DCIT CC 7(1), MUMBAI V. SAIKRIPA FOODS SERVICES P.LTD, MUMBAI

ITA 2619/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0040 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 13-06-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S BIST
• Keywords: Reasonable cause; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.2619/M/2017 ASSESSMENT YEAR: 2013-14 DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -7(1), R. NO.653, 6 TH FLR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S. SAIKRIPA FOODS SERVICES PVT. LTD., GALA NO.3/4, RAJA INDUSTRIAL ESTATE, NEAR INDRAPRASTH, MULUND (WEST), MUMBAI 400 080 PAN: AAEFR8176J (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI SUBHASH S. SHETTY, A.R. REVENUE BY : SHRI B.S. BIST, D.R. DATE OF HEARING : 13.06.2017 DATE OF PRONOUNCEMENT : 30.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 18.01.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2013-14. 2. THE PRESENT APPEAL IS BARRED BY 20 DAYS. THE LD . D.R. HAS SUBMITTED THAT DUE TO THE VARIOUS ADMINISTRATIVE FUNCTIONS, T HE DEPARTMENT COULD NOT FILE THE APPEAL IN TIME. WE FIND THAT THE DEPARTMENT HA D REASONABLE CAUSE. THEREFORE, WE CONDONE THE DELAY. 3. THE ONLY GROUND IN THIS APPEAL IS IN RELATION TO DELETION OF ADDITION OF RS.48,32,999/- MADE BY THE ASSESSING OFFICER (HEREI NAFTER REFERRED TO AS THE AO) UNDER SECTION 2(22)(E) OF THE ACT. ITA NO.2619/M/2017 M/S. SAIKRIPA FOODS SERVICES PVT. LTD. 2 4. THE SHORT FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT ASSESSEE COMPANY HA S TAKEN LOAN OF RS.97,59,694/- FROM ITS SISTER COMPANY M/S. SAIKRIP A FOODS SERVICES (MUMBAI) P. LTD. IT WAS SEEN FROM THE LEDGER ACCOU NT THAT THE AMOUNT HAS BEEN TAKEN AND REPAID ON VARIOUS DATES THROUGHOUT T HE YEAR. THE OUTSTANDING BALANCE PAYABLE BY THE ASSESSEE AT THE END OF THE Y EAR WAS RS.78,135/-. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THIS LOAN S HOULD NOT BE TREATED AS DEEMED DIVIDEND. THE ASSESSEE CONTENDED THAT ASSES SEE IS NOT A SHAREHOLDER OF THE LENDING COMPANY, HENCE, SECTION 2(22)(E) IS NOT APPLICABLE. THE ASSESSEE CONTENDED THAT IF THE BORROWING COMPANY IS A SHAREH OLDER OF A LENDING COMPANY AND HAS CONTROLLING INTEREST IN THE SAID CO MPANY, THEN SECTION 2(22)(E) IS APPLICABLE. BUT AO DID NOT ACCEPT THE CONTENTION AND THE MADE THE ADDITION. 5. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS ALLOWED THE CLAIM BY OBSERVING AS UNDER: 5.4 THE FACTS REGARDING RECEIPT OF RS.97,59,964/- BY THE APPELLANT COMPANY FROM THE LENDING COMPANY AND THE FACT THAT THE TWO DIRECTORS IN BOTH THE COMPANIES ARE COMMON AND ALSO HAVE SUBSTANTIAL SHARES HAS NOT BEEN DENIED BY THE APPELLANT. SO, THE DEEMED DIVIDEND AS DEFINE D U/S 2(22)(E) HAS ARISEN AND IT CANNOT BE SAID THAT THE AO, HAD ERRONEOUSLY INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, HOWEVER, IN VIEW OF TH E ABOVE SAID DECISIONS OF THE JURISDICTIONAL HIGH COURT, IT IS CLEAR THAT THE ADD ITION ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) HAS TO BE MADE IN THE HANDS O F THE SHARE HOLDER I SHAREHOLDERS OF THE LENDING COMPANY, WHO WERE THE B ENEFICIAL OWNER OF SHARES HOLDING NOT LESS THAN 10% OF THE VOTING POWER AND W HO WERE ALSO HOLDING SUBSTANTIAL SHARES IN THE BORROWING COMPANY. FURTHE R, THE ADDITION MADE U/S.2(22)(E) IN THE HANDS OF THE BORROWING COMPANY/ CONCERN WH O IS NOT A SHARE HOLDER IN THE LENDING COMPANY IS REQUIRED TO BE DELETED. SINCE, IN THIS CASE, THE APPELLANT COMPANY, WHICH IS THE BORROWING COMPANY, IS NOT A SHARE HOLDER IN THE LENDING COMPANY, THEREFORE, FOL LOWING THE ABOVE SAID DECISION OF THE JURISDICTIONAL HIGH COURT, THE ADDI TION OF RS . 48,32999/- MADE IN THE CASE OF THE APPELLANT COMPANY, IS DELETED. HOWE VER, THE A.O IS FREE TO TAKE APPROPRIATE ACTION IN THE CASE OF THE SHARE HO LDERS/DIRECTORS HOLDING SUBSTANTIAL SHARES IN BOTH THE LENDING AS WELL AS T HE BORROWING COMPANY, AS PER THE ABOVE-SAID DECISION OF THE HON'BLE BOMBA Y HIGH COURT. ITA NO.2619/M/2017 M/S. SAIKRIPA FOODS SERVICES PVT. LTD. 3 6. DURING THE COURSE OF HEARING, THE LD. A.R. SUBMI TTED THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD. - 324 ITR 263 (BOMBAY HIGH COURT). 7. THE LD. D.R. FAIRLY CONCEDED THAT THIS ISSUE IS COVERED BY THE DECISION OF HONBLE JURISDICTIONAL BOMBAY HIGH COURT IN THE CAS E OF CIT VS. UNIVERSAL MEDICARE PVT. LTD. (SUPRA). THEREFORE, LD. CIT(A) HAS DELETED THE SAME AND MY INTERFERENCE IS NOT REQUIRED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 30.06.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 30.06.2017. * KISHORE, SR. P.S. 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.