Shri Mehul Pratap Asnani, Ahmedabad V. The Income tax Officer,Ward-1(2), Ahmedabad

ITA 2475/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 9711 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 22-12-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 30-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: S N SOPARKAR
• Keywords: Deemed to accrue or arise in india; Deemed dividend; Tax effect
• Section: 148

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER AND SHRI RAJPAL YADAV, JUDICIAL MEMBER ITA NO.2475/AHD/2011 [ASSTT.YEAR : 2005-2006] ITA NO.2476/AHD/2011 ASSTT. YEAR: 2007-2008 SHRI MEHUL PRATAP ASNANI 4, GARDEN ENCLAVE ELLISBRIDGE, AHMEDABAD PIN : 380 014. PAN : ACMPA 6996 R VS ITO, WARD - 1(2) AHMEDABAD. ITA NO.2451/AHD/2011 ASSTT. YEAR: 2007-2008 DCIT, CIR.1 AHMEDABAD. VS SHRI MEHUL PRATAP ASNANI 4, GARDEN ENCLAVE ELLISBRIDGE, AHMEDABAD PIN : 380 014. PAN : ACMPA 6996 R / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI S.N. SOPARKAR REVENUE BY : SHRI DINESH SINGH, SR.DR / DATE OF HEARING : 22/12/2015 / DATE OF PRONOUNCEMENT: 01/02/2016 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE LD. CIT(A) HAS DECIDED APPEALS OF THE ASSESSEE FOR THE ASSTT.YEARS 2005-06 AND 2007-08 BY SEPARATE ORDERS OF EVEN DATED I.E. ITA NO.2475/AHD/2011 AND 2 OTHERS 2 PASSED ON 20.7.2011. THE ASSESSEE AND REVENUE, BOT H ARE CHALLENGING THE ORDERS OF THE CIT(A) IN THE ASSTT.YEAR 2007-08, WHEREAS, IN THE ASSTT.YEAR 2005-06, THE ASSESSEE ALONE IS IN APPEAL . 2. SOLITARY SUBSTANTIAL ISSUE BEFORE US IN EACH APP EAL IS COMMON. THEREFORE, WE HEARD ALL THE APPEALS TOGETHER AND DE EM APPROPRIATE TO DISPOSE OF THEM BY THIS COMMON ORDER. BEFORE CARV ING OUT SPECIFIC DISPUTE, WE DEEM IT APPROPRIATE TO MAKE REFERENCE T O BRIEF FACTS. 3. THE ASSESSEE IS HAVING 40% SHARE HOLDING IN BIO- TECH OPTHALMIC PVT. LTD. (BOPL FOR SHORT) AND ALSO HAVING 94.92 % IN BIO-TECH VISION CARE PVT. LTD. (BVCPL FOR SHORT). BVCPL HAS GR ANTED A LOAN OF RS.41,25,289/- AND RS.40,26,933/- TO BOPL IN THE ASSTT.YEARS 2005- 06 AND 2007-08. THE LD.AO HAS REOPENED THE ASSESSM ENT IN BOTH THE YEARS BY ISSUANCE OF NOTICE UNDER SECTION 148 AND M AKING ADDITION OF RS.40,26,933/- IN THE ASSTT.YEAR 2007-08 AND RS.41, 25,289/- IN THE ASSTT.YEAR 2005-06 WITH THE AID OF SECTION 2(22)(E) OF THE INCOME TAX ACT. ACCORDING TO THE AO, THE LOAN GIVEN BY THE B VCPL TO BOPL IS TREATED AS DEEMED DIVIDEND, BECAUSE, THE ASSESSEE I S A COMMON SHAREHOLDER BETWEEN BOTH THE COMPANIES HAVING SHARE S OF MORE THAN 20% OF THE VOTING POWER. 4. ON APPEAL, IN THE ASSTT.YEAR 2007-08, THE LD.CIT (A) FOUND THAT OUT OF THE TOTAL AMOUNT OF RS.40,26,933/- A SUM OF RS.1 8,73,532/- AND RS.81,374/- PERTAINED TO DEBIT OF INTEREST AND JV F OR EXPENSES RESPECTIVELY. THUS, THE LD.CIT(A) HAS HELD THAT THIS AMOUNT COULD NOT BE TREATED AS DEEMED DIVIDEND. ACCORDINGLY, THE LD .CIT(A) HAS DELETED THE ADDITION TO THIS EXTENT. 5. THE REVENUE IN ITS APPEAL IN THE ASSTT.YEAR 2007 -08 HAS BEEN IMPUGNING THE DELETION OF RS.18,73,532/- OUT OF TOT AL ADDITION, WHEREAS, ITA NO.2475/AHD/2011 AND 2 OTHERS 3 THE ASSESSEE IN BOTH THE YEARS IS IMPUGNING THE REM AINING ADDITION ON THE GROUND THAT BORROWER COMPANY IS NOT REGISTERED SHAREHOLDER OF THE LENDER COMPANY, AND ASSESSEE HAS NOT TAKEN ANY LOAN , THEREFORE, THE DEEMED DIVIDEND CANNOT BE ASSESSED IN HIS HAND. 6. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. THE ISSUE IN DISPUT E IS SQUARELY COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE ITAT IN THE CASE OF AC I T VS. BHAUMIK COLOURS P. LTD. 118 ITD 1 SB (MUM). THE TR IBUNAL IN THE CASE HAS HELD THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE PERSONS OTHER THAN THE SHAREHOLDER. THE TRI BUNAL FURTHER OBSERVED THAT EXPRESSION SHAREHOLDER REFERRED TO SECTION 2(22)(E) OF THE ACT REFERS TO BOTH REGISTERED AND BENEFICIAL SH AREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLDER, BUT NOT THE BENEFICIAL SHAREHOLDER, THEN THE PROVISION OF SECTION 2(22)(E) OF THE ACT WILL NOT A PPLY. SIMILARLY, IF A PERSON IS A BENEFICIAL SHAREHOLDER, BUT NOT A REGIS TERED SHARE HOLDER, THEN ALSO THE PROVISIONS OF SECTION 2(22)(E) WILL N OT APPLY. 7. THE LD.DR WHILE OPPOSING THE CONTENTIONS OF THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT HONBLE SUPREME COURT HAS A DMITTED AN SLP ON THIS ISSUE IN THE CASE OF CIT VS. NAMDHARI SEEDS 56 TAXMAN.COM 19 (SC). HE HAS PLACED ON RECORD COPY OF THIS ORDER E XTRACTED FROM THE WEB-SITE. HE FURTHER PLACED ON RECORD COPY OF THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THIS CASE REPORTED IN 44 TAXMANN.COM 28 AGAINST WHICH SLP HAS BEEN ADMITTED. SHRI DINES H SINGH, LD.SR.DR HAS FURTHER MADE FOLLOWING WRITTEN SUBMISSIONS: THE ABOVE STATED APPEALS WERE HEARD TODAY I.E. ON THE 22ND OF DECEMBER,2015. THESE ARE THREE APPEALS PERTAINING T O THE ABOVE ITA NO.2475/AHD/2011 AND 2 OTHERS 4 STATED TWO(2) ASSESSMENT YEARS. TWO OF THEM PERTAIN ING TO A.Y. 2007-08 AND ONE FOR A.Y. 2005-06 RESPECTIVELY. 2. THE ISSUE INVOLVED IN ALL THE THREE APPEALS ARE IDENTICAL, I.E. WITH REGARD TO ADDITION MADE BY THE A.O U/S 2(22)(E ) OF THE I.T. ACT, 1961 (BEING DEEMED INCOME). SIR, SECTION 2(22) (E) OF THE INCOME TAX ACT BRINGS TO TAX ANY PAYMENT BY A COMPA NY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIAL LY INTERESTED OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE A SSETS OF THE COMPANY OR OTHERWISE) MADE AFTER THE 31ST DAY OF MA Y, 1987 BY WAY OF ADVANCE OR LOAN: I) TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NPT BEING SHARES ENTITLED TO A FIX ED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS ) HOLDING NOT LESS THAN TEN PERCENT OF THE VOTING POW ER II) OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) III) OR, ANY PAYMENT BY ANY SUCH COMPANY O N BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHO LDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSE S ACCUMULATED PROFITS. 3. IN THE INSTANT CASE, THE CASE OF THE ASSESSEE GE TS SQUARELY COVERED BY (II) ABOVE THAT IS, ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. THIS IS MORE SO SUPPORTED AND RELIED UPON , TAKING INTO ACCOUNT THE DECISIONS OF THE HON'BLE SUPREME COURT OF INDIA IN CIT VS NAMDHARI SEEDS [2015] 56 TAXMAN.COM 19 (SC) BY ADMITTING THE SLP OF THE REVENUE AGAINST THE DECISI ON OF HON'BLE KARNATAKA HIGH COURT WHICH ALSO RELIED ON THE DECIS ION OF THE HON'BLE HIGH COURT OF KARNATAKA IN CCIT-III VS SARV A EQUITY (P) LTD [2014] 44 TAXMAN.COM28 (KARNATAKA), (COPY ENCLO SED FOR KIND PERUSAL AND CONSIDERATION PLEASE). 4. IN THE WAKE OF THE AFORESAID DEEMING PROVISIONS AND DECISIONS AND ADMITTED FACTS THAT THE 'SHAREHOLDER' HAD SUBST ANTIAL INTEREST IN BOTH THE COMPANIES AND THE LENDER COMPANY HAD GI VEN THE SUM OUT OF THE ACCUMULATED PROFITS AND IS NOT COVERED B Y ANY OF THE EXCEPTIONS PROVIDED IN SUB-SECTION (I) TO (V) OF TH E SECTION 2(22)(E), THE UNDERSIGNED TOO FULLY VOUCHES FOR THE ACTION OF THE AO IN HAVING ADDED BACK THESE AMOUNTS TO THE INCOME OF THE ITA NO.2475/AHD/2011 AND 2 OTHERS 5 ASSESSEE AND PRAYS THAT THE SAME MAY BE UPHELD AND THAT OF THE LD. CIT(A) MAY BE DISMISSED IN THE INTEREST OF REVE NUE. 8. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT ORDER OF THE SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOURS P. LTD. (SUPRA) HAS BEEN UPHELD BY THE HONBLE BOMBAY HIGH COURT. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE JURISDIC TIONAL HIGH COURT IN THE CASE OF CIT VS. DAISY PACKERS PVT. LTD., IN TAX APPEAL NO.212 OF 2010. ALMOST, A LARGE NUMBER OF HONBLE HIGH COURT S ARE UNANIMOUS ON THIS ISSUE VIZ. CIT VS. UNIVERSAL MEDICARE P. LTD. 324 ITR 263 AND CIT VS. MCC MARKETING P.LTD., 343 ITR 350. HONBLE KAR NATAKA HIGH COURT IN THE CASE OF CCCIT-III VS. SARVA EQUITY P. LTD. ( SUPRA), HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. DA ISY PACKERS PVT. LTD.(SUPRA). THOUGH, THE HONBLE SUPREME COURT HAS ADMITTED SLP AGAINST THE DECISION OF THE HONBLE KARNATAKA HIGH COURT, BUT THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT A ND OTHER HONBLE HIGH COURT HAVE NOT BEEN REVERSED BY THE HONBLE SUPREME COURT. RESPECTFULLY FOLLOWING THE DECISIONS OF THE HONBLE HIGH COURTS AS WELL AS ORDER OF THE SPECIAL BENCH OF THE TRIBUNAL CITED SUPRA, WE ARE OF THE VIEW THAT BOPL IS NOT A SHAREHOLDER OF THE LENDE R COMPANY AND THE ASSESSEE HAS NOT TAKEN ANY LOAN. THEREFORE, THE AL LEGED LOAN CANNOT BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSE SSEE. WE ALLOW THIS GROUND OF APPEAL IN BOTH THESE APPEALS OF THE ASSES SEE AND DELETE THE ADDITION. CONSEQUENTLY, APPEAL OF THE REVENUE IS D ISMISSED. 9. OTHERWISE ALSO, THE TAX EFFECT IN THE APPEAL OF THE REVENUE IS LESS THAN RS.10 LAKHS AND IT IS HIT BY THE LATEST CIRCUL AR ISSUED BY THE CBDT NO. 21/2015 DATED 10.12.2015. BY VIRTUE OF THIS CI RCULAR, THE BOARD HAS RESTRAINED ITS AUTHORITIES FOR FILING APPEAL BE FORE THE TRIBUNAL WHERE THE TAX EFFECT BY VIRTUE OF RELIEF GIVEN BY THE CIT (A) IS LESS THAN RS.10 ITA NO.2475/AHD/2011 AND 2 OTHERS 6 LAKHS. IN THIS SITUATION ALSO, THE APPEAL OF THE R EVENUE IS NOT MAINTAINABLE. 10. APART FROM THIS ISSUE, NO OTHER ISSUES WERE PRE SSED BY ANY PARTY, IN PARTICULAR, THE ASSESSEE DID NOT PRESS CHALLENGE TO THE REOPENING OF THE ASSESSMENT IN THE ASSTT.YEAR 2007-08. 11. IN THE RESULT, APPEALS OF THE ASSESSEE ARE PART LY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 1 ST FEBRUARY, 2016 AT AHMEDABAD. SD/- SD/- (PRAMOD KUMAR) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER