DCIT, Circle-1(1)(2), Ahmedabad V. Double Chem Pvt Ltd, Ahmedabad

ITA 2442/AHD/2017

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6042 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 31-07-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 05-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MSSAUMYAPANDEYJAIN
• Assessee Lawyers: SHRIDIVYANGSHAH; THEHONBLEJURISDICTIONALHIGHCOURTINTHECASEOFCIT

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’B’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And MsMADHUMITAROY,JUDICIALMEMBER आयकरअपीलसं./ITANo.2442/AHD/2017 With C.ONo.18/Ahd/2019 धििाधरणवरध/Asstt.Year:2014-2015 D.C.I.T, Circle-1(1)(2), Ahmedabad. Vs. M/sDoubleChemPvt.Ltd., 19RoyalEnclaveThaltej, Ahmedabad-380059. PAN:AADCD3481C (Applicant)(Respondent) Revenueby:MsSaumyaPandeyJain,Sr.D.R Assesseeby:ShriDivyangShah,A.R सुिवाईकीतारीख/DateofHearing:01/08/2023 घोरणाकीतारीख /DateofPronouncement:30/10/2023 आदेश /ORDER PERWASEEMAHMEDACCOUNTANTMEMBER: ThecaptionedappealandCOhavebeenfiledattheinstanceofthe RevenueandtheassesseeagainsttheorderoftheLearnedCommissionerof IncomeTax(Appeals)-1,Ahmedabad,dated31/08/2017(inshort“Ld.CIT(A)”) arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct1961(here-in-afterreferredtoas"theAct").Theassesseehasfiledthe ITAno.2442/AHD/2017 With C.ONo.18/Ahd/2019 Asstt.Year2014-15 2 CrossObjectionintheRevenue’sappealbearingITANo.2442/Ahd/2017forthe AssessmentYear2014-2015. 2.First,wetakeRevenueappealinITANo.2442/Ahd/2017forA.Y.2014-15. 3.TheonlyissueraisedbytherevenueisthatthelearnedCIT(A)erredin deletingtheadditionofRs.2,66,42,000/-asdeemeddividendundersection 2(22)(e)oftheAct. 4.Thefactsinbriefarethattheassessee,aprivatecompany,isengagedin tradingactivity.Theassesseewasselectedforlimitedscrutinyforthepurposeof verificationofunsecuredloan.TheAOfromthedetailsofunsecuredfoundthat theassesseehasreceivedunsecuredofRs.2,66,42,000/-fromM/sApanImexPvt Ltd.TheAOfurtherfoundthatthedirectoroftheassesseecompanynamelyShri VaidyanathanVIyerandSmt.ShardaVIyerwhohold44.71%and50%sharesin theassesseecompanyalsoholdsharesinrationof50%eachinthelender companynamelyM/sApanImexPvtLtd.AccordinglytheAOheldthattheissue fallsunderthesecondlimboftheprovisionofsection2(22)(e)oftheActi.e.sum paidbytheprivatecompanytoaconcerninwhichshareholderofsuchlending companyismemberorpartnerholdingsubstantialinterest.Thus,theAOtreated theunsecuredloanfromM/sApanImexPvtLtdasdeemeddividendunder section2(22)(e)oftheActandaddedtothetotalincomeoftheassessee. 5.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A). 6.TheassesseebeforethelearnedCIT(A)madeelaboratesubmissionbutthe cruxoftheassesseeisthatthattheloanfromM/sApanImexPvtLtdwastaken intheordinarycourseofbusinesstomeettemporaryrequirementwhichwere squaredup/repaidduringtheyearitself.Further,theprovisionofsection2(22)(e) oftheActappliesonlytotheshareholders.Assuch,theprovisionofsection ITAno.2442/AHD/2017 With C.ONo.18/Ahd/2019 Asstt.Year2014-15 3 2(22)(e)oftheActcannotbemadeapplicabletoaconcernwhichisnota shareholderofthelendingcompany.Inthiscasetheassesseecompanydoesnot holdanysharesinthelendingcompanyasmemberorasbeneficialowner. Therefore,noadditioncanbemadeinitscase.Theassesseeinsupportofits contentionreliedonvariousjudicialpronouncementsincludingthejudgmentof Hon’bleJurisdictionalHighCourtinthecaseofCITvs.DaisyPackers(P.)Ltd reportedin220Taxman331.Besides,theassesseemakingtherelianceon variousjudgmentsinitsfavour,italsodistinguishesthecaselawreferredtoby theAO.Theassesseealternativelyalsocontentedthatpeakcreditoftheloan fromtheimpugnedpartywasRs.89Lakhonly.Therefore,incase,theprovision ofsection2(22)(e)oftheActismadeapplicable,thenmaximumamountbrought underthenetofdeemeddividendcanbeofpeakcreditonly. 7.ThelearnedCIT(A)afterconsideringthefactsintotalitydeletedthe additionmadebytheAObyobservingasunder: 2.6Ihavecarefullyperusedtheassessmentorderandthewrittensubmnissionmade bythelearnedA.Rs.ItisobservedthatitisfactthatShrVaidyanathVIyerandSmt. ShardaVIyerwerehavingsubstantialshareholdinginboththecompaniesI.eGiver CompanywellastheReceiptcompany.Theexpressprovisionsofsection2(22)(e)show thattherearethreelimbsofthesaidsectioni.e. (i)Thepaymentbyacompanybywayofadvanceorloanshouldhavebeenmadeto ashareholderwhoisbeneficialownerofthesharesandsustantialinterest. (ii)Orthepaymentshouldbemadetoanyconcerninwhichsuchshareholderisa memberorpartnerandinthatconcern,heshouldhavasubstantialinterest;& (iii)orthecompanymakespayment,oronitsbehalfpaymentismadeforindividual benefitofanysuchshareholdertotheextenttowhichthecompanyineithercase possessesaccumulatedprofits. 2.7Inthecaptionedcase,thepaymenthasbeenmadebyApanImpexPrivateLimitedto theappellantcompanybuttheappellantcompanyisnotaregisteredshareholderofApan ImpexPrivateLimitedFromthefacts,itisseenthatappellantisnotashareholderinthe lendercompanyhowever,assessingofficertreatedthesameasdeemeddividendinhands ofappellantcompany.Appellant'smainobjectionwasthatinviewofthevariousdecisions includingspecialbenchofITATMumbaiinthecaseofAsstt.CITv/sBhaumikColour(P) Ltd[2009]118ITD1(M)(SB)andjurisdictionalHighCourtdecisioninthecaseofCITv/s DaisyPackers(P)Ltd[2013]40taxmann.com480(Gujarat)andotherdecisions(supra), theadditionofdeemeddividendcannotbemadeinthehandsofthecompany ITAno.2442/AHD/2017 With C.ONo.18/Ahd/2019 Asstt.Year2014-15 4 Howeverinthisregard,itisimportanttonotethattheHon'bleSupremeCourtofIndiahas admittedspecialleavepetitionsagainstthedecisionofvariouscourtsandotherappellate authoritiesinfavouroftherevenue,settingasidesuchdecisionsandacknowledgingthe validityoftheinterpretationadoptedbyRevenue.TheA.O.hasobservedthatSLPinthe casesofCITvs.N.S.NJewlers(P)Ltd.[2015]64taxmann.com327(SC)andCITvs. NamdhariSeeds[2015]56taxmann.com19(SC)Theappellanthassubmittedthat DepartmentalAppealcaseofN.S.N.Jewellers(P)LtdisdismissedbyHon'bleApexCourt astaxeffectvslessthanRs.25LacsThus,Hon'bleApexcourthasnotdecidedthe underlyingisearisedu/s.2(22)(e)oftheact.InthecaseofCITvs.NamdhariSeeds [2015]56exmann.com19(SC)theSLPispending.Therefore,theratioofjurisdictional GujaratHighCourtinthecaseofCITv/sDaisyPackers(P)Ltddecidedtheissueinfavour oftheassessee,relyingonthedecisionoftheDivisionBenchoftheHighCourtinCITv. Ankitech(P)Ltd.(2012)340IR14(Del)holdstheground.Theappellanthasalso distinguishedthejudgmentofHon'bleSupremeCourtincaseofGopalAndSons(HUF)v/s CIT[2017]77taxmann.com71(SC)tothecaseofappellant-Company.Theappellanthas submittedthatfactsofthecaseinGopalandSons(HUF)(Supra)arecompletelydifferent withfactsofappeallntcompanycaseasunder: Sr.No.Factsofthecaseis GopalAndSons(HUF) (Supra) Factsofthecaseif appellant-company I.eDoubleChemPvt Ltd) Not e No. 1.Assesee-HUFwasheld tobeneficialshareholder inpayer-company(Para 17oftheorder) Appellant-Company isneithera registered shareholdernoa beneficial shareholderin “payer-Company” Not e-1 2.Paymentforacquiring sharesinPayer- Companywasmadeby Assessee-HUF(Para17 oftheorder) Nopaymentismade byAppellant- Companytoacquire sharesinPayer CompanyRather. Foracquirinshares ofpayercompany, allpaymentswere madeby shareholder themselves(and Appellant-company isnotthe shareholderin Payer-Company) Not e-2 3.Intheannualreturns filedwithROCand Auditedfinancial statementsofPayer- Company,Assessee-HUF wasshownasregistered aswellasbeneficial shareholderPayer- AsperAnnualreturn &AuditedFinancial statementofPayer- Companyfiledwith ROC,Appellant- Companyisneither aregistered shareholdernora Not e-1 ITAno.2442/AHD/2017 With C.ONo.18/Ahd/2019 Asstt.Year2014-15 5 Company(Para4&Para 17oftheorder) beneficial shareholderin "Payer-Company" 2.8.TheviewtakenbytheIT.AT.MumbaiSpecialEnchinthecaseofACITMumbaiv/s BhaumikColour(P)LtdhasbeenapprovedbytheHon'bleBombayHighCourtinthecase ofCITv/sUniversalMedicarePrivateLited(2010)324ITR263(Bom)TheGujaratHigh CourtinthecaseofCITv/sDaisyackers(P)Ltd[2014]220Taxman331)decidedthe issueinfavouroftheassessee,reyingonthedecisionoftheDivisionBenchoftheDelhi HighCourtinCITv.Ankitech(P)Ltd.(2012)340ITR14whereinitwasheldthatifthe assessee-companydoesnotholdashareinothercompanyfromwhichithadreceived depositthenitcannotbetreatedtobeadeemeddividendunderSection2(22)(e)ofthe Act.Fromthereadingoftheprovisionsofsection2(22)(e),itisseenthattheprovisionis intendedtotaxthedividendinthehandsofashareholderandthedeemingprovisionasit appliestothecaseofloanoradvancebyacompanytoaconcerninwhichisshareholder andhassubstantialinterest,isbasedonthepresumptionthattheloanoradvancewould ultimatelybemadeavailabletotheshareholderofthecompanygivingloanoradvance. Variouscourtdecisions0.g.Asstt.CITv/sBhaumikColour(P)Ltd[2009]118ITD1(Mum) (SB)&jurisdictionalHighCourtdecisioninthecaseofCITv/sDaisyPackers(P)L[2014] 220Taxman331(Gujarat),supportthisviewthatthedeemeddividendu/s2(22(e)can onlybeassessedinthehandsofthepersonwhoisashareholderofthelendercompany andnotinthehandsofapersonotherthantheshareholder.InAdditiontoabove, JurisdictionalTribunalincaseofITOv/s.BiotechOphthalmic(P)Ltd.015]61 taxmann.com9(Ahmedabad-Trib.),hasalsoconfirmedjudicialpositionbyrelyingonthe judgmentofHon'bleGujaratHighCourtincaseofCITv/s.DaisyPackers(P)Ltd.(2014) 220Taxman331(Guj)(HC).Inviewoftheabovefactsandonthebasisoftheabove referreddecisions(supra),theadditionmadebytheAssessingOfficeru/s.2(22)(e)isheld tobenotjustifiedandthesameisdeleted.TheadditionsmadebytheA.Oasdeemed dividendu/s2(22)(e)ofITActforRs.2,66,42,000/-inthehandsoftheappellantcompany isdirectedtobedeleted.Thegroundoftheappellantisallowed. 8.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 9.BoththelearnedDRandthelearnedARbeforeusvehementlysupported theorderoftheauthoritiesbelowasfavourabletothem. 10.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Thefactsofthecasehavebeenelaboratedin previousparagraphs.Therefore,wearenotinclinedtorepeatthesameforthe sakeofbrevity.Attheoutset,wenotethattheissueonhandhasbeenheldin favouroftheassesseebytheHon’bleJurisdictionalHighCourtinthecaseofCIT ITAno.2442/AHD/2017 With C.ONo.18/Ahd/2019 Asstt.Year2014-15 6 vs.DaisyPackers(P.)Ltd.whereinitwasheldthatthedeemeddividendunder section2(22)(e)oftheActcanonlybetaxedinthehandsofthepersonwhois theshareholderofthelendingcompanyandnotinthehandofotherthan shareholder.TherelevantobservationoftheHon’bleHighCourtreadsasunder: “weneednotgointovariousquestionsraisedbylearnedcounselforthepartiesas admittedlytheassesseewasnotshareholderinAmigoBrushesPvt.Ltd.TheDivision BenchoftheHighCourtinCITv.Ankitech(P.)Ltd.[2012]340ITR14/[2011] 199Taxman341/11taxmann.com100(Delhi).TheDelhiHighCourthasheldthatifthe assessee-companydoesnotholdashareinothercompanyfromwhichithadreceived depositthenitcannotbetreatedtobeadeemeddividendundersection2(22)(e)ofthe Act.InviewofthisadmittedpositionthattheassesseeisnotashareholderinAmigo BrushesPvt.Ltd.and,therefore,thedepositreceivedbytheassesseeofRs.25lakhsfrom AmigoBrushesPvt.Ltd.wasaninter-corporatedepositandnotadeemeddividendand, therefore,thoughthisaspecthasnotbeenconsideredbytheTribunalbutsincetheorder oftheTribunalcanbesupportedbyanotherlegalreasonontheadmittedfacts,weneed notsendthematterback.” 10.1Further,wenotethatHon’bleJurisdictionalHighCourtinholdingtheissue infavouroftheassesseereferredthejudgmentofHon’bleDelhiHighCourtin caseofCITvs.Ankitech(P.)Ltd(Supra).ThesaidjudgmentofHon’bleDelhiHigh CourtwasfollowedbyseveralbenchesofdifferentHon’bleHighCourtsagainst whichtherevenuefiledSLPbeforetheHon’bleSupremeCourtinthecaseofCIT vs.MadhurHousing&DevelopmentCo.&reportedin401ITR152wherethe Hon’bleSupremeCourtaffirmedtheviewtakenbytheDelhiHighcourtby observingasunder: Theimpugnedjudgmentandorderdated11-5-2011hasrelieduponajudgmentofthe samedatebyaDivisionBenchoftheHighCourtofDelhiinITANo.462of2009. Havingperusedthejudgmentandhavingheardarguments,weareoftheviewthatthe judgmentisadetailedjudgmentgoingintoSection2(22)(e)oftheIncome-taxActwhich arisesatthecorrectconstructionofthesaidSection.Wedonotwishtoaddanythingto thejudgmentexcepttosaythatweagreetherewith. Theseappealsaredisposedofaccordingly. 10.2Therefore,respectfullyfollowingthejudgmentofHon’bleGujaratHigh CourtaswellasHon’bleSupremeCourtintheabove-mentionedcases,wehereby donotfindanyinfirmityintheorderofthelearnedCIT(A).Hence,thegroundof appealoftherevenueisherebydismissed. ITAno.2442/AHD/2017 With C.ONo.18/Ahd/2019 Asstt.Year2014-15 7 10.11Intheresult,theappealoftheRevenueisherebydismissed. ComingtotheCO.oftheassesseebearingNo.18/Ahd/2019forA.Y. 2014-15 11.Theassesseehasraisedfollowinggroundofobjection: 1.Whether,afterjudgmentofHon’bleApexcourtincaseofMadhurHousingand developmentcompany&insimilarcases,additionu/s.2(22)(e)oftheactcanbemadeinthe handsof“personotherthanashareholder”? 2.Withoutprejudicetoabovegroundsofappeal,whether,onfactsandincircumstancesof thecaseandinlaw,AssessingOfficerhasalsoerredincalculatingamountofloan/advances forsection2(22)eoftheact? 3.Wheher,onfactsandincircumstancesofthecaseandinlaw,Ld.Assessingofficerhas erredinconducting“Completescrutiny”whensamewas“limitedscrutiny”only? 12.Attheoutset,wenotethattheissueonhandhasbeendecidedbyusin favouroftheassesseeintherevenue’sappealvideparagraphno.10ofthisorder. Therefore,werestrictourselvesfromadjudicatingtheissueraisedbytheassessee incrossobjectionastheissueoftheassesseebecomeredundant.Hence,we accordinglydismissedthegroundsofobjectionraisedbytheassessee. 12.1Intheresult,thecrossobjectionoftheassesseeisherebydismissed. 13.Inthecombinedresult,appealfiledbytherevenueaswellascross objectionfiledbytheassesseeareherebydismissed. OrderpronouncedintheCourton30/10/2023atAhmedabad. Sd/-Sd/- (MADHUMITAROY)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated30/10/2023 Manish