Srikanth Marru, Hyderabad, Hyderabad V. ITO, Ward-3(1), Hyderabad, Hyderabad

ITA 240/HYD/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6016 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-05-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANJALA SAHU
• Keywords: Deemed dividend

Judgement Text

ITA N O 240 OF 2017 SRIKANTH MARRU HYDERABAD. PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.240/HYD/2017 (ASSESSMENT YEAR: 2009-10) SRI SRIKANTH MARRU HYDERABAD PAN: ACQPM1 284N VS INCOME TAX OFFICER WARD 3 (1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.C. DEVDAS FOR REVENUE : SMT. ANJALA SAHU, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAIN ST THE ORDER OF THE CIT (A)-3, HYDERABAD, DATED 6.9.20 16. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE HON'BLE CIT(A) IS ERRONEOUS IN LAW AS WELL AS FACTS OF THE CASE. 2. THE HON'BLE CIT(A) OUGHT TO HAVE OBSERVED THAT T HE AMOUNTS ADVANCED TO THE ASSESSEE BY THE COMPANY WER E RELATABLE TO CHITS FOR WHICH HE CONTRIBUTED AND UND ER NO CIRCUMSTANCES THE SAME CANNOT CONSTITUTE DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE IT ACT. 3. THE HON'BLE CIT(A) OUGHT HAVE OBSERVED THAT THE LOAN TAKEN WAS IN RESPECT OF KEY MAN POLICY TAKEN ON THE LIFE OF THE ASSESSEE AND THEREFORE THE SAME CANNOT BE CONSIDERED AS DEEMED DIVIDEND U/S.2(22)( E) OF THE IT ACT. DATE OF HEARING: 29.05.2018 DATE OF PRONOUNCEMENT: 3 1. 0 5 .2018 ITA N O 240 OF 2017 SRIKANTH MARRU HYDERABAD. PAGE 2 OF 4 4. THE HON'BLE CIT(A) ERRED IN UPHOLDING THE ADDITI ON OF THE DEEMED DIVIDEND U/S.2(22)( E) OF THE IT ACT AND THEREFORE THE ENTIRE ADDITION IS LIABLE TO BE DELET ED. 2. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE, AN INDIVIDUAL AND A DIRECTOR OF THE COMPANY M/S. SA NTOSHI CHIT FUND PVT LTD, FILED HIS RETURN OF INCOME FOR THE A. Y 2009-10 ON 30.09.2009 ADMITTING A TOTAL INCOME OF RS.2,72,500 AND THE SAME WAS PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND IT WAS OBSERVED FROM THE LEDGER ACCOUNT COPY OF THE ASSESSEE IN THE BOOKS OF ACCOUNT OF THE COMPANY, THAT THE COMPANY HAS DEBITED THE ACCOUNT OF THE ASSESSEE , WITH A TOTAL SUM OF RS.8,09,750 ON VARIOUS DATES. OBSERVING THAT THE ASSESSEE IS A BENEFICIAL OWNER OF THE SHARES OF THE COMPANY, HOLDING MORE THAN 10% OF THE VOTING POWER, AND ALSO SINCE THE CO MPANY HAS ACCUMULATED PROFITS OF MORE THAN THE ABOVE AGGREGAT E AMOUNT OF ADVANCE, THE AO TREATED THE SAID ADVANCE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND BROUGHT IT TO TAX WHICH INC LUDES A LOAN OF RS.5,29,750 OBTAINED BY THE COMPANY AND THEN WAS PA SSED ON TO THE ASSESSEE. THEREFORE, THE AO TREATED THE ABOVE A MOUNT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AND BROUGHT IT TO TAX. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A), WH O CONFIRMED THE ORDER OF THE AO IN PART AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 3. THE LEARNED COUNSEL FOR THE ASSESSEE, WHILE REIT ERATING THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW, SUBMITTED THAT THE ASSESSEE IS ALSO A SUBSCRIBER TO THE CHITS OF THE COMPANY AND HAS RECEIVED THE CHIT AMOUNT ON BEING THE SUCCE SSFUL BIDDER IN THE AUCTION AND THEREFORE, IT CANNOT BE TREATED AS DEEMED ITA N O 240 OF 2017 SRIKANTH MARRU HYDERABAD. PAGE 3 OF 4 DIVIDEND U/S 2(22)(E) OF THE ACT. AS REGARDS, THE L OAN AMOUNT OF RS.5,29,750 ALSO IT WAS SUBMITTED THAT IT IS A LOA N TAKEN BY THE COMPANY FROM LIC AND NOT OUT OF THE ACCUMULATED PRO FITS AND THEREFORE, THE SAME CANNOT ALSO BE TREATED AS DEEME D DIVIDEND U/S 2(22)(E) OF THE ACT. 4. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT THE ASSESSEE WAS A SUBSCRIB ER OF THE CHITS AND AS SEEN FROM THE LEDGER A/C IN THE BOOKS OF ACC OUNT OF THE COMPANY, THE ASSESSEE HAS RECEIVED A SUM OF RS.50,0 00 ON 21.04.2008, RS.1,30,000 ON 2.5.2008 AND A SUM OF RS .1.00 LAKHS ON 15.05.2008. IT IS ALSO SEEN FROM PAGE NO.49 OF T HE PAPER BOOK FILED BY THE ASSESSEE GIVING THE ACCOUNT COPY OF CH IT NO.10 OF VALUE OF RS.5.00LAKHS, THAT THE DATE OF AUCTION OF THE SAID CHIT WAS 24.02.2008 AND THE ASSESSEE WAS PAID ON 21.04.2008 A SUM OF RS.50,000, ON 2.5.08, A SUM OF RS.1,30,000, AND ON 15.5.08 A SUM OF RS.1.00 LAKHS. THUS, IT IS CLEAR THAT THE AS SESSEE HAS RECEIVED THE BID AMOUNT AS A CUSTOMER OF THE COMPAN Y AND NOT AS A DIRECTOR OR THE SHAREHOLDER OF THE COMPANY. THE B USINESS TRANSACTION OF THE COMPANY DO NOT FALL WITHIN THE P ROVISIONS OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THEREFORE, THE ADDITION OF RS.2,88,000 IS DELETED. 6. AS REGARDS THE SUM OF RS.5,29,750, IT IS SEEN TH AT THE COMPANY HAS RECEIVED A LOAN FROM LIC AND HAS TRANSF ERRED THE ITA N O 240 OF 2017 SRIKANTH MARRU HYDERABAD. PAGE 4 OF 4 SAME TO THE ASSESSEE ON 14.8.2008. THIS LOAN WAS TA KEN ON THE PREMIUM PAID FOR THE KEYMAN INSURANCE POLICY TAKEN ON 31.3.2008. SINCE THE NEXUS BETWEEN THE LOAN AND ADV ANCE TO THE ASSESSEE IS CLEARLY ESTABLISHED AND THERE IS ACCUMU LATED PROFIT OF THE COMPANY AVAILABLE TO SUCH AN EXTENT, THE SAME I S TAXABLE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN VIEW OF THE SAME, THE ADDITION U/S 2(22)(E) IS PARTLY DELETED. 7. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST MAY, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 31 ST MAY 2018. VINODAN/SPS COPY TO: 1 B. NARSINGH RAO & CO. CAS, PLOT NO.554, ROAD NO.9 2, JUBILEE HILLS, HYDERABAD 500096 2 ITO WARD 3(1) HYDERABAD 3 CIT (A) - 3 HYDERABAD 4 PR. CIT 3, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER