The ACIT,(OSD)Range-1, Amritsar V. Dishman Pharmaceuticals & Chemicals Ltd., Ahmedabad

ITA 2105/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0489 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-10-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 21-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Deemed dividend
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 2105/AHD/2012& 2125/AHD/2012 (ASSESSMENT YEAR: 2003-04 & 2004-05) DCIT, (OSD), RANGE-1, AHMEDABAD V/S DISHMAN PHARMACEUTICALS & CHEMICALS LTD.2, BHADR- RAJ CHAMBERS, NR. SWASTIK CROSS ROAD, NAVRANGPURA, AHMEDABAD-380009 (APPELLANT) (RESPONDENT) PAN: AAACD4164D APPELLANT BY : SHRI PRASOON KABRA, SR. D. R. RESPONDENT BY : SHRI TUSHAR HEMANI, A.R. ( )/ ORDER DATE OF HEARING : 04-10-201 6 DATE OF PRONOUNCEMENT : 06 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 2105/AHD/2012 & 2125/AHD/2012 ARE TWO APPE ALS BY THE REVENUE PREFERRED AGAINST TWO SEPARATE ORDERS OF LD . CIT(A)-6, AHMEDABAD ITA NOS. 210 5 & 2125/AHD/2012 . A.YS. 2003-0 4 & 2004-05 2 DATED 10.07.2012 & 09.07.2012 PERTAINING TO A.YS. 2 003-04 & 2004-05 RESPECTIVELY. 2. SINCE BOTH THESE APPEALS INVOLVED COMMON GRIEVANCE WITH DIFFERENT QUANTUM, THEY WERE HEARD TOGETHER AND ARE BEING DIS POSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE COMMON GRIEVANCE OF THE REVENUE IN BOTH THESE A PPEALS RELATES TO THE DELETION OF THE ADDITION MADE U/S. 2(22)(E) OF THE ACT DESPITE THE FACT THAT THE ASSESSEE COMPANY HAD 22.3% SHARE CAPITAL OF SDB PL AND HAD ALSO AVAILED LOAN ALONG WITH SEVERAL FINANCIAL TRANSACTI ON WITH THE SAID COMPANY DURING THE YEAR. 4. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E A.O. NOTICED THAT THE ASSESSEE IS HOLDING SUBSTANTIAL INTEREST IN SCHUTZ DISHMAN BIOTECH LTD. (SDBPL). THE A.O. FURTHER FOUND THAT THE ASSESSEE C OMPANY HOLDS 22.3% SHARE IN SDBPL. WHILE SCRUTINIZING THE STATEMENT OF ACCOUNTS, THE A.O. FOUND THAT THE ASSESSEE HAS TAKEN LOAN FROM SDBPL A ND THE SAID COMPANY HAS ALSO ACCUMULATED PROFIT. 5. THE A.O. WAS OF THE FIRM BELIEF THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT SQUARELY APPLY ON THE FACTS OF THE CASE AND ACC ORDINGLY MADE THE ADDITION OF RS. 4,59,63,532/- IN A.Y. 2003-04 AND R S. 2,17,05,000/- IN A.Y. 2004-05. ITA NOS. 210 5 & 2125/AHD/2012 . A.YS. 2003-0 4 & 2004-05 3 6. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND CLAIMED THAT THE TRANSACTION WITH SDBPL IS BUSINESS TRANSACTION DONE IN THE ORDINARY COURSE OF BUSINESS. IT WAS BROUGHT TO THE NOTICE OF THE FI RST APPELLATE AUTHORITY THAT THE ENTIRE ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE LD. CIT(A) IN ASSESS MENT YEAR 2006-07. 7. THE LD. CIT(A) WAS CONVINCED AFTER VERIFICATION THA T THE ISSUE IS COVERED BY THE DECISION OF THE FIRST APPELLATE AUTHORITY. THE RELEVANT FINDINGS OF THE LD. CIT(A) FOR A.Y. 2003-04 READS AS UNDER:- 'IT IS NOT IN DISPUTE THAT APPELLANT HAD LOT OF BUS INESS TRANSACTIONS WITH M/S SCHUTZ DISHMAN BIOTECH LTD. THERE WERE TRANSACTIONS OF PUR CHASE OF RAW MATERIAL AS WELL AS TEMPORARY ACCOMMODATION DEPOSITS. ASSESSING OFFICER OF M/S SCHUTZ DISHMAN BIOTECH LTD INITIATED ACTION UNDER SECTION 201 (1) BY TREATING THE TRANSACTION WITH APPELLANT COMPANY AS DEEMED DIVIDE ND AND THE SAID COMPANY WAS TREATED AS ASSESSEE IN DEFAULT FOR NOT DEDUCTIN G TDS IN ASSESSMENT YEAR 2004- 05 AND 2005-06. IN BOTH THE YEARS, CIT(A)-XXI, AHME DABAD BY ORDER DATED 28- 09-2010 HELD THAT TRANSACTIONS ENTERED INTO BY THE APPELLANT WHICH ITS ASSOCIATE CONCERN WOULD NOT ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. AND ACCORDINGLY THERE WOULD NOT BE ANY OBLIGATION TO DE DUCT TAX UNDER SECTION 194 AND THEREFORE THE ASSESSEE CANNOT BE TREATED AS THE ASSESSEE IN DEFAULT WITHIN THE MEANING OF SECTION 201(1) OF IT ACT. THE RELEVANT E XTRACT OF THE SAID APPEAL ORDER IN PARA-SIX IS QUOTED BELOW- 'THERE IS LARGE NUMBER OF DEBIT AND CREDIT TRANSACT IONS. MEANING THEREBY, THE APPELLANT HAS GIVEN AND RECEIVED FUNDS AS AND WHEN REQUIRED TO AND FROM ITS ASSOCIATE CONCERN. IT IS NOT ON ACCOUNT WHEREBY LOA NS AND ADVANCES HAVE BEEN GIVEN TO THE ASSOCIATE CONCERN. IT IS ON ACCOUNT PA YMENTS IN THE NATURE OF CURRENT ADJUSTMENT ACCOMMODATION ACCOUNT WHEREIN THERE IS A MOVEMENT OF FUNDS BOTH WAYS, ON THE BASIS. UNLIKE TRANSACTIONS OF LOAN AND ADVANCES, THE MOVEMENT FUNDS IS BOTH WAYS AND THE SAME IS MORE IN THE NATURE OF CURRENT ACCOUNT RATHER THAN A ITA NOS. 210 5 & 2125/AHD/2012 . A.YS. 2003-0 4 & 2004-05 4 LOAN ACCOUNT. TRANSACTIONS IN THE NATURE OF LOANS A ND ADVANCES ARE USUALLY VERY FEW AND FOR A LONGER DURATION. IN THE FACTS OF THE PRESENT CASE, THE NATURE OF THE TRANSACTION AS IN THE FORM OF CURRENT ACCOMMODATION , ADJUSTMENT ACCOUNT AND THEREFORE THE SAME IS NOT A TRANSACTION IN THE NATU RE OF LOANS AND ADVANCES. IN ABSENCE OF ANY LOANS AND ADVANCES, THE PROVISIONS O F SECTION 2 (22) (E) OF THE ACT IN RESPECT OF DEEMED DIVIDEND ARE NOT ATTRACTED AND THEREFORE THE QUESTION OF DEDUCTION OF TAX AT SOURCE ALSO WOULD NOT ARISE.' SINCE THESE TRANSACTIONS BETWEEN APPELLANT AND ITS ASSOCIATE CONCERN M/S SCHUTZ DISHMAN BIOTECH LTD WAS THERE SINCE ASSESSME NT YEAR 2004-05 ONWARDS AND DURING THE YEAR THE DEBIT BALANCE IN THE APPELL ANT'S ACCOUNT WAS SUBSTANTIALLY REDUCED. SINCE CIT (A) DID NOT FIND THE TRANSACTION S BETWEEN APPELLANT AND ITS ASSOCIATE CONCERN AS LOANS AND ADVANCES GIVEN, LOGI CALLY THE SAME CANNOT BE LOANS AND ADVANCES RECEIVED BY THE APPELLANT. IT IS NOT IN DISPUTE THAT IN THE BOOKS OF THE A SSOCIATE CONCERN, THERE ARE FIVE ACCOUNTS RELATING TO VARIOUS TRANSACTIONS IN THE NA ME OF APPELLANT AND SIX ACCOUNTS IN THE NAME OF ASSOCIATE CONCERN IN THE BO OKS OF APPELLANT. IN THESE MANY ACCOUNTS WHERE A LARGE NUMBER OF DEBIT AND CRE DIT ENTRIES INVOLVING DIFFERENT BUSINESS TRANSACTIONS. APART FROM THIS, T HERE ARE CERTAIN FINANCIAL TRANSACTIONS ALSO IN THESE ACCOUNTS. THE MOVEMENT O F FUNDS WAS NOT FOR ANY PERIOD BUT WAS FREQUENT AND IN BOTH WAYS. RESPECTFU LLY FOLLOWING THE DECISION OF ID CIJ (APPEAL) IN THE CASE OF ASSOCIATE CONCERN HO LDING THAT TRANSACTIONS ARE NOT IN THE NATURE OF LOAN AND ALSO DECISIONS OF JURISDI CTIONAL ITAJ RELIED UPON BY THE APPELLANT, THE ADDITION ON ACCOUNT OF DEEMED DIVIDE ND CANNOT SURVIVE IN THIS YEAR.' FACTS RELATING TO THE FINANCIAL TRANSACTIONS WITH S DBPL ARE IDENTICAL TO THE AFORESAID ASSESSMENT YEAR IN WHICH THE ISSUE IS DECIDED IN FA VOUR OF THE APPELLANT. IN VIEW OF THIS, BY FOLLOWING THE APPEAL ORDER IN ASSESSMENT Y EAR 2006-07, ADDITION ON ACCOUNT OF DEEMED DIVIDEND IN RESPECT OF FINANCIAL TRANSACTION S WITH SDBPL MADE BY THE ASSESSING OFFICER IS NOT CONFIRMED. ITA NOS. 210 5 & 2125/AHD/2012 . A.YS. 2003-0 4 & 2004-05 5 8. A PERUSAL OF THE AFOREMENTIONED FINDINGS OF THE LD. CIT(A) SHOWS THAT HE HAS FOLLOWED THE FINDINGS GIVEN IN A.Y. 2006-07 WHEREIN THE FIRST APPELLATE AUTHORITY HAS FOLLOWED THE DECISION TAKEN IN THE CA SE OF SDBPL. WE FIND THAT THE APPEAL OF SDBPL TRAVELLED UP TO THE HONBL E JURISDICTIONAL HIGH COURT OF GUJARAT WHEREIN THE HONBLE HIGH COURT WAS SEIZED WITH THE FOLLOWING QUESTION OF LAW FOR CONSIDERATION;- 'WHETHER ON FACTS AND IN LAW THE ITAT WAS RIGHT IN CANCELLING THE ORDER PASSED U/S 201(1) AND 201(A) OF THE ACT, WITH OUT APPRECIATING THAT THE AMOUNT ADVANCED WAS IN THE NATURE OF DEEMED DIVIDEN D U/S 2(22)(E) OF THE ACT?' 9. AND THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT READS AS UNDER:- 4. IT CAN THUS BE SEEN THAT THE COMMISSIONER AS A MATTER OF FACT FOUND THAT THE PAYMENTS WERE NOT IN THE NATURE OF CURRENT ADJUSTME NT. THERE WAS MOVEMENT OF FUND BOTH WAYS ON NEED BASIS. THE TRANSACTIONS IN THE NA TURE OF LOANS AND ADVANCES ARE USUALLY VERY FEW IN NUMBER WHEREAS IN THE PRESENT C ASE, SUCH TRANSACTIONS ARE IN THE FORM OF CURRENT ACCOMMODATION ADJUSTMENT ENTRIES. T HE COMMISSIONER THEREFORE, HELD THAT THE TRANSACTIONS WERE NOT IN THE NATURE O F LOANS AND ADVANCES. THE REVENUE CARRIED THE MATTER IN APPEAL. THE TRIBUNAL CONCURRE D WITH THE VIEW OF THE CIT (APPEALS) AND HELD THAT THE AMOUNTS WERE NOT IN THE NATURE OF INTER CORPORATE DEPOSITS AND WERE THEREFORE, NOT TO BE TREATED AS L OANS OR ADVANCES AS CONTEMPLATED IN SECTION 2(22)(E) OF THE ACT. 5. THE ISSUE IS SUBSTANTIALLY ONE OF APPRECIATION O F FACTS. WHEN THE CIT(APPEALS) AS WELL AS TRIBUNAL CONCURRENTLY HELD THAT LOOKING TO LARGE NUMBER OF ADJUSTMENT ENTRIES IN THE ACCOUNTS BETWEEN TWO ENTITIES, THE AMOUNTS W ERE NOT IN THE NATURE OF LOAN OR DEPOSIT, BUT MERELY ADJUSTMENTS, APPLICATION OF SEC TION 2(22)(E) OF THE ACT WOULD NOT ARISE. CONSEQUENTLY, NO QUESTION OF LAW ARISES. TAX APPEALS ARE DISMISSED. ITA NOS. 210 5 & 2125/AHD/2012 . A.YS. 2003-0 4 & 2004-05 6 10. CONSIDERING THE FINDINGS OF THE FIRST APPELLATE A UTHORITY IN THE LIGHT OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT O F GUJARAT (SUPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). BOTH THESE APPEALS OF THE REVENUE ARE ACCORDINGLY DISMIS SED. ORDER PRONOUNCED IN OPEN COURT ON 06 - 10- 2016. SD- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD