G.Balasubramanian, Coimbatore V. DCIT, Coimbatore

ITA 258/CHNY/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4417 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 12-07-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 27-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M SUBASHRI
• Assessee Lawyers: S SRIDHAR
• Keywords: Deemed dividend; Set aside
• Section: 2(22)(e); 14A; 6

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , ! ' # , % #& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.258/CHNY/2017 ) *) / ASSESSMENT YEAR : 2012-13 SHRI G. BALASUBRAMANIAN, NO.5, VINAYAGAR KOIL STREET, KRISHNASWAMY NAGAR, RAMANATHAPURAM, COIMBATORE 641 045. PAN : ACBPB 9344 D V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2, COIMBATORE. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE ./,- 0 1 / RESPONDENT BY : MS. M. SUBASHRI, JCIT 2 0 3% / DATE OF HEARING : 14.03.2019 45* 0 3% / DATE OF PRONOUNCEMENT : 21.03.2019 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -1, COIMBA TORE, DATED 23.11.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2 I.T.A. NO.258/CHNY/17 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS DISA LLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE I NCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). 3. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSES SEE DID NOT EARN ANY DIVIDEND INCOME, THEREFORE, THERE CANNOT BE ANY DISALLOWANCE IN VIEW OF THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. CHETTINAD LOGISTICS (P.) LTD. (2017) 80 TAXMANN.COM 221. 4. ON THE CONTRARY, MS. M. SUBASHRI, THE LD. DEPART MENTAL REPRESENTATIVE, SUBMITTED THAT EVEN THOUGH NO DIVID END INCOME WAS EARNED BY THE ASSESSEE, 0.5% OF INVESTMENT MADE DURING THE YEAR SHALL BE DEEMED TO BE INCOME OF THE ASSESSEE, THEREFORE, THE SAME HAS TO BE DISALLOWED. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE DID NOT EARN ANY EXEMPTED INCOME BY WAY OF DIVIDEND DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN VIEW OF THE JUDGMENT OF MADRAS HIGH COURT IN CHETTINAD LOGISTIC S (P.) LTD. (SUPRA), THERE CANNOT BE ANY DISALLOWANCE. IN VIEW OF THE ABOVE, WE 3 I.T.A. NO.258/CHNY/17 ARE UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHOR ITIES. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW A RE SET ASIDE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS D ELETED. 6. THE NEXT ISSUE ARISES FOR CONSIDERATION IS ADDIT ION MADE BY THE ASSESSING OFFICER UNDER SECTION 2(22)(E) OF THE ACT. 7. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE IS ONE OF THE DIRECTORS IN M/S SH REE MURUGAN FLOUR MILLS P. LTD. ACCORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER MADE ADDITION ON THE GROUND THAT M/S SHREE MURUGAN FLOUR MILLS P. LTD. ADVANCED MONEY TO M/S SWAMY TRADERS, WHICH IS A PROPRIETORSHIP CONCERN OF ONE SHRI V. KALYANARAMAN. THE LD.COUNSEL BY PLACING RELIANCE ON THE ACCOUNTS OF M /S SWAMY TRADERS IN THE BOOKS OF M/S SHREE MURUGAN FLOUR MIL LS P. LTD., SUBMITTED THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, NO PAYMENT WAS MADE EITHER BY WAY OF ADVANCE OR LOAN TO M/S SWAMY TRADERS. THEREFORE, A CCORDING TO THE LD. COUNSEL, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS NOT APPLICABLE AT ALL. ACCORDING TO THE LD. COUNSEL, I N THE BOOKS OF M/S GBJ HOTELS P. LTD., M/S SWAMY TRADERS HAD A CREDIT BALANCE OF 77,50,000/- AS ON 01.04.2011. THIS AMOUNT WAS TRAN SFERRED BY 4 I.T.A. NO.258/CHNY/17 WAY OF CREDIT ENTRIES. THEREFORE, ACCORDING TO THE LD. COUNSEL, THERE WAS NO LOAN OR ADVANCE BY M/S SHREE MURUGAN FLOUR M ILLS P. LTD. TO THE ASSESSEE-COMPANY. HENCE, THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTENT OF 77,50,000/- IS NOT CALLED FOR. 8. REFERRING TO THE CASE OF M/S SRI SAKTHI TRANSPOR T, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE AR E TWO ACCOUNTS. ONE IN THE NAME OF M/S SRI SIVASAKTHI ENTERPRISES A ND ANOTHER IN THE NAME OF SRI SAKTHI TRANSPORT. THE TRANSACTION BETWEEN M/S SHREE MURUGAN FLOUR MILLS P. LTD. AND M/S SRI SIVAS AKTHI ENTERPRISES IS A COMMERCIAL TRANSACTION. M/S SRI S IVASAKTHI ENTERPRISES USE TO PURCHASE WHEAT FROM M/S SHREE MU RUGAN FLOUR MILLS P. LTD. THEREFORE, ACCORDING TO THE LD. COUN SEL, IT IS A RUNNING CURRENT ACCOUNT IN A COMMERCIAL TRANSACTION BETWEEN THE COMPANIES, NAMELY, M/S SHREE MURUGAN FLOUR MILLS P. LTD. AND M/S SRI SIVASAKTHI ENTERPRISES. MOREOVER, ACCORDING TO THE LD. COUNSEL, THE TRANSACTION BETWEEN M/S SHREE MURUGAN FLOUR MIL LS P. LTD. AND SRI SAKTHI TRANSPORT IS ALSO A COMMERCIAL TRANSACTI ON. ACCORDING TO THE LD. COUNSEL, THE ASSESSEE GAVE HIS PERSONAL PRO PERTY AS A COLLATERAL SECURITY FOR THE LOAN AVAILED BY M/S SHR EE MURUGAN FLOUR MILLS P. LTD. IN OTHER WORDS, ACCORDING TO THE LD. COUNSEL, THE 5 I.T.A. NO.258/CHNY/17 ASSESSEES PERSONAL ASSETS WERE ENCUMBERED FOR THE LOAN BORROWED BY M/S SHREE MURUGAN FLOUR MILLS P. LTD. SINCE THE ASSESSEE HAD TO REPAY THE LOAN TAKEN IN THE NAME OF M/S SRI SAKTHI TRANSPORT, ACCORDING TO THE LD. COUNSEL, THE REPAYM ENT WAS MADE IN THE ACCOUNT ONLY TO KEEP A RECORD OF SUCH PAYMENT M ADE TO THE BANK. ACCORDING TO THE LD. COUNSEL, INSTEAD OF DEB ITING THE ACCOUNT OF SRI SIVASAKTHI ENTERPRISES, THE ACCOUNT WAS DEBI TED IN THE NAME OF SRI SAKTHI TRANSPORT FOR A BETTER CONTROL OF REP AYMENT TO THE BANK. THE LD.COUNSEL FURTHER EXPLAINED THAT THE TRANSACTI ONS BETWEEN M/S SHREE MURUGAN FLOUR MILLS P. LTD. AND M/S SRI SIVAS AKTHI ENTERPRISES ARE PURELY COMMERCIAL TRANSACTIONS CARR IED OUT IN THE ORDINARY COURSE OF BUSINESS. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE ADDITION OF 64,40,000/- AS DEEMED DIVIDEND INCOME IS NOT CALLED FOR. THE LD.COUNSEL PLACED HIS RELIANC E ON THE ORDER OF THIS TRIBUNAL IN CAI INDUSTRIES P. LTD. V. DCIT IN I.T.A. NO.356/MDS/2017 DATED 21.09.2017, A COPY OF WHICH I S AVAILABLE AT PAGE 20 OF THE PAPER-BOOK. 9. ON THE CONTRARY, MS. M. SUBASHRI, THE LD. DEPART MENTAL REPRESENTATIVE, SUBMITTED THAT SHRI V. KALYANARAMAN , PROPRIETOR OF M/S SWAMY TRADERS WAS EXAMINED ON 09.03.2015 UNDER SECTION 6 I.T.A. NO.258/CHNY/17 131 OF THE ACT. ACCORDING TO THE LD. D.R., HE EXPL AINED THAT HE HAS NOT CARRIED OUT ANY BUSINESS ACTIVITY WITH THE ASSE SSEE. CHEQUES WERE RECEIVED FROM VARIOUS PARTIES AND TRANSFERRED TO THE ASSESSEE HEREIN AND HIS GROUP COMPANIES. THEREFORE, ACCORDI NG TO THE LD. D.R., THE MONEY ADVANCED BY M/S SHREE MURUGAN FLOUR MILLS P. LTD. TO M/S SWAMY TRADERS IS NOTHING BUT A LOAN OR ADVANCE, HENCE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 10. REFERRING TO THE TRANSACTION OF M/S SHREE MURUG AN FLOUR MILLS P. LTD. WITH M/S SRI SAKTHI TRANSPORT, THE LD. D.R. SUBMITTED THAT THE MONEY WAS TRANSFERRED TO M/S SRI SAKTHI TRANSPORT A ND THE ASSESSEE HAS CREATED AN ILLUSION AS IF THE TRANSACT IONS WERE IN THE NORMAL COURSE OF BUSINESS. ACCORDING TO THE LD. D. R., THERE WAS NO TRANSACTION BETWEEN M/S SHREE MURUGAN FLOUR MILLS P . LTD. AND M/S SRI SAKTHI TRANSPORT, THEREFORE, THE CIT(APPEALS) H AS RIGHTLY CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. WITH REGARD TO M/S SWAMY TRADERS, THE ASSESSEE CLAIMS THAT IN THE BOOKS OF M/S GBJ HOTELS P. LTD., M/S SWAMY TRADERS HAD A CREDIT BALANCE OF 7 I.T.A. NO.258/CHNY/17 77,50,000/- AS ON 01.04.2011. THE ASSESSEE HAS PRO DUCED A COPY OF THE ACCOUNT EXTRACT OF M/S SWAMY TRADERS IN THE BOOKS OF M/S GBJ HOTELS P. LTD. WHICH SHOWS CREDIT BALANCE O F 77,50,000/- AS ON 01.04.2011. THEREFORE, AS RIGHTLY CLAIMED BY THE LD.COUNSEL FOR THE ASSESSEE, THIS AMOUNT WAS TRANSFERRED TO TH E ASSESSEE. HENCE, IT IS NOT CORRECT TO SAY THAT M/S SWAMY TRAD ERS TRANSFERRED ANY MONEY TO THE ASSESSEE WHICH WAS RECEIVED FROM M /S SHREE MURUGAN FLOUR MILLS P. LTD. IN VIEW OF THE ABOVE F ACTUAL SITUATION, THIS TRIBUNAL IS UNABLE TO UPHOLD THE ORDERS OF BOT H THE AUTHORITIES BELOW. 12. NOW COMING TO TRANSACTION WITH M/S SRI SAKTHI T RANSPORT AND M/S SRI SIVASAKTHI ENTERPRISES, IT IS NOT IN DISPUT E THAT M/S SRI SIVASAKTHI ENTERPRISES USE TO PURCHASE WHEAT FROM M /S SHREE MURUGAN FLOUR MILLS P. LTD. THEREFORE, THERE WAS A RUNNING ACCOUNT BETWEEN M/S SRI SIVASAKTHI ENTERPRISES AND M/S SHRE E MURUGAN FLOUR MILLS P. LTD. THE ASSESSEE CLAIMS THAT IN RE SPECT OF THE TRANSACTION, INSTEAD OF DEBITING ACCOUNT OF M/S SRI SIVASAKTHI ENTERPRISES, THE AMOUNT WAS DEBITED TO SRI SAKTHI T RANSPORT FOR BETTER CONTROL OF REPAYMENT TO THE BANK. IT IS ALS O NOT IN DISPUTE THAT THE ASSESSEE ENCUMBERED HIS PERSONAL ASSETS FOR THE LOAN 8 I.T.A. NO.258/CHNY/17 BORROWED BY M/S SHREE MURUGAN FLOUR MILLS P. LTD. THE ASSESSEE HAD REPAID THE AMOUNT TAKEN ORIGINALLY IN THE NAME OF M/S SRI SAKTHI TRANSPORT WHICH IS A PROPRIETORSHIP CONCERN OF THE ASSESSEE. IN THOSE CIRCUMSTANCES, THIS TRIBUNAL IS OF THE CONSID ERED OPINION THAT THE TRANSACTION IS PURELY A COMMERCIAL ONE AND THE ASSESSEE IS MAINTAINING RUNNING CURRENT ACCOUNT. HENCE, IN VIE W OF DECISION OF THIS BENCH OF THE TRIBUNAL IN CAI INDUSTRIES P. LTD . (SUPRA), WE ARE UNABLE TO UPHOLD THE ORDERS OF THE AUTHORITIES BELO W. ACCORDINGLY, ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ADDITION MADE UNDER SECTION 2(22)(E) OF THE ACT AS DEEMED DI VIDEND IS DELETED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 21 ST MARCH, 2019 AT CHENNAI. SD/- SD/- ( ! ' # ) ( . . . ) (INTURI RAMA RAO) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 7 /DATED, THE 21 ST MARCH, 2019. KRI. 9 I.T.A. NO.258/CHNY/17 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-1, COIMBATORE 4. PRINCIPAL CIT- 1, COIMBATORE 5. 9< .3 /DR 6. ) = /GF.