Deputy Commissioner of Income-tax, V. Rane Axle & Pressing Pvt. Ltd., Pune

ITA 2297/PUN/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7697 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 26-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, PUNE , , , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI , AM . / I TA NO. 2297/ PUN/2014 / ASSESSMENT YEAR : 2010 - 11 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 10. PUNE ....... / APPELLANT / V/S. RANE AXLE & PRESSING PVT. LTD. PLOT NO. 310, SECTOR NO. 7, PCNTDA, BHOSARI, PUNE - 411 026 PAN : AADCR7071E / RESPONDENT A PPELLANT BY : NONE R ESPONDENT BY : SHRI ACHAL SHARMA / DATE OF HEARING : 10.08.2017 / DATE OF PRONOUNCEMENT : 16 .08.2017 / ORDER PER SUSHMA CHOWLA , JM T HIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(APPEALS) - V, PUNE DATED 19.09.2014 RELATING TO ASSESSMENT YEAR 2010 - 11 AGAINST ORDER PASSED U/S 143(3) OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT). 2. THE ONLY GROUND RAISED BY THE REVENUE IS AS UNDER: - WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT ALLOWING ASSESSMEN T OF DEEMED DIVIDEND IN THE HANDS OF ASSESSEE. 2 ITA NO. 2297/PUN/2014 A.Y . 2010 - 11 3. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE INCOME TAX ACT, 1961 ( HEREINAFTER REFERRED TO AS THE ACT) OF RS. 32,55,643/ - . 4 . BRIEFLY IN THE FACTS OF THE CASE, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY HAD TAKEN LOAN OF RS. 50,00,000/ - FROM RANE INDUSTRIES PVT LTD. DURING THE YEAR. THE ASSESSING OFFICER ALSO VERIFIED THE BALANCE SHEET AND FOUND THAT BOTH THE CO MPANIES WERE HAV ING COMMON SHAREHOLDERS WITH SUBSTANTIAL INTEREST IN BOTH THE COMPANIES. THE ASSESSEE CONCERNED WAS HAVING SURPLUS OF RS. 32,55,643/ - AS RESERVE. ACCORDINGLY, THE ASSESSING OFFICER HELD SUM OF RS . 32,55,643/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY. 5. BEFORE THE CIT(A), THE ASSESSEE FILED WRITTEN SUBMISSION WHICH ARE REPRODUCED UNDER PARA - 6 AND AFTER CONSIDERING THE SAME, THE CIT(A) VIDE PAR A - 8 OF THE APPELLATE ORDER HELD NO ADDITION IS WARRANTED U/S 2(2 2) (E) OF THE ACT AFTER RELYIN G ON THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE ( PVT) LTD., 324 ITR 363 WHEREIN IT HAS BEEN HELD THAT ADDITION U/S 2(22)(E) OF INCOME TAX ACT ON ACCOUNT OF DEEMED DIVIDEND CA N ONLY BE MADE IN CASE OF SHAREHOLDERS . THE RELEVANT FINDINGS OF THE HONBLE BOMBAY HIGH COURT ARE REPRODUCED AT PAGE 11 OF THE APPELLATE ORDER. THE CIT(A) VIDE PARA - 9 , ALLOWED THE CLAIM OF THE ASSESSEE AND HELD THAT NO DEEMED DIVIDEND CAN BE TAXED IN THE HANDS OF THE ASSESSEE AND IF THE SAME IS REQUIRED TO BE TAXED THEN THE SAME CAN BE TAXED IN THE HANDS OF SHAREHOLDERS. 6 . NOW, THE REVENUE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 7 . DESPITES SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE. HO WEVER, SINCE THE ISSUE IS COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT, WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING OF THE LD. DR FOR THE REVENUE , WHO PLACED RELIANCE ON THE ORDER OF THE ASSESSING OFFICER. 3 ITA NO. 2297/PUN/2014 A.Y . 2010 - 11 8 . ON PERUSAL OF THE RECORD AND ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST ASSESSABILITY OF DEEMED DIVIDEND U/S. 2(22) (E) OF THE ACT IN THE HANDS OF THE ASSESSEE WHO HAD MADE BORROWING FROM ITS SISTERS CO NCERN OF RS. 50,00,000/ - . THE ASSESSING OFFICER NOTICED THAT SINCE BOTH THE COMPANIES WERE HAVING COMMON SHAREHOLDERS WITH SUBSTANTIAL INTEREST IN BOTH THE COMPANIES AND WHERE THE ASSESSEE HAD SURPLUS OF RS. 32,55,643/ - AS RESERVE THEN HE MADE DISALLOWAN CE U/S 2(22) (E) OF THE ACT. THE ISSUE RAISED IN THE PRESENT APPEAL IS FULLY COVERED BY THE RATIO LAID DOWN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE ( PVT) LTD.( SUPRA). THE RELEVANT FINDINGS OF THE HONBLE BOMBAY HIGH COURT AR E REPRODUCED AT PAGE 11 OF THE APPELLATE ORDER WHICH ARE BEING REFERRED, BUT NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. ACCO RDINGLY, WE HO LD THAT THERE IS NO JUSTIFICATION OF MAKING ADDITION U/S. 2(22) (E) OF THE ACT IN THE HANDS OF THE ASSESSEE COMPANY AND ADDITION, IF ANY, MAY BE TAXED IN THE HANDS OF SHAREHOLDERS, IF THE ASSESSING OFFICER SO DESIRES. THUS, THE GROUND S RAISED BY THE REVENUE ARE DISMISSED. 9 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRO NOUNCED ON THIS 16 TH DAY OF AUGUST , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI) ( SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE; / DATED : 16 TH AUGUST , 2017 . SB / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE CIT(A) - V, PUNE. 4. THE CIT - V, PUNE 5. , , , / DR, ITAT, A BENCH, PUNE. 6. / GUARD FILE. / BY ORDER, // TRUE COPY // / PRIVATE SECRETARY , / ITAT, PUNE.