The ITO, Ward-2, V. M/s Trisuns Export Corporation,

ITA 197/RJT/2005

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50063 (ITAT-RAJKOT)
• Duration Of Justice: 6 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 13-06-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 14-02-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PREM PRAKASH
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.195/RJT/2005 - AY 1998-99 I.T.A. NO.196/RJT/2005 - AY 1999-00 I.T.A. NO.197/RJT/2005 - AY 2000-01 ITO, WD.2 VS M/S TRISUNS EXPORT CORPORATION GANDHIDHAM SHOP NO.24, VIVEKANAND MARKET PLOT NO.122/123, SECTOR-8 GANDHIDHAM PAN : AABHL5906P (APPELLANT) (RESPONDENT) ITA NO.1000/RJT/2009 (ASSESSMENT YEAR 1997-98) M/S TRISUNS EXPORT CORPORATION VS THE ITO, WD.2 GANDHIDHAM GANDHIDHAM (APPELLANT) (RESPONDENT) REVENUE BY : SHRI PREM PRAKASH ASSESSEE BY : SHRI VIMAL DESAI O R D E R PER N.R.S. GANESAN, JM APPEALS IN ITAS NO.195, 196 & 197/RJT/2005 ARE FIL ED BY THE REVENUE AND PERTAIN TO ASSESSMENT YEARS 1998-99, 1999-2000 AND 2000-01 AND APPEAL IN ITA NO.1000/RJT/2009 IS FILED BY THE REVENUE AND PERTAI NS TO ASSESSMENT YEAR 1997-98. SINCE COMMON ISSUE ARISES IN ALL THE APPEALS WE HEA RD THEM TOGETHER. THOUGH THE ASSESSEE WAS REPRESENTED BY SHRI VIMAL DESAI IN ITA S NO.195, 196 & 197/RJT/2005, NO ONE APPEARED FOR THE ASSESSEE IN ITA NO.1000/RJT/20 09. SINCE THE ISSUE INVOLVED IN THESE APPEALS IS COMMON WE DISPOSE OFF ALL THE APPE ALS BY THIS COMMON ORDER. 2. WE HEARD SHRI PREM PRAKASH, THE LD.DR AND SHRI V IMAL DESAI, THE LD.REPRESENTATIVE FOR THE ASSESSEE. FOR THE ASSESS MENT YEARS 1998-99, 1999-2000 & 2000-01 THE CIT(A) DELETED THE ADDITION MADE U/S 2( 22)(E) OF THE ACT ON THE GROUND THAT THE BENEFICIAL OWNERSHIP DID NOT EXCEED MORE THAN 1 0% OF THE SHAREHOLDING OF THE COMPANY. THE CIT(A) ALSO FOUND THAT THE ADVANCE WA S RECEIVED BY THE ASSESSEE IN THE COURSE OF NORMAL BUSINESS ACTIVITY. THE CONTENTION OF THE ASSESSEE BEFORE THIS TRIBUNAL ITA NOS.195, 196 & 197/RJT/2005 ITA NO.1000/RJT/2009 2 IS THAT THE ADVANCE WAS RECEIVED BY THE PARTNERSHIP FIRM AND NOT BY THE PARTNERS. THE PARTNERSHIP FIRM IS NOT A SHAREHOLDER IN THE COMPAN Y. THEREFORE, THE ADVANCE MADE TO THE COMPANY CANNOT BE TREATED AS DEEMED DIVIDEND U/ S 2(22)(E) OF THE ACT. THE LD.REPRESENTATIVE OF THE ASSESSEE PLACED HIS RELIAN CE ON THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN CIT VS HOTEL HILL TOP (2009) 313 ITR 116 (RAJ) AND ALSO THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF A CIT VS BHAUMIK COLOUR (P) LTD 118 ITD 1 (2009). THE FACT REMAINS THAT THE COMPANY AD VANCED MONEY TO THE PARTNERSHIP FIRM. THE CLAIM OF THE ASSESSEE IS THAT THE SAID A DVANCE WAS MADE IN THE COURSE OF REGULAR BUSINESS ACTIVITY. WE FIND THAT THE HONBL E APEX COURT IN THE CASE OF CIT VS MUKUNDRAY K SHAH (2007) 290 ITR 433 (SC) HAD AN OCC ASION TO CONSIDER AN IDENTICAL ISSUE. IN THIS CASE ALSO THE MONEY WAS ADVANCED BY THE COMPANY TO THE PARTNERSHIP FIRM. THE PARTNERSHIP FIRM, IN TURN, ADVANCED THE MONEY TO ITS PARTNERS, WHICH WAS FOUND TO BE INVESTED IN RBI BONDS. IN THOSE FACTUAL CIRC UMSTANCES THE HONBLE APEX COURT FOUND THAT THE PARTNERSHIP FIRM WAS USED AS A CONDU IT FOR THE BENEFIT OF THE ASSESSEE / PARTNERS. ACCORDINGLY, THE HONBLE APEX COURT REVE RSED THE JUDGMENT OF THE CALCUTTA HIGH COURT AND FOUND THAT THE PAYMENT MADE TO THE P ARTNERSHIP FIRM WAS FOR THE BENEFIT OF THE PARTNERS, WHO WERE SHAREHOLDERS IN THE COMPA NY. THIS JUDGMENT OF THE HONBLE APEX COURT WAS NOT CONSIDERED BY THE RAJASTHAN HIGH COURT IN HOTEL HILL TOP (SUPRA) AND THE MUMBAI SPECIAL BENCH OF THIS TRIBUNAL IN AC IT VS BHAUMIK COLOUR (P) LTD (SUPRA). THE MUMBAI SPECIAL BENCH OF THIS TRIBUNAL APPARENTLY FOLLOWED THE JUDGMENT OF THE RAJASTHAN HIGH COURT IN HOTEL HILL TOP (SUPRA). PROBABLY THE JUDGMENT OF THE APEX COURT IN THE CASE OF MUKUNDRAY K SHAH (SUPRA) MIGHT NOT HAVE BEEN BROUGHT TO THE NOTICE OF THE RAJASTHAN HIGH COURT AND THE MUMBAI S PECIAL BENCH OF THIS TRIBUNAL. THEREFORE, IN OUR OPINION, THE FACTS OF THE CASE HA VE TO BE EXAMINED IN THE LIGHT OF JUDGMENT OF THE APEX COURT IN THE CASE OF MUKUNDRAY K SHAH (SUPRA). BOTH THE AUTHORITIES BELOW AND THE ASSESSEE HAD NO OCCASION TO CONSIDER THIS LATEST JUDGMENT OF THE APEX COURT ON THE SUBJECT. THOUGH THE CIT(A) D ELETED THE ADDITION FOR THREE ASSESSMENT YEARS, VIZ. 1998-99, 1999-2000 & 2000-01 , ON IDENTICAL SET OF FACTS, FOR THE ASSESSMENT YEAR 1997-98 THE CIT(A) CONFIRMED THE OR DER OF THE ASSESSING OFFICER. SINCE THE LOWER AUTHORITIES HAVE TAKEN CONFLICTING VIEWS FOR DIFFERENT ASSESSMENT YEARS AND THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF M UKUNDRAY K SHAH (SUPRA) WAS NOT CONSIDERED, IN OUR OPINION, THE MATTER NEEDS TO BE RE-EXAMINED BY THE LOWER AUTHORITIES IN THE LIGHT OF JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF MUKUNDRAY K SHAH (SUPRA). WE MAKE IT CLEAR THAT THE ASSESSING OFFIC ER SHALL BRING ON RECORD AS TO HOW THE ITA NOS.195, 196 & 197/RJT/2005 ITA NO.1000/RJT/2009 3 ADVANCE / LOAN WAS GIVEN TO THE PARTNERSHIP FIRM AN D HOW THE SAME WAS UTILIZED BY THE FIRM AND WHETHER THE PARTNERS OF THE FIRM DERIVED A NY BENEFIT OUT OF THE LOAN ADVANCED BY THE COMPANY. AFTER BRINGING THESE FACTS ON RECORD, THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE JUDGMENT OF THE AP EX COURT IN MUKUNDRAY K SHAH (SUPRA). ACCORDINGLY WE SET ASIDE THE ORDER OF THE LOWER AUT HORITY AND REMAND THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING O FFICER SHALL DECIDE THE ISSUE AFRESH IN THE LIGHT OF ABOVE DIRECTIONS AFTER GIVING DUE OPPO RTUNITY OF HEARING TO THE ASSESSEE. 3. THERE ARE TWO MORE ISSUES IN THE APPEALS PERTAIN ING TO ASSESSMENT YEARS 1998- 99, 1999-2000 AND 2000-01, VIZ. DISALLOWANCE OF DEP RECIATION ON TRUCKS / TANKERS AND DISALLOWANCE OUT OF HEAD OFFICE EXPENSES. SINCE WE HAVE RESTORED THE MAIN ISSUE RELATING TO PROVISIONS OF SECTION 2(22)(E) OF THE A CT, WE DEEM IT FIT TO RESTORE THESE ISSUES ALSO TO HIS FILE. THE ASSESSING OFFICER IS DIRECTE D TO RECONSIDER THESE ISSUES AFTER HEARING THE ASSESSEE. 4. IN THE RESULT, THE APPEALS FILED BY THE REVENUE AS WELL AS THE APPEAL FILED BY THE ASSESSEE ARE TREATED AS ALLOWED, FOR STATISTICAL PU RPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 17-06-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 17 TH JUNE, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-II, RAJKOT 4. THE CIT-I, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT