The DCIT, Circle-1, Ahmedabad V. Biotech Opthalmics Pvt.Ltd., Ahmedabad

ITA 2141/AHD/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94725 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 30-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER. ITA. NO.2141/AHD/2012 (ASSESSMENT YEARS:2007-08) DCIT, CIRCLE-1, AHMEDABAD APPELLANT VS. M/S. BIOTECH OPTHALMICS PVT. LTD. 401, SARTHIK-II, OPP. RAJPATH CLUB, S.G. HIGHWAY, AHMEDABAD RESPONDENT PAN: AACCB0328F /BY APPELLANT : MS. SANYOGITA NAGPAL, SR. D.R. /BY RESPONDENT : SHRI VIJAY RANJAN, A.R. /DATE OF HEARING : 30.11.2015 /DATE OF PRONOUNCEMENT : 02.12.2015 ORDER PER RAJESH KUMAR, A.M: THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-6, AHMEDABAD, DATED 03.07.2012 FOR A.Y. 2007-08 ON FOL LOWING GROUNDS: 2 ITA NO.2141/ AHD/ 2012 (DCIT VS. BIOTECH OPTHALMIC S P. LTD.) 1. THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITI ON OF RS.40,26,933/- BEING DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT DESPITE THE FACT THAT THE ASSESSEE HAD AVAILED ALONE FROM BIO-TECH VISION CARE PVT. LTD. IN WHICH ONE OF ITS SHAREHOLDER HAD 94.92% SHARE HOLDING. THE SAME SHARE HOLDER SIMULTANEOUSLY HELD 40% SHARES IN THE ASSESSEE COMPANY. 2. THE SAID SHAREHOLDER SHRI MEHUL ASHWIN, THEREFORE, HAD SUBSTANTIAL INTEREST IN BOTH THE CONCERNS AS ENVISAGED U/S 2(22)(E) OF THE ACT. 2. THE FIRST GROUND IS AGAINST THE ADDITION OF RS.4 0,26,933/- BEING DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF OPHTHALMIC SOLUTIONS AND THE ASSESSEE FILED HIS RET URN OF INCOME ON 31.10.2007 DECLARING TOTAL INCOME OF RS.14,47,760/- . THE ASSESSEE COMPANY HAS TAKEN A LOAN OF RS.40,26,933/- FROM BIO-TECH VI SION CARE PVT. LTD. DURING THE YEAR. SHRI MEHUL P. S. ASNANI WAS HOLDI NG SUBSTANTIAL SHARES IN THE ASSESSEE COMPANY 40% AS WELL AS IN BIO-TECH VIS ION CARE PVT. LTD. 94.92%. 2.1 THE LD. A.O. TREATED THE LOAN TAKEN FROM M/S.BI O-TECH VISION CARE PVT. LTD. OF RS.40,26,933/- AS DEEMED DIVIDEND U/S.2(22 )(E) OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY ON THE GROUND THAT SH RI MEHUL P. S. ASNANI WAS HAVING SUBSTANTIAL INTEREST IN THE ASSESSEE COM PANY AND ALSO IN BIO-TECH VISION CARE PVT. LTD. AND THE LATTER COMPANY WAS HA VING AN ACCUMULATE PROFIT OF RS.15,01,16,388/- AND THEREFORE, THE SAID LOAN W AS COVERED BY THE DEFINITION OF DEEMED DIVIDEND U/S.2(22)(E) OF THE A CT IN THE HANDS OF THE PAYEE CONCERN. THE LD. A.O. FURTHER OBSERVED THAT THE DEEMED DIVIDEND IS NOT EXEMPT U/S.10(34) OF THE ACT BECAUSE THE LENDER COM PANY HAS NOT PAID DIVIDEND DISTRIBUTION TAX U/S.115-O OF THE ACT AND THE PURPOSE TO INSERT THE SECTION 2(22)(E) IS THAT NO COMPANY AVOID THE DIVID END DISTRIBUTION TAX U/S.115-O OF THE ACT BY GIVING ADVANCE TO THE SISTE R CONCERN COMPANY IN 3 ITA NO.2141/ AHD/ 2012 (DCIT VS. BIOTECH OPTHALMIC S P. LTD.) WHICH THE SHAREHOLDER IS HAVING SUBSTANTIAL INTERES T OR SHAREHOLDER OF THE COMPANY. 3. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE CASE OF THE ASSESSEE IS COVERED BY ITS OWN CASE FOR A.Y. 2006-07 IN ITA NO. 443/AHD/2011 IN WHICH AN IDENTICAL ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND THEREFORE THE LD.CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.40,26,933/- ON THE GROUND THAT ISSUE OF THE ASSESSEE WAS SQUAR ELY COVERED BY THE ORDER OF CIT(A) DATED 27.12.2010 IN THE APPELLANTS OWN CASE IN PREVIOUS YEAR I.E. A.Y.2006-07. ON THE OTHER HAND, LD. D.R. RELIED UP ON THE ORDER OF A.O. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDE D IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL IN ITA NO.443/AHD/2011 FOR A.Y. 200 6-07 VIDE PARA NOS. 6 TO 8, WHICH IS REPRODUCED AS UNDER: 6. WE FIND THAT THERE IS NO CONTROVERSY OR DISPUTE ABOUT THE FUNDAMENTAL LE GAL POSITION THAT UNLESS THE ASSESSE IS A SHAREHOLDER IN THE COMPANY FROM WHICH THE AMOUNTS ARE RECEIVED, SUCH AMOUNTS CANNOT BE TAXED IN HIS HANDS AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. IN THE CASE OF CIT VS DAISY PACKERS PVT LTD (JUDGMENT DATED 18 TH JULY 2012 IN TAX APPEAL NO. 212 OF 2010), HON'BLE JURISDICTIONAL HIGH COURT HAS, INTER ALIA, NOTED THAT IT IS NOT NECESSARY TO GO INTO OTHER LEGAL ISSUES ONCE IT IS AN UNDISPUTED POSITION THAT THE ASSESSE WAS NOT SHAREHOLDER IN AMIGO BRUSHES PVT LTD, AND THAT 'IF THE ASSESSE COMPANY DOES NOT HOLD A SHARE IN OTHER COMPANY FROM WHICH IT HAD RECEIVED DEPOS IT, IT CANNOT BE TREATED TO BE A DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. THE SAME WAS THE POSITION IN THE CASE OF ACIT VS BHAUMIK COLOURS PVT LTD [(2009) 118 ITD 1 SB (MUM)] WHEREIN A SPECIAL BENCH OF THIS TRIBUNAL CONCLUDED THAT, 'DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHAREHOLDER' AND THAT 'THE EXPRESSION 'SHAREHOLDER' REFERRED TO IN S. 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER . IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISI ONS OF S. 2(22)(E) WILL NOT APPLY. SIMILARLY, IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIONS OF S. 2(22)(E ) WILL NOT APPLY'. 4 ITA NO.2141/ AHD/ 2012 (DCIT VS. BIOTECH OPTHALMIC S P. LTD.) 7. IT IS THUS CLEAR THAT BEING A REGISTERED SHAREHOLDER IS A CONDITION PRE CEDENT FOR INVOKING SECTION 2(22][E) OF THE ACT, AND THAT CONDITION IS ADMITTEDLY NOT SATI SFIED. FOR THIS SHORT REASON ALONE, THE IMPUGNED ADDITIONS SHOULD HAVE BEEN DELETED BY THE CIT(A). WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) IN T HIS RESPECT AND DECLINE TO INTERFERE IN THE MATTER SO FAR AS THE RELIEF GIVEN BY THE CIT(A) IS CONCERNED. 8. IN THE RESULT, THE APPEAL IS DISMISSED. 5. IT IS CLEAR FROM THE ABOVE THAT THE CASE OF THE REVENUE IS COVERED AGAINST THE REVENUE BY THE ORDER OF TRIBUNAL. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF TRIBUNAL IN ITA NO.443/AHD/2 011, DISMISS THE APPEAL. 6. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 2 ND DAY OF DECEMBER, 2015. SD/- SD/- (SHAILENDRA KUMAR YADAV) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 02/12/2015 TRUE COPY / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE $%&%'( ) / CONCERNED CIT 4 )- / CIT (A) ,-./00'(1 '(123& / DR, ITAT, AHMEDABAD 4/56 / GUARD FILE. BY ORDER / 1 /2% '(123&