The Asstt. Commissioner of Income-tax, Jalandhar V. M/s. Zoloto Industries Ltd, Jalandhar

ITA 248/ASR/2011

• Counselvise Citation: 24820914 RSA 2011
• Duration Of Justice: 1 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 16-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R L CHHANALIA
• Assessee Lawyers: J S BHASIN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO. 248(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN :AAAFZ0521B ASSTT. COMMR. OF INCOME-TAX, VS. M/S. ZOLOTO INDUST RIES LTD. RANGE-IV, AMRITSAR. VPO LAMBA, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. R.L. CHHANALIA, DR RESPONDENT BY:SH. J.S. BHASIN, ADV DATE OF HEARING:22/08/2012 DATE OF PRONOUNCEMENT:27/08/2012 ORDER PER BENCH ; THIS APPEAL OF THE REVENUE ARISES FROM THE ORDER O F THE CIT(A), BHATINDA, DATED 28.02.2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS.88, 68,352/- MADE BY THE AO BY INVOKING THE PROVISIONS OF SECTION 2(2 2)(E) OF THE INCOME-TAX ACT, 1961. 2. WHILE DONG SO, THE LD. CIT(A) HAS FAILED TO APPR ECIATE THE FACT THAT SECTION 2(22)(E) STATED THAT DIVIDEND INCLUDED ANY PAYMENT BY A COMPANY TO ANY CONCERN IN WHICH ITS SHAREHOLDE R WAS A MEMBER OR PARTNER AND IN WHICH HE HAD SUBSTANTIAL I NTEREST. 2 3. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE SET-ASIDE AND THAT OF THE A.O. RESTORED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E-FIRM HAD RECEIVED RS.88,68,352/- FROM M/S. ZOLOTO VALVES PVT. LTD; A COMPANY IN WHICH PARTNERS OF THE ASSESSEE HAD SUBSTANTIAL INTEREST. THE DIRECTORS OF THE COMPANY HAD ALSO SUBSTANTIAL INTEREST IN THE ASSESS EE-FIRM. THE AO DID NOT ACCEPT THE EXPLANATION GIVEN BY THE ASSESSEE AND TR EATED THE SAID AMOUNT AS DEEMED DIVIDEND OF THE ASSESSEE FIRM UNDER SECTION 2(22)(E) OF THE INCOME- TAX ACT, 1961. 4. THE LD. CIT(A) DELETED ADDITION BY RELYING UPON THE DECISION OF THE SPECIAL BENCH OF ITAT, MUMBAI BENCH, IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT. LTD. 118 ITD 1 AND DECISION OF JURISDI CTIONAL TRIBUNAL IN THE CASE OF DCIT, CIR.1 VS. THE MERCHANTS, JALANDHAR, IN ITA NO.331(ASR)/2009 DATED 26.08.2009 ON THE IDENTICAL ISSUE. THE LD. CIT(A) OTHERWISE ALSO DELETED THE ADDITION BY ACCEPTING TH E EXPLANATION OF THE ASSESSEE THAT THE COMPANY M/S. ZOLOTO VALVES PVT. L TD; HAD CHANGED ITS ACTIVITY FROM MANUFACTURING TO EARNING INCOME FROM RENT, INTEREST AND THAT LENDING OF FUNDS, WHICH HAD BECOME A SUBSTANTIAL PA RT OF THE BUSINESS OF THE COMPANY M/S. ZOLOTO VALVES PVT. LTD; AND THEREFORE , THE AMOUNT ADVANCED BY THE SAID COMPANY TO THE ASSESSEE COMPANY IS COVE RED BY THE EXCEPTION IN CLAUSE (II) OF SECTION 2(22)(E) OF THE ACT. 3 5. THE LD. DR, SH. R.L. CHHANALIA,RELIED UPON THE O RDER OF THE ASSESSING OFFICER. 6. THE LD. COUNSEL FOR THE ASSESSEE, SH. J.S. BHASI N,ADVOCATE, ON THE OTHER HAND, STRONGLY RELIED UPON THE ORDER OF THE L D. CIT(A), WHERE THE LD. CIT(A) HAD RELIED UPON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT. LTD. (SUPRA) AND T HE ORDER OF JURISDICTIONAL TRIBUNAL IN THE CASE OF DCIT, CIR.1 VS. THE MERCHANTS, JALANDHAR. MR. BHASIN ALSO PLACED ON RECORD, THE DE CISION OF ITAT, AMRITSAR BENCH IN THE CASE OF DY. COMMR. OF INCOME TAX, RAN GE-1, JALANDHAR VS. M/S. KAPSONS ELECTRO STAMPINGS, JALANDHAR, ITA NO.4 26(ASR)/2010 , DATED 17TH JUNE, 2011 ON THE IDENTICAL ISSUE. MR. J.S. B HASIN, FURTHER RELIED UPON THE DECISION OF THE LD. CIT(A) ON THE FINDINGS THAT M/S. ZOLOTO VALVES PVT. LTD. HAD CHANGED ITS ACTIVITY FROM MANUFACTURING TO EARNING INCOME FROM RENT, INTEREST AND LENDING OF FUNDS WHICH HAD BECOM E SUBSTANTIAL PART OF THE BUSINESS OF THE SAID COMPANY, WHO HAD ADVANCED THE MONEY TO THE ASSESSEE AND THEREFORE, THE SAID ADVANCE IS COVERED BY THE EXCEPTION OF CLAUSE (II) OF SECTION 2(22)(E) OF THE ACT. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. ON PERUSAL OF THE FACTS OF THE PRESENT CASE, WE ARE CONVINCED WITH THE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE SH. J.S. BHASIN, ADVOCATE AND THE FINDINGS OF THE LD. CIT(A). THE FACTS OF TH E PRESENT CASE ARE SQUARELY COVERED BY THE DECISION OF SPECIAL BENCH OF ITAT, MUMBAI, IN THE CASE OF 4 ACIT VS. BHAUMIK COLOUR PVT. LTD. (SUPRA) AND THE DECISION OF JURISDICTIONAL TRIBUNAL IN THE CASE OF DCIT, CIR.1 VS. THE MERCHANTS, JALANDHAR (SUPRA) AND ALSO THE DECISION OF ITAT, AM RITSAR BENCH IN THE CASE OF DY. COMMR. OF INCOME TAX, RANGE-1, JALANDHAR VS . M/S. KAPSONS ELECTRO STAMPINGS, JALANDHAR (SUPRA). IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F THE LD. CIT(A) WHO HAS RIGHTLY REVERSED THE ORDER OF THE A.O. ON ACCOUNT OF ADDITION OF DEEMED DIVIDEND. ALSO, WE UPHOLD THE VIEWS OF THE LD. CIT( A) IN HIS ORDER IN PARA 4.9 THAT THE ADVANCE IS COVERED BY EXCEPTION OF CLA USE (II) OF SECTION 2(22)(E) OF THE ACT. WE FIND NO INFIRMITY IN THE ORDER OF TH E LD. CIT(A) IN THIS RESPECT TOO. IN THE FACTS AND CIRCUMSTANCES, ALL THE GROUND S OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.248(ASR)/2011 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH AUGUST, 2012. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 TH AUGUST, 2012 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. ZOLOTO INDUSTRIES LTD. JALANDHAR. 2. THE ACIT R-IV, JLR. 3. THE CIT(A), JLR 4. THE CIT, JLR 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY