M/s. Stresscrete (P) Ltd, New Delhi V. DCIT, New Delhi

ITA 2768/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9695 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 08-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANOOP KUMA R SINGH
• Assessee Lawyers: R D GARG
• Keywords: Deemed dividend; Set aside
• Section: 2(22)(e)

Judgement Text

ITA NO. 2768/DEL/09 A.Y. 2005-06 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2768/DEL/2009 A.Y. 2005-06 M/S STRESSCRETE (P) LTD. VS. DCIT, CIRCLE 9(1), NEW DELHI E-42/3, OKHLA INDUSTRIAL AREA, PHASE-II, NEW DELHI [APPELLANT] (RESPONDENT) APPELLANT BY : SHRI R.D. GARG, CA RESPONDENT BY : SHRI ANOOP KUMAR SINGH, SR. DR ORDER PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDERS OF THE CIT(A) DATED 13.2.2009 FOR THE ASSESSMENT YEAR 2005-06. 2. THE ISSUE RAISED IN THE GROUNDS OF APPEAL IS :- THAT THE LD. CIT(A) IS NOT JUSTIFED IN CONFIRMING THE ADDITION OF RS. 10 LACS TAKEN BY THE APPELLANT COMPANY FROM ANOTHER GROUP CONCERN TREATING THE SAME AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT. 3. IN THIS CASE, DURING THE COURSE OF ASSESSMENT PR OCEEDINGS THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAD RECEIVED UNS ECURED LOAN FROM M/S BATRA ASSOCIATES LTD. AMOUNTING TO RS. 10 LACS. DETAILS OF SHAREHOLDING OF THE ASSESSEE COMPANY AS WELL AS M/S BATRA ASSOCIATES LTD. WERE C ALLED FOR AND IT WAS OBSERVED THAT ITA NO. 2768/DEL/09 A.Y. 2005-06 2 SHRI A.L. BATRA WAS HOLDING 19,16,720 SHARES OUT O F TOTAL SHAREHOLDING OF THE COMPANY, M/S STRESSCRETE PVT. LTD., BEING 34,64,720, I.E., S HRI A.L. BATRA WAS HOLDING MORE THAN 20% OF THE TOTAL SHAREHOLDING OF THE ASSESSEE COMPA NY. SIMILARLY, IT WAS ALSO FOUND THAT SHRI A.L. BATRA WAS HAVING 5,64,750 SHARES OUT OF T OTAL SHARES OF 21,37,500 OF M/S BATRA ASSOCIATES LTD., I.E. MORE THAN 10% OF THE TOTAL SH AREHOLDING OF M/S BATRA ASSOCIATES LTD. 4. ON THESE FACTS, THE ASSESSING OFFICER INVOKED TH E PROVISIONS OF SECTION 2(22)(E) AND MADE THE ADDITION AS DEEMED DIVIDEND INCOME UNDER S ECTION 2(22)(E) OF THE IT ACT. 5. UPON ASSESSEES APPEAL THE CIT(A) REFERRED TO TH E ASSESSEES SUBMISSIONS AND CONCLUDED AS UNDER:- IN VIEW OF THE LEGAL PROVISIONS WHICH SPECIFIED THAT ANY LOAN OR ADVANCE GIVEN TO A CONCERN IN WHICH SUCH SHARE HOLDERS AND AS A SUBSTA NTIAL INTEREST, MEANS A PERSONS WHO IS A BENEFICIAL OWNER OF SHARE CARRYING NOT LESS TH AN 20% OF VOTING POWER. ASSESSING OFFICER HAS BROUGHT ON RECORD THE SHARE HOLDING PAT TERN. IT HAS BEEN BROUGHT ON RECORD THAT THE SAID PAYMENT WAS CLAIMED BY THE ASSESSEE A S UNSECURED LOAN RECEIVED IN ITS BOOKS OF ACCOUNT. HENCE, ASSESSEES CLAIM NOW I.E. THE SAME WAS PAYMENT DURING THE COURSE OF DAY TO DAY BUSINESS TRANSACTION IS NOT AC CEPTABLE. IN THE VIEW OF THE ABOVE THE APPEAL IS DISMISSED STAND OF THE ASSESSING OFFI CER IS CONFIRMED. 6. AGAINST THIS ORDER THE ASSESSEE IS AN APPEAL B EFORE US. 7. WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. WE CAN GAINFULLY REFER TO THE DEEMING PROVISION OF SECTION 2(22)(E) WHICH REA DS AS UNDER:- ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF ANY SUM (WHETHER A S REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AF TER THE 31 ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLD ER, BEING A PERSON WHO IS BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING PO WER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE RE FERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEH ALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFIT S ITA NO. 2768/DEL/09 A.Y. 2005-06 3 8. WE FIND THAT AUTHORITIES BELOW HAVE FOUND THAT T HE ASSESSEES CASE FALLS UNDER THE SECOND LIMB IN THE ABOVE PROVISION. HOWEVER, THE SAME ASPECT WAS SUBJECT MATTER OF CONSIDERATION BY THE SPECIAL BENCH OF THIS TRIBUNAL IN 313 ITR 146 IN THE CASE OF BHAUMIK COLOUR PVT LTD. THE SPECIAL BENCH ELABORATELY CONSI DERED THE ISSUE AND CONCLUDED THAT IN SUCH A CASE DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT CAN BE ASSESSED ONLY IN THE HANDS OF THE SHARE HOLDER OF THE LENDER COMPANY AND NOT IN T HE HANDS OF ANY OTHER PERSON. 9. APPLYING THE ABOVE RATIO TO THE FACTS OF THE PRE SENT CASE, WE FIND THAT THE ASSESSEE COMPANY WHO HAS RECEIVED THE AMOUNT IS NOT THE SHAR EHOLDER OF THE LENDER COMPANY, AND AS SUCH CANNOT BE HELD LIABLE FOR DEEMED DIVIDED UNDER SECTION 2(22)(E) OF THE IT ACT. HENCE FOLLOWING THE PRECEDENT FROM THE SPECIAL BENCH, WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSE E. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESS EE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH SEPTEMBER, 2009. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 4 TH SEPTEMBER, 2009 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES