The ACIT, 1(2), Bhopal V. M/s Star Delta Transformer Ltd., Bhopal

ITA 273/IND/2011

• Counselvise Citation: 27322714 RSA 2011
• Duration Of Justice: 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: ANIL KHAA
• Keywords: Deemed dividend
• Section: 6

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM & SHRI R.C. SHARMA, AM ITA NO. 273/IND/2011 A.Y. 2007-08 ACIT-1(2), BHOPAL . APPELLANT VS. M/S. STAR DELTA TRANSFORMER LTD., BHOPAL . RESPONDENT APPELLANT BY : SHRI ARUN DEWAN, SR. DR RESPONDENT BY : SHRI ANIL KHABYA, CA DATE OF HEARING : 31.1.2012 DATE OF PRONOUNCEMENT : 29.2.2012 ORDER PER R.C. SHARMA, AM THIS APPEAL IS FILED BY THE REVENUE CHALLENGING TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -II, BHOPAL, DATED 30.6.2011 FOR THE AY 2007-08 ON THE G ROUND THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF 2 RS.17,16,832/- MADE BY THE AO ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E|) OF THE I.T. ACT, 1961. 2. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE AO IN THE ASSESSMENT ORDER OBSERVED THAT THE ASSESSEE HAS ACCEPTED LOAN OF RS. 40 LACS FROM M/S. ARK TRANSFORMERS P. LTD. AND FROM THE SHA REHOLDING PATTERNS OF M/S. ARK TRANSFORMERS P. LTD., IT WAS F OUND THAT MR. KISHORE GUPTA (ONE OF THE SHAREHOLDER OF PRESEN T ASSESSEE) HAS SHAREHOLDING OF 54.75%. THE AO ALSO OBSERVED TH AT MR. KISHORE GUPTA HOLDS 20.42% SHARES OF STAR DELTA LIM ITED, THEREFORE, MR. KISHORE GUPTA IS A COMMON SHAREHOLDE R IN BOTH THE COMPANIES. M/S. ARK TRANSFORMERS P. LTD. HAS RE SERVE AND SURPLUS OF RS.17,16,832.28 (AS SHOWN IN THE BALANCE -SHEET) AS ON 31.3.2006. THE AO, THEREFORE, CONSIDERING THE LO AN FROM M/S. ARK TRANSFORMERS P. LTD. TO THE TUNE OF ACCUMU LATED PROFIT OF M/S. ARK TRANSFORMERS P. LTD. OF RS.17,16 ,832/- ADDED TO THE INCOME OF THE PRESENT ASSESSEE. 3 3. AGGRIEVED WITH THE ACTION OF THE AO, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE SUBMI TTED THAT AS ON 31.3.2007, THE PAID UP CAPITAL OF THE ASSESSEE C OMPANY WAS RS.2,96,05,00, OUT OF WHICH, MR. KISHORE GUPTA HELD CAPITAL OF RS.58,35,000/-, WHICH AMOUNTED TO MERELY 19.70% OF THE TOTAL PAID UP CAPITAL OF THE COMPANY, THEREFORE, MR. KISH ORE GUPTA DOES NOT HOLD SUBSTANTIAL INTEREST IN THE ASSESSEE COMPANY. THE ADDITION OF RS.17,16,832/- IN THE HANDS OF THE ASSESSEE BY TAKING RECOURSE OF PROVISIONS OF SEC. 2(22)(E) OF T HE I.T. ACT COULD NOT BE SUSTAINED. THE LD. CIT(A) CONSIDERING THE SUBMISSIONS AND MATERIAL AVAILABLE ON RECORD DELETE D THE ADDITION OF RS.17,16,832/-. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS MADE BEFORE THE REVE NUE AUTHORITIES AND SUBMITTED THAT THE ASSESSEE COMPANY WAS NOT A SHAREHOLDER IN ANY OF THE COMPANIES FROM WHOM FUN DS WERE BORROWED BY THE ASSESSEE COMPANY. HE, THEREFORE, RE LYING ON 4 THE ORDER OF SPECIAL BENCH IN CASE OF ACIT VS. BHAU MIK COLOUR LAB (2009) 18 DTR (MUMBAI) (SB) TRIBUNAL 451 PLEADE D THAT DEEMED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT COULD BE ASSESSED ONLY IN THE HAND OF A PERSON WHO IS A SHAREHOLDER O F THE LENDER COMPANY AND NOT IN THE HANDS OF THE PERSON OTHER TH AN THE SHAREHOLDER. ON THE OTHER HAND, LD. SR. DR RELIED O N THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE ASSERTION MA DE BY THE LD. COUNSEL FOR THE ASSESSEE AND THE FINDINGS RECOR DED BY LD. CIT(A), BY BRINING ANY POSITIVE MATERIAL ON RECORD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D AND FIND THAT THE ISSUE IS COVERED BY THE ORDER OF SPECIAL B ENCH IN CASE OF ACIT VS. BHAUMIK COLOUR LAB (2009) 18 DTR (MUMBA I) (SB) TRIBUNAL 451, IN WHICH, IT WAS HELD THAT THE PROVIS IONS OF SEC. 2(22)(E) OF THE I.T. ACT CAN BE ATTRACTED ONLY WHEN LOAN OR ADVANCE HAS BEEN GIVEN TO A PERSON WHO IS NOT ONLY A REGISTERED SHAREHOLDER BUT ALSO A BENEFICIAL OWNER OF SHARES I N THE LENDER COMPANY. HENCE, BOTH THE CONDITIONS ARE TO BE CUMUL ATIVELY 5 SATISFIED FOR TAXING THE LOAN OR ADVANCE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT. IN THE PRESENT CASE, THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN M/S. ARK TRANSFORME R P. LTD. AND HENCE TRANSACTIONS BETWEEN THE TWO COMPANIES WI LL NOT FALL WITHIN THE AMBIT OF SEC. 2(22)(E) OF THE I.T. ACT. THE RATIO LAID DOWN IN CIT VS. HOTEL HILLTOP (2008) 217 CTR (RAJ) 527 AND CIT VS. INDIAN TECHNOCRAFT LTD., ITA NO.352 OF 2011, OR DER DATED 11.5.2011 (HONBLE DELHI HIGH COURT) FURTHER SUPPOR TS THE CASE OF THE ASSESSEE. 6. IN VIEW OF THE FACTS & CIRCUMSTANCES AS NARRATED ABOVE AND THE ABOVE JUDICIAL PRONOUNCEMENTS, WE HOLD THAT FOR BRINING AN ASSESSEE WITHIN THE PURVIEW OF SEC. 2(22 )(E) OF THE I.T. ACT, BOTH THE CONDITIONS REGARDING ASSESSEE BE ING REGISTERED AS WELL AS BENEFICIAL SHAREHOLDER OF THE LENDER COMPANY ARE REQUIRED TO BE ESTABLISHED. IN CASE ANY OF THE CONDITIONS IS NOT SATISFIED THEN DEEMING PROVISIONS CONTAINED U/S 2(22)(E) OF THE I.T. ACT CANNOT BE ATTRACTED. T HEREFORE, THE PRESENT ASSESSEE DOES NOT COME WITHIN THE AMBIT OF PROVISIONS 6 OF SEC. 2(22)(E) OF THE I.T. ACT. WE UPHOLD THE ORD ER OF THE LD. CIT(A). 7. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29.2.2012 . SD/- SD/- (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29.2.2012 COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR