Best Cheran Spintex India Ltd., Pallipalayam V. ACIT, Salem

ITA 202/CHNY/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4469 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 23-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G M DASS
• Assessee Lawyers: S SRIDHAR
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO. : 202/MDS/2017 / ASSESSMENT YEAR :2011-12 M/S. BEST CHERAN SPINTAX INDIA LIMITED, SF NO.198, ELANTHAKUTTAI VILLAGE, VEPPADAI, PALLIPALAYAM 638 006. PAN: AACCB8241P V. THE ACIT, CIRCLE-1, SALEM ( /APPELLANT) ( /RESPONDENT) /APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE /RESPONDENT BY : SHRI G.M. DASS, CIT /DATE OF HEARING : 24.05.2017 /DATE OF PRONOUNCEMENT : 31.05.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), SALEM DAT ED 06.12.2016 AND PERTAINS TO THE ASSESSMENT YEAR 2011 -12. THE ONLY ISSUE ARISES FOR CONSIDERATION IS ASSESSMENT O F DEEMED DIVIDEND U/S.2(22)(E) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2 I.T.A. NO. 202/MDS/2017 2. SHRI S. SRIDHAR, THE LD. COUNSEL FOR THE ASSESSE E SUBMITTED THAT ADMITTEDLY THE ASSESSEE COMPANY RECEIVED RS.10 .38 CRORES AS LOAN FROM M/S. CHERAN SPINNERS LTD. THE ASSESSE E COMPANY IS NOT A SHAREHOLDER IN M/S. CHERAN SPINNERS LTD. HOW EVER, THERE ARE SOME COMMON SHAREHOLDERS IN BOTH THE COMPANIES. REFERRING TO THE JUDGMENT OF THE MADRAS HIGH COURT IN CIT V. ENNORE CARGO CONTAINER TERMINAL P. LTD IN T.C (A) NOS. 105 & 106 OF 2017 DATED 27.03.2017, FOUND THAT THE ASSESSMENT HAS TO BE MAD E ONLY IN THE HANDS OF THE REGISTERED SHAREHOLDERS. IN THIS CASE , ACCORDING TO THE LD. COUNSEL, THE ASSESSEE IS ADMITTEDLY NOT A R EGISTERED SHAREHOLDER OF M/S. CHERAN SPINNERS LIMITED. THERE FORE THERE CANNOT BE ANY ASSESSMENT IN THE HANDS OF THE ASSESS EE. AT THE BEST, IT CAN BE ASSESSED ONLY IN THE HANDS OF THE S HAREHOLDERS OF THE ASSESSEE COMPANY IF AT ALL THERE WAS A FINDING THAT ON WHOSE BENEFIT THE MONEY WAS RECEIVED BY THE ASSESSEE COMP ANY. 3. ON THE CONTRARY SHRI G.M. DASS, THE LD. DEPARTME NTAL REPRESENTATIVE SUBMITTED THAT THE MONEY WAS ADVANCE D BY M/S. CHERAN SPINNERS LIMITED TO THE ASSESSEES COMP ANY. EVEN THOUGH, THE ASSESSEE COMPANY IS NOT A REGISTERED SH AREHOLDER OF M/S. CHERAN SPINNERS LIMITED, THE MONEY WAS ADVANCE D FOR THE BENEFIT OF THE SHAREHOLDERS OF THE ASSESSEE COMPANY . REFERRING TO 3 I.T.A. NO. 202/MDS/2017 THE JUDGMENT OF THE APEX COURT IN GOPAL AND SONS (H UF) V CIT, KOLKATTA, CIVIL APPEAL NO.12274 OF 2016, THE LD.DR SUBMITTED THAT ON IDENTICAL SITUATION, THE APEX COURT FOUND THAT T HE ASSESSMENT CAN BE MADE IN THE HANDS OF HUF. THIS JUDGMENT OF THE APEX COURT WAS DISTINGUISHED BY THE MADRAS HIGH COURT IN M/S. ENNORE CARGO CONTAINER TERMINAL P LTD. (SUPRA). ACCORDING TO THE LD.DR, THE JUDGMENT OF THE APEX COURT IN GOPAL AND SONS HU F (SUPRA) IS VERY MUCH APPLICABLE. HENCE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE AO. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE QUEST ION ARISES FOR CONSIDERATION IS WHEN THE ASSESSEE COMPANY IS NOT A REGISTERED SHAREHOLDER OF M/S. CHERAN SPINNERS LTD, WHETHER TH ERE CAN BE ANY ASSESSMENT UNDER DEEMED DIVIDEND U/S.2(22)(E) O F THE ACT IN RESPECT OF THE SUM RECEIVED BY THE ASSESSEE. THIS WAS EXAMINED BY THE MADRAS HIGH COURT IN M/S. ENNORE CARGO CONTA INER TERMINAL P LTD (SUPRA). THE MADRAS HIGH COURT FOUN D THAT BOTH REGISTERED AND BENEFICIAL SHAREHOLDERS ARE TWO INDI VIDUALS AND THE ASSESSEE COMPANY IS NEITHER A REGISTERED SHAREHOLDE R NOR BENEFICIAL SHAREHOLDER. THEREFORE IT WAS FOUND THA T THE JUDGMENT OF THE APEX COURT IN GOPAL AND SONS HUF (SUPRA) IS NO T APPLICABLE AT 4 I.T.A. NO. 202/MDS/2017 ALL. IN VIEW OF THE JUDGMENT OF THE MADRAS HIGH C OURT IN ENNORE CARGO CONTAINER TERMINAL P. LTD (SUPRA), THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE ASSESSMENT U/S.2(22)(E) OF THE ACT, HAS TO BE MADE ONLY IN THE HANDS OF THE REGISTERED SHAREHOLDER. THE ASSESSEE COMPANY ADMITTEDLY IS NOT A REGISTERED SHAREHOLDER. THERE CANNOT BE ANY ASSESSMENT IN THE HANDS OF THE ASSESSEE, AS RIGHTLY SUBMITTED BY THE LD. COUNSEL FOR THE ASSESS EE. AT THE BEST, IT CAN BE ASSESSED ONLY IN THE HANDS OF THE SO CALL ED COMMON SHAREHOLDERS OF THE ASSESSEE COMPANY. IN VIEW OF T HE ABOVE, WE ARE UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHOR ITIES. ACCORDINGLY THE ORDERS OF BOTH THE AUTHORITIES BELO W ARE SET ASIDE AND THE ADDITION MADE BY THE AO IS DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED ON 31 ST MAY, 2017 AT CHENNAI. SD/- SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER /CHENNAI, /DATED, THE 31 ST MAY, 2017. JR. /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( )/CIT(A) 4. /CIT 5. !'# /DR 6. $% /GF