Sri.Baby Mathew, Trivandrum V. ACIT, Trivandrum

ITA 204/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69011 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 19-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K I JOHN SMT S LATHA V KUMAR
• Keywords: Opportunity of being heard; Deemed dividend

Judgement Text

ITA NO. 204 / COCH/ 201 3 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO.204/COCH/2013 (ASST YEAR 200 8 - 09 ) SHRI BABY MATHEW SOMATHEHEERAM CHOWARA PO BALARAMAPURAM TRIVANDRYUM VS THE ASST COMMR OF INCOME TAX C IRCLE 1(1), TRIVANDRUM ( APPELLANT) (RESPONDENT) PAN NO. ADOPM4999D ASSESSEE BY SHRI K I JOHN REVENUE BY SMT S LATHA V KUMAR , JR DR DATE OF HEARING 3 RD OCT 2013 DATE OF PRONOUNCEMENT 25 TH , OCT 2013 OR D ER PER N.R.S GANESAN,JM: THIS APP EAL OF TH E ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A),TRIVANDRUM DATED 22.2.2013 AND IT PERTAINS TO ASSESSMENT YEAR 2008 - 09. THE ONLY ISSUE ARISES FOR OUR CONSIDERATION IS THE ASSESSMENT OF DEEMED DIVIDEND INCOME U/S 2(22)(E) OF THE ACT OF RS. 2,22,65,558/ - . 2 SHRI K I JOHN, THE LD REPRESENTATIVE FOR ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ASSESSMENT ORDER ABOUT THE DEEMED DIVIDEND. ACCORDING TO THE LD REPRESENTATIVE, THE ASSESSING OFFICER FAILED TO PASS A SPEAKING ORDER. THE LD REPRESENTATIVE FURTHER SUBMITTED THAT THE ADVANCES WERE MADE BY THE RESPECTIVE COMPANIES IN THE EARLIER ASSESSMENT YEARS . THE LD REPRESENTATIVE FURTHER SUBMITTED THAT THE CURRENT YEAR PROFIT CANNOT FORM PA RT OF THE ACCUMULATED PROFIT; THEREFORE, THE CURRENT YEAR PROFIT HAS TO BE ITA NO. 204 / COCH/ 201 3 2 EXCLUDED. ACCORDING TO THE LD REPRESENTATIVE, THE ASSESSING OFFICER HAS TAKEN THE NET DRAWINGS FOR THE PURPOSE OF ASSESSING THE DEEMED DIVIDEND. THE LD REPRESENTATIVE FURTHER SUBMI TTED THAT THE ADVANCES ARE MADE IN THE COURSE OF REGULAR COURSE OF BUSINESS ACTIVITY OF THE ASSESSEE; THEREFORE, THERE CANNOT BE ANY DEEMED DIVIDEND. THE LD REPRESENTATIVE HAS FILED THE COMPUTATION OF ACCUMULATED PROFIT FOR THE RESPECTIVE ASSESSMENT YEAR S . THE LD REPRESENTATIVE SUBMITTED THAT THESE COMPUTATION WERE FILED FIRST TIME BEFORE THE TRIBUNAL; THEREFORE, THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION OF THE COMPUTATION MADE BY THE ASSESSEE A N D PASS A SPEAKING OR DER. 2.1 WE HAVE HEARD SMT LATHA V KUMAR, THE LD DR. THE LD DR HAS SUBMITTED THAT SINCE THE ASSESSEE FILED THE COMPUTATION OF ACCUMULATED PROFIT FOR THE FIRST TIME BEFORE THE TRIBUNAL, THE ASSESSING OFFICER MAY BE ASKED TO VERIFY THE SAME AND PASS A SPEA KING ORDER. 3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. SECTION (22)(E) READS AS FOLLOWS: SEC.2(22)( E ) ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERE STED, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED T O A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (H EREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS ; BUT 'DIVIDEND' DOES NOT INCLUDE ( I ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CLAUSE ( C ) OR SUB - CLAUSE ( D ) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONSIDERATION, WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN THE EVENT OF LIQUIDATION TO PARTICIPATE IN THE SUR PLUS ASSETS ; ITA NO. 204 / COCH/ 201 3 3 [( IA ) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB - CLAUSE ( C ) OR SUB - CLAUSE ( D ) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIBUTABLE TO THE CAPITALISED PROFITS OF THE COMPANY REPRESENTING BONUS SHARES ALLOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH, 1964, [AND BEFORE THE 1ST DAY OF APRIL, 1965] ;] ( II ) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER 3 [OR THE SAID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS, WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF THE COMPANY ; ( III ) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB - CLAUSE ( E ), TO THE EXTENT TO WHICH IT IS SO SET OFF; [( IV ) ANY PAYMENT MADE BY A COMPANY ON P URCHASE OF ITS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISIONS OF SECTION 77A OF THE COMPANIES ACT, 1956 (1 OF 1956); ( V ) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERGER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERGED COMPAN Y (WHETHER OR NOT THERE IS A REDUCTION OF CAPITAL IN THE DEMERGED COMPANY).] EXPLANATION 1. THE EXPRESSION 'ACCUMULATED PROFITS', WHEREVER IT OCCURS IN THIS CLAUSE, SHALL NOT INCLUDE CAPITAL GAINS ARISING BEFORE THE 1ST DAY OF APRIL, 1946, OR AFTER THE 31S T DAY OF MARCH, 1948, AND BEFORE THE 1ST DAY OF APRIL, 1956. EXPLANATION 2. THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB - CLAUSES ( A), (B), (D ) AND ( E ), SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE S UB - CLAUSES, AND IN SUB - CLAUSE ( C ) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF LIQUIDATION, [BUT SHALL NOT, WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNED OR CONTR OLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE, INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. [ EXPLANATION 3 . FOR THE PURPOSES O F THIS CLAUSE, ( A ) 'CONCERN' MEANS A HINDU UNDIVIDED FAMILY, OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY ; ( B ) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INTEREST IN A CONCERN, OTHER THAN A COMPANY, IF HE IS, AT AN Y TIME DURING THE PREVIOUS YEAR, BENEFICIALLY ENTITLED TO NOT LESS THAN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN ;] ITA NO. 204 / COCH/ 201 3 4 3.1 FROM THE ABOVE PROVISION OF INCOME TAX ACT, TO THE EXTENT OF ACCUMULATED PROFIT, THE LOAN OR ADVANCE TO THE SHARE HOLDER OR FOR THE BENEFIT OF THE SHAREHOLDER HAS TO BE TREATED AS DEEMED DIVIDEND. 3.2 THE ASSESSING OFFICER , WITHOUT COMPUTING THE ACCUMULATED PROFIT HAS TREATED THE AMOUNT OF ADVANCE BY THE RESPECTIVE COMPANIES AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT IN VIEW OF THE SPECIFIC PROVISIONS , ONLY TO THE EXTENT OF ACCUMULATED PROFIT HAS TO BE TREATED AS DEEMED DIVIDEND. THE ASSESSEE HAS ALSO CLAIMS THAT THE ADVANCES ARE MADE IN THE EARLIER ASSESSMENT YEARS FOR BUSINES S PURPOSES. THIS FACT WAS NOT CONSIDERED BY THE ASSESSING OFFICER . THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER NEEDS TO RECONSIDER THE ISSUE AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AND THE AVAILABLE ACCUMULATE D PROFIT. 3.3 ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE WITH REGARD TO DEEMED DIVIDEND IS REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER . THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF THE MATER IAL ON RECORD AND THE AVAILABLE ACCUMULATED PROFITS AND THEREAFTER DECIDE THE SAME BY A SPEAKING ORDER IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IT IS ALSO MADE IT CLEAR THAT THE ASSESSING OFFICER SHALL EX AMINE THE COMPUTATION OF ACCUMULATED PROFIT FILED BY THE ASSESSEE AND IF ANY ERROR OR MISTAKE IS FOUND, THE ASSESSING OFFICER SHALL RE - COMPUTE THE ACCUMULATED PROFIT ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. IT IS ALSO MADE CLEAR THAT THIS TRIBUNAL IS NOT EXPRESSING ANY OPINION ON MERIT; AND THE ASSESSING OFFICER SHALL DECIDE THE MATTER ON MERIT IN ACCORDANCE WITH LAW AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. ITA NO. 204 / COCH/ 201 3 5 4 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 25 TH , OCT 2013. SD/ - SD/ - (B.R. BASKARAN) ( N.R.S GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN: DATED 25 TH , OCT 2013 RAJ* COPY TO: 1. APPELLANT SRI BABY MATHEW, SOMATHEERAM,CHOWARA P O,BALARAMAPURAM, TRIVANDRUM 2. RESPONDENT - THE ASST COMMR OF INCOME TAX, CIRCLE (1)(1), TRIVANDRUM 3. CIT(A) 4. CIT, TRIVANDRUM 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN