ACIT, CHENNAI V. M/s. Sphera Minerals Pvt. Ltd., CHENNAI

ITA 2000/CHNY/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9874 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 13-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JOE SEBASTIAN
• Assessee Lawyers: B S PURUSHOTHAM
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2000/MDS/2013 ( )( / ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), CHENNAI - 600 034. V. M/S SPHERA MINERALS PVT. LTD., 1, SUBBARAYA AVENUE, C.P. RAMASAMY ROAD, ALWARPET, CHENNAI - 600 018. PAN : AACCP 0379 A (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. JOE SEBASTIAN, CIT -.+, / 0 / RESPONDENT BY : SH. B.S. PURUSHOTHAM, CA 1 / 2% / DATE OF HEARING : 26.05.2015 3') / 2% / DATE OF PRONOUNCEMENT : 26.06.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST TH E ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI, D ATED 30.08.2013 AND PERTAINS TO ASSESSMENT YEAR 2006-07. 2. SH. JOE SEBASTIAN, THE LD. DEPARTMENTAL REPRESEN TATIVE, SUBMITTED THAT THE ONLY ISSUE ARISES FOR CONSIDERAT ION IS WITH REGARD TO ADDITION MADE BY THE ASSESSING OFFICER UNDER SEC TION 2(22)(E) OF 2 I.T.A. NO.2000/MDS/13 THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AS DE EMED DIVIDEND. THE LD. D.R. POINTED OUT THAT THE ASSESSEE-COMPANY HAS RECEIVED ` 6,42,25,343/- FROM ITS SISTER CONCERN M/S TRIMEX IN DUSTRIES PRIVATE LIMITED. ACCORDING TO THE LD. D.R., BOTH, THE ASSE SSEE-COMPANY AS WELL AS ITS SISTER CONCERN M/S TRIMEX INDUSTRIES PR IVATE LIMITED, HAVE COMMON SHAREHOLDERS AND DIRECTORS. THEREFORE, ACCORDING TO THE LD. D.R., THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS SQUARELY APPLICABLE. REFERRING TO THE ASSESSMENT ORDER, THE LD. D.R. POINTED OUT THAT THE ASSESSEE-COMPANY ENTERED INTO AGREEMEN T WITH THIRD PARTIES AND THE SISTER CONCERN HAS ALSO ENTERED INT O AGREEMENT WITH THIRD PARTIES FOR PURCHASING IRON ORE. ACCORDING T O THE LD. D.R., THE ASSESSEE-COMPANY UNDER THE PRETEXT OF RECEIVING ADV ANCE MONEY FROM SISTER CONCERN FOR PURCHASING OF IRON ORE, REC EIVED THE ADVANCE IN VIOLATION OF SECTION 2(22)(E) OF THE ACT. ACCOR DING TO THE LD. D.R., EVEN THOUGH THE ASSESSEE CLAIMS THAT THE TRANSACTIO N BETWEEN THE ASSESSEE AND ITS SISTER CONCERN WAS COMMERCIAL IN N ATURE, NO SUCH COMMERCIAL REQUIREMENT WAS ESTABLISHED. THEREFORE, THE RECEIPT OF ADVANCE OF ` 6,42,25,343/- HAS TO BE CONSIDERED AS DEEMED DIVIDEND. HENCE, THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. 3. ON THE CONTRARY, SHRI B.S. PURUSHOTHAM, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE- 3 I.T.A. NO.2000/MDS/13 COMPANY IS NOT A SHAREHOLDER IN M/S TRIMEX INDUSTRI ES PRIVATE LIMITED. THEREFORE, ACCORDING TO THE LD. REPRESENT ATIVE, THERE IS NO QUESTION OF APPLYING THE PROVISIONS OF SECTION 2(22 )(E) OF THE ACT IN THE HANDS OF THE ASSESSEE. EVEN OTHERWISE, ACCORDI NG TO THE LD. REPRESENTATIVE, THE ADVANCE WAS PAID BY THE SISTER CONCERN FOR PURCHASING IRON ORE. THEREFORE, THERE WAS COMMERCI AL TRANSACTION BETWEEN THE ASSESSEE AND M/S TRIMEX INDUSTRIES PRIV ATE LIMITED. SINCE THE MONEY WAS ADVANCED IN COMMERCIAL TRANSACT ION, ACCORDING TO THE LD. REPRESENTATIVE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WILL NOT BE APPLICABLE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE-COMPANY IS NOT A SHAREHOLDER IN M/S TRIMEX INDUSTRIES PRIVATE LIMITED. SECTION 2(22)(E) OF THE ACT CLEAR LY SAYS THAT ANY PAYMENT MADE BY A COMPANY BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER OR TO THE BENEFIT OF THE SHAREHOLDER, I T HAS TO BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE AC T. DIVIDEND HAS TO BE ASSESSED ONLY IN THE HANDS OF THE SHAREHO LDERS. IF THE PAYMENT WAS MADE ON BEHALF OF THE SHAREHOLDER OR BE NEFIT OF THE SHAREHOLDER, THE ASSESSMENT HAS TO BE MADE ONLY IN THE HANDS OF THE SHAREHOLDER ON WHOSE BENEFIT THE ADVANCE WAS MA DE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. IN THIS CASE, 4 I.T.A. NO.2000/MDS/13 EVEN THOUGH THERE ARE COMMON SHAREHOLDERS/DIRECTORS IN ASSESSEE- COMPANY AS WELL AS ITS SISTER CONCERN M/S TRIMEX IN DUSTRIES PRIVATE LIMITED, ADMITTEDLY, THE ASSESSEE-COMPANY IS NOT A SHAREHOLDER, THEREFORE, ADDITION IF ANY HAS TO BE MADE ONLY IN T HE HANDS OF COMMON SHAREHOLDERS/DIRECTORS ON WHOSE BENEFIT THE ADVANCE WAS MADE. SINCE THE ASSESSEE-COMPANY IS NOT A SHAREHOL DER IN M/S TRIMEX INDUSTRIES PRIVATE LIMITED, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS NOT APPLICABLE. THEREFORE, WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 26 TH JUNE, 2015 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 26 TH JUNE, 2015. KRI. / -267 87)2 /COPY TO: +, /APPELLANT / -.+, /RESPONDENT / 1 92 () / CIT(A)-VI, CHENNAI-34 / 1 92 /CIT-VI, CHENNAI-34 / 7: -2 /DR / ( ; /GF.