSESSEES SOLE SUBSTANTIVE GRIEVANCE R AISED IN INSTANT APPEAL BACK TO THE ASSESSING OFFICER FOR HIS FRESH ADJUDICATION ON MERITS AFTER AWAITING FOR THE HONBLE APEX COURTS LARGER BENCHS DECISION FOLLOWED BY THREE EFFECTIVE OPPORTUNITIES OF HEARING. 4. THIS ASSESSEES APPEAL IS ALLOWED FOR STATISTICA L PURPOSES IN ABOVE TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH SEPTEMBER,2021. SD/- SDSD SD/- SD/- (INTURI RAMA RAO) ACCOUNTANT MEMBER (S.S. GODARA) JUDICIAL MEMBER HYDERABAD, DATED 24 TH SEPTEMBER, 2021. TYNM / SPS COPY TO: S. NO ADDRESS ES 1 M/S. ASIP PRIVATE LIMITED, PLOT NO.473, ROAD NO.87, JUBILE HILLS, HYDERABAD 500 033. 2 T HE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1( 1 ), HYDERABAD. 3 THE CIT(A)-1, HYDERABAD. 4 THE PR.CIT(1), HYDERABAD. 5 DR, IT AT HYD ERABAD BEN CHES 6 GUARD FILE . BY ORDER