ITO, New Delhi V. M/s Navyug Promoters Pvt. Ltd., New Delhi

ITA 2176/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3700 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 08-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 07-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BANITA DEVI NAREOM
• Keywords: Deemed dividend

Judgement Text

I.T.A. NO. 2176 /DEL/2010 1/4 IN THE INCOME TAX APPELLATE TRIBUNAL, NEW DELHI, BENCH F BEFORE SHRI C. L. SETHI, JUDICIAL MEMBER AND SHRI A K GARODIA, ACCOUTANT MEMBER ITA NO. 2176 /DEL/2010 (ASSESSMENT YEAR 2006-07) ITO, WARD 13(1), VS. NAVYUG PROMOTERS P. LTD., NEW DELHI E-87, FIRST FLOOR, MASJID MOTH, NEW DELHI. (APPELLANTS) (RESPONDENTS) PAN / GIR NO. AAACN0195Q APPELLANT BY: SMT BANITA DEVI NAREOM, SR. DR RESPONDENT BY: NONE ORDER PER A. K. GARODIA, AM: 1. THIS IS THE REVENUES APPEAL DIRECTED AGAINST THE O RDER OF LD. CIT(A) XVI, NEW DELHI DATED 25.02.2010 FOR THE ASSE SSMENT YEAR 2006-07. THE GROUNDS RAISED BY THE REVENUE AR E AS UNDER: 1)ON THE FACT AND CIRCUMSTANCES OF THE CASE NEW DE LHI IN LAW THE LD. CIT(A) ERRED IN HOLDING THAT THE ADDITION O F RS.6,05,29,778/- MADE BY THE A.O. AS DEEMED DIVIDEN D U/S 2(22)(E) OF THE ACT CANNOT BE MADE IN THE HANDS OF THE ASSESSEE. 2) LD. CIT(A) FAILED TO APPRECIATE THAT AS PER THE PROVISIONS OF SECTION 2(22)(E), THE ASSESSEE CONCERNED IS VERY MU CH LIABLE TO TAX WITH RESPECT OF THE ABOVE SAID AMOUNT DEEMED DIVIDENDS. THE ACTION OF THE A.O. TO TAX THE SAME IN THE HANDS OF THE ASSESSEE CONCERNED FINDS SUPPORT FROM THE DECISIONS ON THE ISSUE IN THE CASE OF M/S. SKYLINE INDIA RECRUIT. COM PRIVATE LIMITED VS ITO (2008) 24 SOT 4 20 (MUMBAI) AND EXTEMPORE SECURITY AND INVESTMENTS PRI VATE LIMITED VS. DCIT 116 TTJ (MUMBAI) 525. CIT(A) HAS NOT APPRECIATED THE IMPOSSIBILITY OF TAX ING THE DEEMED DIVIDENDS IN THE HANDS OF SHAREHOLDERS I NSTEAD OF I.T.A. NO. 2176 /DEL/2010 2/4 THE CONCERN TO WHOM THE LOAN/ADVANCE IS GIVEN. IN A GIVEN SITUATION IT MAY BE THAT THE QUALIFYING SHAREHOLDER S I.E. THE SHAREHOLDERS HOLDING NOT LESS THAN 10% OF THE VOTIN G POWER IN THE LENDING COMPANY AND HAVING SUBSTANTIAL INTER EST IN THE BORROWING CONCERN HAVE DIFFERENT PERCENTAGE OF SHAREHOLDING IN THE LENDING COMPANY SAY 17% & 27% A ND AGAIN A DIFFERENT PERCENTAGE OF SHAREHOLDING SAY 21 % & 29% INTEREST IN THE BORROWINGS CONCERN. IN SUCH A S ITUATION WHAT AMOUNT OF THE DEEMED DIVIDEND WILL BE TAXED IN THE HANDS OF WHICH OF THE QUALIFYING SHAREHOLDERS, CANN OT BE DETERMINED. VIEWED FROM THIS ANGLE ALSO THE OBVIOU S INTERPRETATION OF SECTION 2(22)(E) WOULD BE THAT TH E DEEMED DIVIDENDS WOULD BE ASSESSED IN HANDS OF THE BORROWE R, WHICH IN THIS CASE IS THE ASSESSEE CONCERN. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AND HENCE W E DECIDE THIS APPEAL OF THE REVENUE EX-PARTE QUA THE ASSESSE E. 3. THE ISSUE INVOLVED IN THE PRESENT CASE IS REGARDING ASSESSMENT OF DEEMED DIVIDEND BY THE A.O. U/S 2(22)(E) OF THE INCOME-TAX ACT TO THE EXTENT OF RS.1,10,29,778/- IN RESPECT OF LOAN RECEIVED BY THE ASSESSEE FROM M/S. AIRCON DEVELOPERS PVT. LT D. AND ALSO TO THE EXTENT OF RS.495 LACS IN RESPECT OF LOAN REC EIVED BY THE ASSESSEE FROM M/S. B R ARORA & ASSOCIATES PVT. LTD. IT IS NOTED BY THE LD. CIT(A) IN PARA 3.2 OF HIS ORDER THAT THE RE IS NO DISPUTE THAT THE A.O. HAS PROCEEDED TO MAKE ADDITIO N ON ACCOUNT OF DEEMED DIVIDEND ON THE BASIS OF COMMON SHAREHOLDING OF ONE OF THE DIRECTORS NAMELY SHRI B R ARORA IN 3 COMPANIES I.E. THE ASSESSEE COMPANY AND THE TWO COM PANIES FORM WHOM LOANS WERE RECEIVED BY THE ASSESSEE COMPA NY. LD. CIT(A) HAS DECIDED THIS ISSUE BY FOLLOWING THE DECI SION OF SPECIAL BENCH OF THIS TRIBUNAL RENDERED IN THE CASE OF ACIT VS. BHAUMIK COLOURS PVT. LTD. 314 ITR 80(AT)(MUM.) (SB ). NOW, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. D.R. SUPPORTED THE ASSESSMENT ORDER. I.T.A. NO. 2176 /DEL/2010 3/4 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D.R. FOR THE REVENUE AND HAVE GONE THROUGH THE MATERIAL ON RECOR D AND THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT IT IS NO TED BY THE A.O. IN THE ASSESSMENT ORDER THAT SHRI B R ARORA IS HOLD ING 39.27% OF THE SHARES IN THE ASSESSEE COMPANY AND THE SAME PERSON IS HOLDING 52.92% SHARES IN M/S. B R ARORA & ASSOCIATE S PVT. LTD. AND 30.86% SHARES IN M/S. AIRCON DEVELOPERS PV T. LTD. HENCE IT IS CLEAR THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER HOLDING THE REQUIRED PERCENTAGE OF SHARES OF THESE TWO COMPANIES I.E. M/S. B R ARORA & ASSOCIATES PVT. LTD . AND M/S. AIRCON DEVELOPERS PVT. LTD. AS PRESCRIBED IN SECTIO N 2(22)(E) OF THE I. T. ACT. IT WAS HELD BY THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF BHAUMIK COLOURS PVT. LTD. (SUPRA) TH AT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PER SON WHO IS A SHAREHOLDER IN THE LENDER COMPANY AND NOT IN THE HA NDS OF A PERSON OTHER THAN A SHAREHOLDER. IT WAS ALSO HELD BY THE SPECIAL BENCH OF THIS TRIBUNAL THAT SUCH SHAREHOLDER SHOULD BE REGISTERED SHAREHOLDER AS WELL AS BENEFICIARY SHARE HOLDER. IN THE PRESENT CASE THE ASSESSEE IS NOT A SHAREHOLDER OF T HESE TWO LENDER COMPANIES AND HENCE AS PER THIS DECISION OF SPECIAL BENCH OF THIS TRIBUNAL, LD. CIT(A) HAS RIGHTLY DELE TED THE ADDITION MADE BY THE A.O. U/S 2(22)(E) OF THE I. T. ACT. 6. REGARDING THE RELIANCE PLACED BY THE REVENUE IN GRO UND NO.2 ON THE TRIBUNAL DECISION RENDERED IN THE COURSE OF SKY LINE INDIA RECRUIT PVT. LTD. VS ITO 24 SOT 20 (MUM.) AND EX TE MPOR SECURITIES & INVESTMENTS PVT. LTD. VS DCIT 116 TTJ 525 (MUM.), WE WOULD LIKE TO OBSERVE THAT SINCE WE ARE FOLLOWING THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL, ANY DECISION OF A DIVISION BENCH OF THE TRIBUNAL CANNOT BE CONSIDERED EVEN IF THIS I.T.A. NO. 2176 /DEL/2010 4/4 DECISION IS NOT IN LINE WITH THE DECISION OF SPECIA L BENCH OF THIS TRIBUNAL BECAUSE WE HAVE TO FOLLOW THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN PREFERENCE TO ANY DECISIO N OF A DIVISION BENCH OF THE TRIBUNAL. HENCE, WE DECLINE TO INTERFERE IN THE ORDER OF LD. CIT(A). 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. 8. THIS DECISION WAS PRONOUNCED IN THE OPEN COURT ON 0 8.07.2010. SD./- SD./- (C. L. SETHI) (A K GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08 TH JULY, 2010 SP. COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT TRUE COPY: BY ORDER 4. CIT(A) 5. DR DY. REGISTRAR, ITAT, NEW DELHI