IRM Trust, Ahmedabad V. The Dy.CIT.,Circle-11, Ahmedabad

ITA 1894/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89680 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 22-06-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 29-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Keywords: Deemed dividend
• Section: 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: S H RI G. D. AGRAWAL , VICE PRESIDENT AND SHR I RAJPAL YADAV , JUDICIAL MEMBER IRM TRUST 13, SANJIV BAUG SOCIETY, NEW SHARDA MANDIR ROAD, PALDI, AHMEDABAD PAN: AAATI0877R (APPELLANT) VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 11, AHMEDABAD (RESPONDENT) ASSESSEE BY: S H RI PA RIN SHAH , A.R. REVENUE BY: SMT. SONIA KUMAR, SR. D.R. DATE OF HEARING : 22 - 06 - 2 015 DATE OF PRONOUNCEMENT : 25 - 06 - 2 015 / ORDER P ER : RAJPAL YADA V , JUDICIAL MEMBER : - THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 2 7 TH MAY , 201 1 PASSED FOR ASSESSMENT YEAR 2003 - 04 . I T A NO . 1894 / A HD/20 11 A SSESSMENT YEAR 200 3 - 04 I.T.A NO. 1894 /AHD/20 11 A.Y. 20 03 - 04 PAGE NO IRM TRUST V S. DCIT 2 2. THE SOLITARY GRIE VANCE OF THE ASSESSEE IS THAT LD. COMMISSIONER OF INCOM E TAX (APPEALS) HAS ERRED IN CONFI RMING THE ADDITION OF RS. 2,30,4 00/ - WHICH WAS ADDED BY THE ASSESSING OFFICER W ITH THE AID OF SECTION 2(22)(E). 3. LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL BENCH OF THE ITAT RENDERED IN THE CASE OF ACIT VS. BHOMIK COLOUR LTD REPORTED IN 118 ITD 1. 4. THE BRIEF FACTS OF THE CASE ARE THAT LD. ASSESSING OFFICER HAS INITIATED RE - ASSESSMENT PROCEEDING BY ISSU ANCE OF A NOTICE U/S. 148 OF THE INCOME TAX ACT ON 31 - 03 - 2010. ACCORDING TO THE ASSESSING OFFICER, DURING THE ASSESSMENT PROCEEDING FOR ASSESSMENT YEAR 2006 - 07 IN THE CASE OF M/S CADILA PHARMACEUTICAL LTD R EVEALED THAT M/S. CASIL HEALTH P RODUCT S LTD HAD A N OPENING DEBIT BALANCE OF RS. 5.01 CRORE AND A CLOSING BALANCE OF RS. 4.7 CRORE. THE ASSESSING OFFICER HAS ALSO NOTICED THAT FURTHER AMOUNTS W ERE GIVEN BY THE ASSESSEE TO THE S E CONCERN S DURING THE YEAR. THUS, THERE WAS HEAVY OUTSTANDING AMOUNT PENDING A GAINST M/S CASIL HEALTH PRODUCT S LTD FOR A LONG PERIOD STARTING FROM 2001 TO TI LL DATE OF ASSESSMENT ORDER . 5. HE FURT HER OBSERVED THAT PERUSAL OF SHARE - HOLDING PATTERN OF THESE CONCERNS INDICATE THAT M/S IRM TRUST HAS 82.2% SHARE - HOLDING IN M/S CADILA P HARMACEUTICAL LTD. THIS COMPANY HAD 29% SHARE - HOLDING IN M/S IRM TRUST. ACCORDING TO THE ASSESSING OFFICER, SECTION 2(22)(E) IS SQUARELY APPLICABLE IN THE HANDS OF THE ASSESSEE BECAUSE M/S IRM TRUST HAVING I.T.A NO. 1894 /AHD/20 11 A.Y. 20 03 - 04 PAGE NO IRM TRUST V S. DCIT 3 SUBSTANTIAL INTEREST IN BOTH THE CONCERNS. HE O RIGINALLY WORKED OUT THE DEEMED DIVIDEND TO THE TUNE OF RS. 1,86,86,427/ - . THE ASSESSEE MOVED AN APPLICATION U/S. 154 . T HAT APPLICATION HAS BEEN ALLOWED AND ULTIMATELY AN ADDITION OF RS. 2,30,400/ - HAS BEEN WORKED O UT. THE SPECIFIC REASON FOR MAKING THE ADDITION BY THE ASSESSING O FFICER IS THAT M/S. IRM TRUST HAS A COMMON SHARE - HOLDING BETWEEN M/S CADILA PHARMACEUTICAL L TD AND M/S CASIL HEALTH PRODUCT L TD. THE LOAN GIVEN BY M/S CADILA PHARMACEUTICAL L TD TO M/S CA SIL HEALTH PRODUCT LTD I S TO BE TREATED A S DEEMED DIVIDEND . 6. APPEAL TO THE COMMISSIONER OF INCOME TAX (APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 7. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE FACTS IN THE CASE OF BHOMIK COLOUR PVT. LTD RELIED UPON BY THE LD. COUNSEL FOR THE ASSESSEE ARE THAT ASSESSEE COMPANY NAMELY; BCP L TOOK A N INTEREST BEARING LOAN OF RS. 9 LACS FROM ANOTHER COMPANY, UPPL. THE ASSESSING OFFICER NOTICED THAT THO UGH BCPL WAS NOT A SHARE - HOLDER OF UPPL YET, BOTH THE COMP ANIES HAD ONE COMMON SHARE - HOLDER I.E. NARMADA BEN NANDLAL TRUST (NTT) AND THAT TRUST WAS HOLDING 20% SHARES IN BCPL AND 10% SHARES IN UPPL. THE LD. ASSESSING OFFICER ARRIVED AT A CONCLUSION THAT THE IMPUGNED TRANSACTION OF LOAN WAS COVERED BY THE SECOND LIMB OF SECTION 2(22)(E) . THE ITAT HAS HELD THAT FOR ATTRACTING FIRST LIMB OF THE SECTION 2(22)(E) , THE PAYMENT MUST BE MADE TO A PERSON WHO IS A REGISTERED SHARE - HOLDER. IN THE PRESENT CASE ALSO, THE PAYMENT WAS NOT MADE TO M/S. IR M TRUST, THE PAYMENT W AS MADE BY M/S CADILA PHARMACEUTICAL LTD TO M/S CASIL HEALTH PRODUCT LTD. IN OTHER WORDS, FOR ATTRACTING SECTION 2(22)(E), APART FROM OTHER CONDITIONS , THE FOLLOWING TWO CONDITIONS SHOULD BE PRESENT I.E. (A) THERE SHOULD BY PAYMENT TO A I.T.A NO. 1894 /AHD/20 11 A.Y. 20 03 - 04 PAGE NO IRM TRUST V S. DCIT 4 PERSON/ENTITY; (B) THE RECIPIENT SHOULD BE REGISTERED SHARE - HOLDER WITH A SHARE - HOLDING OF NOT LESS THAN 10% OF THE VOTING POWER. THE ASSESSEE IS NOT THE RECIPIENT OF ANY MONEY. THEREFORE, SECTION 2(22) (E) IS NOT ATTRACTED. THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SPECIAL BENCH. THEREFORE, WE ALLOW THE APPEAL OF ASSESSEE AND DELETE THE DISALLOWANCE. ORDER PR ON OUNCED IN THE OPEN COURT ON 25 - 06 - 2015 SD/ - SD/ - ( G.D. AGRAWAL ) ( RAJPAL YADAV ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD : DATED 25 /06 /2015 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,