GOLANI BROTHERS, MUMBAI V. DCIT 12(2), MUMBAI

ITA 2615/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5092 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 10-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Bogus purchase; Advance ruling; Deemed dividend; Accommodation entries
• Section: 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.2615/M/2017 ASSESSMENT YEAR: 2011-12 M/S. GOLANI BROTHERS, 303, DALAMAL CHAMBERS, 29, NEW MARINE LINES, MUMBAI 400 020 PAN: AACFG5348R VS. DCIT-12 (2), MUMBAI (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI VIMAL PUNMIYA, A.R. REVENUE BY : SHRI CHAUDHARY ARUNKUMAR SINGH, D.R . DATE OF HEARING : 17.01.2019 DATE OF PRONOUNCEMENT : 07.02.2019 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 23.12.2017 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE ISSUE RAISED IN GROUND NO.1 BY THE ASSESSEE IS AGAINST THE ORDER OF LD. CIT(A) CONFIRMING THE ADDITION OF RS.1,29,61,420/- AS MADE BY THE AO ON ACCOUNT OF DE EMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX A CT BY IGNORING THE FACT THAT ASSESSEE IS NOT A SHAREHOLDER OF M/S. GOLANI CONSTRUCTION INDIA PVT. LTD. AND PROVISIONS QUA DEE MED DIVIDEND AS ENVISAGED UNDER SECTION 2(22)(E) ARE NO T APPLICABLE TO THE ASSESSEE WHO IS NOT SHAREHOLDER OF THE COMP ANY WHO HAS ITA NO.2615/M/2017 M/S. GULANI BROTHERS 2 ADVANCED THE MONEY. WHEREAS THE ISSUE RAISED IN GRO UND NO.2 IS AS REGARDS BOGUS PURCHASES TO THE TUNE OF RS.4,09,6 57/-. 3. THE LD. A.R. AT THE TIME OF HEARING SUBMITTED BE FORE THE BENCH THAT GROUND NO.2 IS NOT PRESSED. THEREFORE, THE SAME IS DISMISSED AS NOT BEING PRESSED. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED R ETURN OF INCOME ON 29.09.2011 DECLARING INCOME OF RS.1,50,61 ,430/- WHICH WAS REVISED ON 30.03.2013 DECLARING INCOME OF RS.1,91,57,582/-. THEREAFTER, THE CASE OF THE ASSE SSEE WAS SELECTED UNDER SCRUTINY. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, THE AO OBSERVED THAT ASSESSEE HAS TAKE N A LOAN OF RS.2,10,00,000/- FROM ITS SISTER CONCERN A CLOSELY HELD COMPANY M/S. GOLANI CONSTRUCTION INDIA PVT. LTD. THE AO OBS ERVED THAT TWO OF THE PARTNERS OF THE ASSESSEE FIRM ARE HOLDIN G 20000 SHARES OUT OF TOTAL SHARE HOLDING 30000 SHARES OF T HE SAID COMPANY AND THE ACCUMULATED PROFIT OF THE SAID COMP ANY AS ON 31.03.2010 WAS RS.1,29,61,420/- AND ON 31.03.2011 RS.1,95,84,331/-. ACCORDINGLY, THE AO ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE CALLING UPON TO EXPLAIN AS T O WHY THE LOAN RECEIPT FROM M/S. GOLANI CONSTRUCTION INDIA PVT. LT D. SHOULD NOT BE ASSESSED AS DEEMED DIVIDEND IN THE HANDS OF ASSE SSEE FIRM UNDER THE PROVISION OF SECTION 2(22)(E) OF THE ACT WHICH WAS REPLIED OF THE ASSESSEE VIDE WRITTEN SUBMISSION DAT ED 10.02.2014 BY SUBMITTING THAT THE ASSESSEE RECEIVED INTEREST BEARING LOANS FROM M/S. GOLANI CONSTRUCTION INDIA P VT. LTD. DURING 2011-12 AND THE SAID LOAN ALONG WITH INTERES T WAS RETURNED BY THE ASSESSEE TO M/S. GOLANI CONSTRUCTIO N INDIA PVT. LTD. THE AO, HOWEVER, RELYING ON THE DECISION OF H ONBLE ITA NO.2615/M/2017 M/S. GULANI BROTHERS 3 SUPREME COURT IN THE CASE OF SMT. TARULATA SHYAM V. CIT (1977) 108 ITR 345 (SC) TREATED THE SAID LOAN AS DEEMED DI VIDEND AND THUS ACCORDINGLY MADE THE ADDITION OF RS.1,95,84,13 3/- BY FRAMING ASSESSMENT UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 19.03.2014 BESIDES MAKING OTHER ADDITIONS. 5. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) PAR TLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING THE ADDITI ON TO THE TUNE OF RS.1,29,61,420/- BY OBSERVING AND HOLDING AS UND ER: 13.6 I HAVE GONE THROUGH THE DECISION ALSO RELIED ABOVE OF BINAL SEVENTILAL KORADIA (HUF) VS. DIT WHICH HAS RELIED ON THE DECISION OF B HAUMIK COLOUR P.LTD. (SUPRA), THE RELEVANT PART OF IT WHICH IS EXTRACTED HEREWITH. 4. WE OBSERVE THAT THE AO CONSIDERED A SUM OF RS. 6 0,64,205 RECEIVED FROM M/S. KARODIA CONSTRUCTIONS P. LTD., BY THE ASSESSEE AS DEEMED DIVIDEND UNDER SECTION 2(22) (E) OF THE ACT. HOWEVER, ID CIT (A) HAS HELD THAT ASSESSEE IS NOT AT ALL THE SHAREHOLDER OF M/S. KARODAI CONST RUCTIONS P. LTD. SHRI BINAL S KARODIA IS A SHARE HOLDER IN HIS INDIVIDUAL CAPACIT Y ONLY AND, THEREFORE, ASSESSEE HUF CANNOT BE SAID TO BE A SHAREHOLDER OR A BENEFICIAL SHARE HOLDER. ID CIT(A) BY CONSIDERING THE DECISION OF IT AT SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOUR PVT LTD. 118 ITD 1/(313 ITR 146(AT), HELD THAT LOANS RECEIVED BY THE ASSESSEE FROM M/S. KARODIA CO NSTRUCTIONS PLTD., CANNOT BE TREATED AS DEEMED DIVIDEND U/S.2(22)(E) O F THE ACT AS RECIPIENT OF MONEY SHOULD BE A REGISTERED SHARE HOLDER AS WELL A S BENEFICIAL SHARE HOLDER WHEREAS IN THE CASE OF THE ASSESSEE NONE OF THE ABO VE CONDITIONS ARE SATISFIED. 5. LD D.R, HAS NOT DISPUTED ABOVE FACTS AND AS MENT IONED ABOVE, BUT DUTIFULLY RELIED ON ORDER OF ASSESSING OFFICER. 6. THE ITAT, SPECIAL BENCH IN THE CASE OF BHAUMIK C OLOUR PVT LTD (SUPRA) HELD THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT CREA TE A FICTION BRINGING ANY AMOUNT PAID OTHERWISE THAN AS DIVIDEND INTO NET OF DIVIDEND. THEREFORE, THIS CLAUSE MUST BE GIVEN STRICT INTERPRETATION. IT WAS HELD THEREIN THAT IF THE PERSON IS A REGISTERED HOLDER BUT NOT THE BENEFICIA RY SHARE HOLDER, THEN PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. SIMI LARLY, IF A PERSON IS A BENEFICIARY SHARE HOLDER BUT NOT A REGISTERED SHARE HOLDER, THEN ALSO THE FIRST LIMB OF PROVISIONS OF SECTION 2(22) (E) WILL NOT AP PLY. THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF HOTEL HILL TOP (2009) 313 ITR 116(RAJ) HAS HELD THAT IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT, FOLLOWING FOUR CONDITIONS ARE THE SINE QUO NON I.E. (I) THE ASSESSEE SHOULD BE A SHAREHOLDER OF THE COM PANY ; ITA NO.2615/M/2017 M/S. GULANI BROTHERS 4 (II) THE COMPANY SHOULD BE A CLOSELY HELD COMPANY I N WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED ; (I) THERE MUST BE PAYMENT BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER OR ANY PAYMENT BY THE COMPANY ON BEHALF OF OR FOR THE INDI VIDUAL BENEFIT OF THE SHAREHOLDER ; AND (IV) THERE MUST BE SUFFICIENT ACCUMULATED PROFITS IN THE HANDS OF THE COMPANY UP TO THE DATE OF SUCH PAYMENT. IT IS EVIDENT FROM THE ABOVE THAT THE RECIPIENT OF THE LOAN FROM A CLOSELY HELD COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY I NTERESTED SHOULD BE A REGISTERED SHAREHOLDER AS WELL AS BENEFICIAL SHARE HOLDER IN THE LENDER COMPANY. HOWEVER, IN THE CASE BEFORE US, ASSESSEE I S NEITHER A SHAREHOLDER NOR A BENEFICIAL SHAREHOLDER AS OBSERVED BY ID CIT( A) AND NOT DISPUTED BY ID D. R. AT THE TIME OF HEARING OF THE APPEAL. THEREFO RE, THE VIEW TAKEN BY ID CIT(A) IS DIRECTLY COVERED BY THE DECISION OF ITAT SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR P. LTD. AS WELL AS DECISION OF HON'B LE RAJASTHAN HIGH COURT IN THE CASE OF HOTEL HILL TOP (SUPRA). IT IS RELEVANT TO STATE THAT SAME VIEW HAS BEEN TAKEN BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. UNIVERSAL MEDICARE PRIVATE LIMITED, 3 24ITR 263(BOM) AS WELL AS BY AUTHORITY OF ADVANCE RULING IN THE CASE OFMAD URA COATS P. LTD., IN RE, 274 ITR 609.' 13.7 IN EFFECT, THE DECISION OF THE APEX COURT IS T O REITERATE THAT THE DEEMING PROVISION IS ATTACTED ONCE THE CONDITION OF- I) THE BENEFICIAL SHAREHOLDER OF CLOSELY HELD COMPANY HAS SUBSTANTIAL INTEREST IN THE CONCERN. II) LOAN OR ADVANCE IS GIVEN. THE DECISION OF APEX COURT IS WITH REFERENCE TO THE SECOND LIMB OF THE PROVISIONS OF SECTION 2(22)(E). IN THE PRESENT CASE, BOTH CONDITIONS ARE FULFILLED AS THE TWO BENEFICIAL SHAREHOLDERS HAVE SUBSTANTIAL INTEREST IN THE CONCE RN (APPELLATE FIRM), HENCE THE DEEMING PROVISION IS ATTRACTED. 13.8 AS REGARDS THE AMOUNT INVOLVED AS PER THE LEDG ER COPY, THE OPENING BALANCE WAS RS.40 LACS, THERE WERE MULTIPLE TRANSACTIONS DU RING THE YEAR WHICH INCREASED TO RS. 1,34,63,7497- AND LATER A NEGATIVE BALANCE APPE ARING OF RS. 15,73,0477- AS ON 09-02-2011 WHICH LATER INCREASED TO RS.116,33,132/- OF 31-03-2011. THE CLOSING BALANCE IS NIL. THUS, THERE WERE TWO INSTANCES OF L OANS/ADVANCES GIVEN. AS THE RESERVES AND SURPLUS ON 31-03-2010 WAS RS.1,29,61,4 20/-, THE DEEMED DIVIDEND WOULD BE LIMITED TO SUCH AMOUNTS ONLY. THE ADDITION MADE IS THUS UPHELD. GROUNDS OF APPEAL NO. 3,4 & 5 ARE DISMISSED. 6. THE LD. A.R. VEHEMENTLY SUBMITTED BEFORE THE BEN CH THAT THE ASSESSEE IS NOT A SHAREHOLDER OF M/S. GOLANI CO NSTRUCTION INDIA PVT. LTD. AND THEREFORE THE PROVISION OF SECT ION 2(22)(E) OF ITA NO.2615/M/2017 M/S. GULANI BROTHERS 5 THE ACT WOULD NOT APPLY TO THE ASSESSEE. THE LD. A .R. SUBMITTED THAT THE ASSESSEE I.E. M/S. GOLANI BROTHERS A PARTN ERSHIP CONCERN HAVE FOUR PARTNERS MIRA S. GOLANI, KISHORE S. GOLANI, RAVI S. GOLANI AND NURSING LAL D. GOLANI UP TO 17. 02.2011 AND WERE HAVING PROFIT SHARE LOADING OF 7%, 50%, 7% AND 36% RESPECTIVELY. AFTER RECONSTITUTION ONLY FIRST THREE PARTNERS REMAINED IN THE ASSESSEE FIRM WITH PROFIT SHARING R ATIO OF 7%, 68.50% AND 24.50% RESPECTIVELY. IN THE M/S. GOLANI CONSTRUCTION INDIA PVT. LTD. THERE WERE THREE SHARE HOLDERS KISHORE S. GOLANI, RAVI S. GOLANI AND AKASH K. GOLA NI WITH SHAREHOLDINGS OF 15000, 5000 AND 10000 SHARE AGGREG ATING TO 30000 SHARES. THE LD. A.R. SUBMITTED THAT THE ASSE SSEE IS NEITHER A REGISTERED SHAREHOLDER NOR A BENEFICIAL S HAREHOLDER OF M/S. GOLANI CONSTRUCTION INDIA PVT. LTD. AND THEREF ORE THE PROVISIONS AS CONTAINED IN SECTION 2(22)(E) OF THE ACT IN RESPECT OF DEEMED DIVIDEND ARE NOT APPLICABLE TO THE ASSESSEE. THE LD. A.R. SUBMITTED THAT THE SECTION 2(22)(E) OF THE ACT FURTHER STATES THAT A SHAREHOLDER HAS TO BE A BENEFICIAL OWNER OF THE SHARES NOT BEING SHARES ENTITLED TO FIXED RATE OF DIVIDEND WHE THER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS HOLDING N OT LESS THAN 10% OF THE VOTING POWER. THEREFORE, THE LD. A.R. S UBMITTED THAT EXPRESSION SHAREHOLDER HAS TO BE BOTH REGISTERED SHAREHOLDER AS WELL AS BENEFICIAL SHAREHOLDER. THE LD. A.R. SU BMITTED THAT IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT BENEFI CIAL SHAREHOLDER THEN SECTION 2(22)(E) OF THE ACT WOULD NOT APPLY. SIMILARLY IF A PERSON IS BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER, THEN ALSO THE PROVISION OF SECTION 2(22)(E) OF THE ACT WILL NOT APPLY. THE LD. A.R. RELIED HEA VILY ON A SERIES OF DECISIONS NAMELY; ITA NO.2615/M/2017 M/S. GULANI BROTHERS 6 (1) CIT VS. ANKITECH P. LTD. (2011) 199 TAXMAN 341 (DEL. HC. (2) CIT VS. IMPACT CONTAINERS (P.) LTD. (2014) 48 TAXMANN.COM 294 (BOMBAY) (3) CIT VS. NARMINA TRADE INVESTMENT (P.) LTD. (201 7) 81 TAXMANN.COM 129 (BOMBAY HC) (4) CIT VS. SARVA EQUITY (P.) LTD. (2014) 44 TAXMAN N.COM 28 (KARNATAKA HC) (5) CIT VS. AR MAGNETICS (P.) LTD. (2014) 220 TAXMA N 209 (DELHI HC) (6) CIT VS. DAISY PACKERS (P) LTD. (2014) 220 TAXMA N 331 (GUJ HC) (7) ITO VS SAGAR SAHIL INVESTMENT (P) LTD. (2010) 3 7 SOT 1 (MUM) (URO) (8) ACIT VS. BHAUMIK COLOUR (P) LTD. (2009) 118 ITD 1 (MUM) (9) NIRMALA REALTORS (P) LTD. VS. DCIT (2011) 12 TAXMANNC.COM 216 (AGRA) (10) CIT VS. RAJ KUMAR SINGH & CO. (2005) 149 TAXMA N 254 (ALL). ALTERNATIVELY, THE LD. A.R. SUBMITTED THAT THE TRAN SACTIONS BETWEEN GROUP COMPANIES CAN NOT BE TREATED AS LOAN ADVANCES FALLING UNDER SECTION 2(22)(E) OF THE ACT AS THE IN TER-BANKING COMPANIES HAVE CURRENT ACCOUNT ACCOUNTING FOR ALL R ECEIPTS AND PAYMENTS. THE LD. A.R. SUBMITTED THAT DURING THE Y EAR 77 TRANSACTIONS BOTH RECEIPTS AND PAYMENTS WERE ENTERE D INTO WHICH CAN NOT BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. IN DEFENCE OF HIS ARGUMENT THE LD. A.R. RELIED ON A SERIES OF DECISIO NS NAMELY; (1) CIT VS. JAYANT H. MODI (2015) 58 TAXMANN.COM 36 6 (BOMBAY HC) (2) DICT VS. SCHUTZ DISHMAN BIO-TECH (P) LTD. (ITA NOS.958 & 959 OF 2015) (GUJ HC) (3) RAVINDRA R FOTEDAR VS. ACIT (2017) 85 TAXMANN. COM 314 (MUMBAI-TRIB) (4) SAAMAG DEVELOPERS (P) LTD. VS. ACIT (2018) 90 TAXMANN.COM 20 (DELHI-TRIB.) ITA NO.2615/M/2017 M/S. GULANI BROTHERS 7 THE LD. A.R. ALSO SUBMITTED DISTINGUISHED THE DECIS ION RELIED UPON BY THE LD. CIT(A) BY SUBMITTING THAT TH E SAME ARE DISTINGUISHABLE ON FACTS IN THE CASE OF GOPAL AND S ONS (HUF) VS CIT [2017] 77 TAXMANN.COM 71 (SC). THE FACTS IN TH IS CASE ARE THAT THE ASSESSEE WAS BOTH REGISTERED AS WELL AS A BENEFICIAL SHAREHOLDER OF THE COMPANY HOLDING MORE THAN 10% OF THE VOTING POWER WHEREAS IN THE PRESENT CASE THE ASSESSEE IS N EITHER A REGISTERED SHAREHOLDER NOR A BENEFICIAL SHAREHOLDER OF M/S. GOLANI CONSTRUCTION INDIA PVT. LTD. IN THE ABOVE C ASE OF GOPAL AND SONS (SUPRA) THE MONEY TO PURCHASE THE SHARES I N THE COMPANY WAS GIVEN BY ASSESSEE HUF AND THE SHARES W ERE ISSUED IN THE NAME OF KARTA SHRI GOPAL KUMAR SANEI BUT IN GENERAL RETURNS THE HUF WAS SHOWN AS REGISTERED AS WELL AS BENEFICIAL OWNER WHEREAS IN THE PRESENT CASE THE FA CTS ARE DIFFERENT. IN THE CASE OF NATIONAL TRAVEL SERVICES (2018) 89 TAXMANN.COM 332 SC, THE TWO PARTNERS WERE MEMBERS O F THE COMPANY/SHAREHOLDERS OF THE COMPANY AND THEY HELD T HE SHARES ON BEHALF OF THE FIRM WHICH HAPPENS TO BE A BENEFIC IAL SHAREHOLDER. HOWEVER, IN THE PRESENT CASE AGAIN TH E ASSESSEE IS NEITHER A REGISTERED SHAREHOLDER NOR A BENEFICIAL S HAREHOLDER. THE LD. A.R. SUBMITTED THAT AO ALSO RELIED ON THE A BOVE CASE NAMELY CIT VS. NATIONAL TRAVEL SERVICES (SUPRA) WHI CH IS DISTINGUISHABLE ON FACTS AND FINALLY SUBMITTED THAT IN VIEW OF THE AFORESAID FACTS AND THE RATIO LAID DOWN BY THE VARI OUS COURTS THE DECISION OF LD. CIT(A) MAY BE REVERSED AND ADDITION MADE BY THE AO ON ACCOUNT OF DEEMED DIVIDEND SHOULD BE DELETED. 7. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AUTHORITIES BELOW BY SUBMITTING THAT THIS IS A CLEA R CUT CASE WHERE THE ADVANCE GIVEN BY THE COMPANY TO THE ASSES SEE A ITA NO.2615/M/2017 M/S. GULANI BROTHERS 8 PARTNERSHIP FIRM WHOSE PARTNERS ARE SHAREHOLDERS IN THE LENDER COMPANY AND THEREFORE LOAN GIVEN TO THE ASSESSEE HA S TO BE ASSESSED UNDER SECTION 2(22)(E) OF THE ACT AND THER EFORE THE ORDER OF LD. CIT(A) SHOULD BE AFFIRMED. THE LD. D. R. RELIED ON ALL THE CASE LAWS AS RELIED BY THE LD. CIT(A) WHILE PAS SING THE ORDER. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE IS A REGISTERED FIRM WHO HAS TAKE N LOAN FROM ANOTHER COMPANY NAMELY M/S. GOLANI CONSTRUCTION IND IA PVT. LTD. OF RS.2.10 CRORES. THE FIRM HAS FOLLOWING SHA REHOLDERS: NAME OF PARTNER SHARE OF PROFIT FROM 01.04.2010 TO 17.02.2011 SHARE OF PROFIT FROM 18.02.2011 TO 31.03.2011 MIRA . S . GOLANI 7% 7% KISHORE . S . GOLANI 50% 68.5% RAVI.S.GOLANI 7% 24.5% NARSINGLAL D. GOLANI 36% - THE SHAREHOLDING OF THE LENDER COMPANY IS ALSO GI VEN AS UNDER: NAME OF SHAREHILDERS NOS. OF SHARES HOLDING % OF SHAREHOLDING KISHORE .S. GOLANI 15000 50% RAVI.S.GOLANI 5000 16.67% AKASH K GOLANI 1000 33.33% TOTAL 3000 100% IT IS CLEAR FROM THE ABOVE THAT TWO PARTNERS OF TH E ASSESSEE FIRM KISHORE S GOLANI AND RAVI S. GOLANI WERE HOLDI NG SHARES IN THE LENDER COMPANY I.E. M/S. GOLANI CONSTRUCTION IN DIA PVT. LTD. ITA NO.2615/M/2017 M/S. GULANI BROTHERS 9 TO THE EXTENT OF 15000 AND 5000 SHARES. THE SHAREH OLDING PERCENTAGE WORKED OUT 15% & 16.67% RESPECTIVELY FOR BOTH THE SHAREHOLDERS. THIS IS ALSO UNDISPUTED THAT THESE S HAREHOLDERS HAVE BOUGHT THE SHARES IN THE LENDER COMPANY ON THE IR OWN ABSOLUTE RIGHT AND NOT ON BEHALF OF THE FIRM. NOW THE ISSUE BEFORE US WHETHER THE LOAN ADVANCED BY THE M/S. GOL ANI CONSTRUCTION INDIA PVT. LTD. OF RS.2.10 CRORES TO T HE ASSESSEE FIRM COULD BE CONSIDERED AS DEEMED DIVIDEND UNDER S ECTION 2(22)(E) OF THE ACT TO THE EXTENT THE LENDER COMPAN Y HAS ACCUMULATED RESERVED AND SURPLUSES. IT IS CLEAR FR OM THE ABOVE THAT THE FIRM M/S. GOLANI BROTHERS IS NEITHER A REG ISTERED SHAREHOLDER NOR A BENEFICIAL SHAREHOLDER IN THE M/S . GOLANI CONSTRUCTION INDIA PVT. LTD. BEFORE REACHING ANY C ONCLUSION WE WOULD LIKE TO TOUCH UPON THE DECISION OF THE VARIOU S JUDICIAL FIRMS ON THE MATTER WHICH IS REPRODUCED AS UNDER: 10.. HON'BLE SUPREME COURT HAS APPROVED THE DECISI ON OF HON'BLE DELHI HIGH COURT IN CASE OF ANKITECH PVT. LTD., (2011) 199 TAXMAN 34 1, WHILE DECIDING THE CIVIL APPEAL NO.3961 OF 2013. HON'BLE SUPREME COURT OBSERVED THAT ONCE IT IS FOUND THAT SUCH A LOAN OR ADVANCE CANNOT BE TREATED AS DEEMED DIVIDEND AT THE HANDS OF SUCH A CONCERN WHICH IS NOT SHAREHO LDER, THE PROVISIONS OF SECTION 2(22) E CANNOT BE APPLIED. HON'BLE SUPREME COURT FURTHER OBSERVED AS UNDER:- 'HAVING PERUSED THE JUDGMENT AND HAVING HEARD ARGUM ENTS, WE ARE OF THE VIEW THAT THE JUDGMENT IS A DETAILED JUDGMENT GOING INTO SECTION 2(22)(E) OF THE INCOME TAX ACT WHICH ARISES AT THE CORRECT CONSTRUCTION OF THE SAID SECTION. WE DO NOT WISH TO ADD ANYTHING TO THE JUDGMENT EXCEPT TO SAY THAT WE AGREE THEREWITH.' 11. HON'BLE BOMBAY HIGH COURT IN THE CASE OF IMPACT CONTAINERS LTD., (2014) 48 TAXMAN.COM 294 OBSERVED THAT WHERE CERTAIN COMPANIE S ADVANCED MONEY TO ASSESSEE-COMPANY IN WHICH ONE DIRECTOR OF ASSESSEE WAS HOLDING MORE THAN 10 PER CENT EQUITY SHARES, SINCE ASSESSEE ITSELF WAS NOT S HAREHOLDER OF THOSE LENDING COMPANIES, IMPUGNED ADDITION MADE BY ASSESSING OFFI CER BY INVOKING PROVISIONS OF SECTION 2(22)(E) WAS NOT SUSTAINABLE. 12. HON'BLE KARNATAKA HIGH COURT IN THE CASE OF SAR VA EQUITY (P) LTD., (2014) 44 TAXMANN.COM 28 OBSERVED AS UNDER: ITA NO.2615/M/2017 M/S. GULANI BROTHERS 10 'WHETHER IN TERMS OF SECTION 2(22)(E) , IT IS ONLY PERSON WHOSE NAME IS ENTERED IN REGISTER OF SHAREHOLDERS OF COMPANY AS H OLDER OF SHARES WHO CAN BE SAID TO BE A SHAREHOLDER QUA COMPANY AND- NOT A PERSON BENEFICIALLY ENTITLED TO SHARES - HELD, YES - WHETHER, THEREFORE , IT IS ONLY WHERE A LOAN IS ADVANCED BY COMPANY TO REGISTERED SHAREHOLDER AND O THER CONDITIONS SET OUT IN SECTION 2 (22}(E) ARE SATISFIED, SAID AMOUNT OF LOAN WOULD BE LIABLE TO BE REGARDED AS DEEMED DIVIDEND WITHIN MEANING OF SA ID SECTION - HELD, YES.' 13. IN THE CASE OF CIT VS. AR MAGNETICS (P) LTD., ( 2014) 220 TAXMAN 209 (DELHI) (HC) & CIT VS. DAISY PACKERS (P) LTD., (2014) 220 TAXMAN 331 (GUJ) (HC), THE COURT OBSERVED AS UNDER:- 'THE ASSESSEE COMPANY HAD RECEIVED LOAN FROM ANOTHE R COMPANY. THE ASSESSEE WAS NOT A SHAREHOLDER OF THE OTHER COMPANY . HOWEVER, THERE WAS A COMMON SHAREHOLDER (INDIVIDUAL) WHO HELD MORE THA N 50% IN BOTH THE COMPANIES. IN VIEW OF THE ABOVE FACTS THE AO HELD T HAT THE AMOUNT RECEIVED BY THE ASSESSEE FROM AN ANOTHER COMPANY WAS A DEEME D DIVIDEND U/S 2(22)(E) OF THE ACT. THE CIT(A) UPHELD THE AO'S ORD ER. ON FURTHER APPEAL, THE TRIBUNAL DELETED THE ADDITION MADE BY AO FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN CIT V. ANKITECH (P.) L TD. 340 ITR 14 (DELHI) WHERE IT HAS BEEN HELD THAT DEEMED DIVIDEND PROVISIONS CA NNOT BE INVOKED MERELY BECAUSE THERE ARE COMMON SHAREHOLDERS BETWEEN THE T WO COMPANIES. THE HIGH COURT FOLLOWED THE AFORESAID JUDGMENT AND DISM ISSED REVENUE'S APPEAL.' 14. FROM THE RECORD, WE ALSO FOUND THAT ASSESSEE HA S NOT INVESTED EVEN A SINGLE RUPEE IN SHARE CAPITAL OF EIPL. BOTH THE COMPANIES EIPL AS WELL AS NHBPL ARE PART OF GUNDECHA GROUP OF COMPANIES. THE TRANSACTIONS BETWE EN THE GROUP COMPANIES WERE CURRENT AND INTER BANKING ACCOUNTS CONTAINING BOTH TYPE OF ENTRIES I.E. RECEIPTS AND PAYMENTS. THERE ARE TOTAL 61 TRANSACTI ONS ENTERED DURING THE YEAR ON NEED BASIS. IN CASE WHERE BOTH RECEIPTS AND PAYMENT S IS TAKING PLACE IN INTER BANKING ACCOUNTS THE SAME CANNOT BE REGARDED AS LOA NS AND ADVANCES AS CONTEMPLATED U/S 2(22)(E) AND THUS NO ADDITION COUL D BE MADE AS DEEMED DIVIDEND. OUR VIEW IS SUPPORTED BY THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF SCHUTZ DISHMAN BIO-TECH (P) LTD., (IT APPEAL NOS. 9 58 & 959 OF 2015 OF 2015) (GUJ. HC) OBSERVED AS UNDER:- 'IF THERE ARE TRANSACTIONS IN THE FORM OF CURRENT A CCOMMODATION ENTRIES, THEY CANNOT BE REGARDED TO BE LOANS AND ADVANCES FO R THE PURPOSE OF DEEMED DIVIDEND.' 15. ITAT MUMBAI BENCH IN THE CASE OF RAVINDRA R FOT EDAR (2017) 85 TAXMANN.COM 314 OBSERVED AS UNDER:- 'WHETHER WHERE ASSESSING OFFICER MADE ADDITION TO A SSESSEE'S INCOME 'UNDER SECTION 2(22)(E) IN RESPECT OF LOAN GIVEN BY ONE COMPANY TO ANOTHER COMPANY BY TAKING A VIEW THAT ASSESSEE WAS HOLDING SUBSTANTIAL INTEREST I.E. MORE THAN TEN PER CENT SHAREHOLDING IN BOTH COMPANI ES, IN VIEW OF FACT THAT TRANSACTIONS WERE IN FORM OF CURRENT ACCOMMODATION ENTRIES AND THERE WAS MOVEMENT OF FUNDS IN BOTH WAYS ON NEED BASIS, AMOUN T IN QUESTION COULD ITA NO.2615/M/2017 M/S. GULANI BROTHERS 11 NOT BE REGARDED AS DEEMED DIVIDEND AND, CONSEQUENTL Y, IMPUGNED ADDITION WAS TO BE DELETED - HELD, YES.' 16. DELHI TRIBUNAL IN THE CASE OF SAAMAG DEVELOPERS (P) LTD., (2018) 90 TAXMANN.COM 20 OBSERVED AS UNDER:- 'TRANSACTIONS BETWEEN GROUP CONCERNS BEING CURRENT AND INTER BANKING ACCOUNTS, ADDITIONS MADE TO ASSESSEE'S INCOME UNDER SECTION 2(22)(E) IN RESPECT OF AMOUNTS RECEIVED FROM VARIOUS GROUP COMP ANIES COULD NOT BE CONSIDERED AS LOANS AND ADVANCES AS CONTEMPLATED UN DER SECTION 2(22)(E), HENCE, NO ADDITIONS COULD BE MADE AS DEEMED DIVIDEN D UNDER SECTION 2(22)(E).' 17. IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS SI NCE TRANSACTION BETWEEN GROUP COMPANIES WERE CARRIED AS INTER BANKING ACCOUNTS CO NTAINING BOTH THE TYPES OF ENTRIES I.E., RECEIPTS AND PAYMENTS, HAVING ENTITLE D THESE TWO TRANSACTIONS, THE AMOUNT CANNOT BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY. IN THE CASE OF GOPAL AND SONS (HUF) VS CIT [2017] 77 TAXMANN.COM 71 (SC) , THE FACTS ARE DISTINGUISHABLE AS IN THAT CASE ASSESSEE WAS REGISTERED AS WELL AS BENEFICIAL SHAREHOLDER WHEREAS IN THE PRESENT THE ASSESSEE IS NEITHER A RE GISTERED NOR BENEFICIAL SHAREHOLDER OF M/S GOLANI CONSTRUCTION I NDIA PVT LTD. SIMILARLY THE FACTS IN CIT VS. NATIONAL TRAVEL SER VICES (SUPRA) ARE ALSO DISTINGUISHABLE ON FACTS. IN VIEW OF THE ABOVE LEGAL POSITION VIS A VIS THE RATIO LAID DOWN BY VARIOUS J UDICIAL FORUMS , WE ARE OF THE OPINION THAT THE PROVISIONS OF SECTIO N 2(22)(E) OF THE ACT ARE NOT APPLICABLE TO THE ASSESSEE AND ACCORDIN GLY AO IS DIRECTED TO DELETE THE ADDITION OF RS. 1,29,61,420/ - MADE ON ACCOUNT OF DEEMED DIVIDEND. 9. IN RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.02.2019. SD/- SD/- (MAHAVIR SINGH) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 07.02.2019. * KISHORE, SR. P.S. ITA NO.2615/M/2017 M/S. GULANI BROTHERS 12 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.