R.Lakshminarayanamoorthy, Coimbatore V. DCIT Corporate Circle 1, Coimbatore

ITA 2783/CHNY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9152 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 27-09-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS M SUBASHRI
• Assessee Lawyers: R KUMAR
• Keywords: Deemed dividend; Scheme of amalgamation; Commercial expediency
• Section: 2(22)(e)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , $% & , ) BEFORE SHRI GEORGE MATHAN , JUDICIAL MEMBER AND SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER ./ ITA NO.2783/CHNY/2018 /ASSESSMENT YEAR: 2011-12 SHRI R. LAKSHMINARAYANAMOORTHY, C/O. SHRI T.N.SEETHARAMAN, ADV., #384 (OLD NO.196), LLOYDS ROAD, CHENNAI-600 086. VS. THE DY. COMMISSIONER- OF INCOME TAX, CORPORATE CIRCLE-1, COIMBATORE. [PAN: AATPL 4105 E ] ( + /APPELLANT) ( ,-+ /RESPONDENT) + . / APPELLANT BY : MR.R.KUMAR, ADV. ,-+ . /RESPONDENT BY : MRS.M.SUBASHRI, JCIT . /DATE OF HEARING : 03.07.2019 . /DATE OF PRONOUNCEMENT : 03.07.2019 / O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, COIMBATORE, IN APPEAL NO.155/16-17 DATED 27.08.2018 FOR THE AY 2011-12. 2. MRS.M.SUBASHRI, JCIT, REPRESENTED ON BEHALF OF T HE REVENUE AND MR.R.KUMAR, ADV., REPRESENTED ON BEHALF OF THE ASSE SSEE. ITA NO.2783/CHNY/2018 :- 2 -: 3. IT WAS SUBMITTED BY THE LD.AR THAT THE ONLY ISSU E IN THE ASSESSEES APPEAL WAS AGAINST THE ACTION OF THE LD.CIT(A) IN C ONFIRMING THE ADDITION ON ACCOUNT OF THE DEEMED DIVIDEND MADE BY THE AO BY INVOKING THE PROVISIONS OF SEC.2(22)(E) OF THE ACT. IT WAS A SUB MISSION THAT THE ASSESSEE IS A MANAGING DIRECTOR OF M/S.CHROMA PRINT INDIA PVT. LTD. THE ASSESSEE WAS RECEIVING REMUNERATION OF RS.1.50 LAKH S P.M. AND RENT OF RS.1,87,500/- P.M. IT WAS A SUBMISSION THAT THE AS SESSEE HAD ALSO EARNED PROFIT COMMISSION OF RS.21,22,347/- DURING T HE YEAR. IT WAS A SUBMISSION THAT THE AO IN THE COURSE OF THE ASSESSM ENT NOTICED THAT THE ASSESSEE HAD RECEIVED AMOUNTS FROM M/S.CHROMA PRINT INDIA PVT. LTD., WHEN HE WAS HAVING DEBIT BALANCES, TO THE EXTENT OF RS.14,48,685/- ON VARIOUS DATES. CONSEQUENTLY, THE AO HAD INVOKED TH E PROVISIONS OF SEC.2(22)(E) OF THE ACT AND BROUGHT THE SAME TO TAX AS THE ASSESSEE WAS SHAREHOLDER AND WAS HAVING CONTROLLING INTEREST IN THE COMPANY ALSO. IT WAS A SUBMISSION THAT THE LD.CIT(A) HAD FOLLOWED TH E DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. P. K.BADIANI REPORTED IN 76 ITR 369 (BOM) AND UPHELD THE FINDINGS OF THE AO. IT WAS A SUBMISSION THAT FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR BEING THE AY 2010- 11, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE A SSESSEES OWN CASE IN ITA NOS.3408 & 3409/MDS/2016 FOR THE AY 2010-11 DAT ED 12.04.2017, WHEREIN, IT HAS HELD THE ISSUE AGAINST THE ASSESSEE AS FOLLOWS: 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED T HE MATERIAL ON RECORD. IN THIS CASE, ADMITTED FACT THAT THE AO ONLY CONSIDERED THE DEBT B ALANCE IN THE NAME OF ASSESSEE IN THE BOOKS OF ACCOUNT OF THE COMPANY TO CONSIDER THE DEE MED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT AT RS.52,64,846/- AND HE CANNOT DOUBT TH E CREDIT TOWARDS THE AMOUNT RECEIVED BY THE ASSESSEE IN RESPECT OF RS.11,51,373/- ON ACC OUNT OF RENT AND RS.9,33,600/- ON ACCOUNT OF SALARY FROM M/S.CHROMA PRINT INDIA PVT LT D., RS.2,98,180/- ON ACCOUNT OF COMMISSION PAYMENTS; OUT OF GROSS AMOUNT RECEIVED A T RS.76,47,999/-. NOW THE ITA NO.2783/CHNY/2018 :- 3 -: CONTENTION OF ASSESSEE IS THAT THE ASSESSEE RECEIVE D MONEY ON ACCOUNT OF COMMERCIAL EXPEDIENCY FOR MORTGAGING THE ASSESSEES PROPERTY T O BANK FOR ENABLING THE COMPANY, M/S.CHROMA PRINT INDIA PVT LTD., TO AVAIL LOAN FROM STATE BANK OF INDIA(SBI). HOWEVER, THE LOWER AUTHORITIES CLEARLY BROUGHT ON RECORD THAT TH ERE WAS NO AUTHORITY BY WAY OF BOARD RESOLUTION FROM M/S.CHROMA PRINT INDIA PVT LTD. TO G IVE THE SAID AMOUNT OF RS.52,64,846/- . WHEN THERE IS NO RESOLUTION OR AUTHORITY FROM THE BOARD OF DIRECTORS OF THE SAID COMPANY, TO GIVE THE SAID AMOUNT TO THE ASSESSEE, IT CANNOT BE SAID THAT THERE EXIST IN COMMERCIAL EXPEDIENCE TO GRANT SUCH A HUGE AMOUNT TO THE ASSES SEE. IN SUCH CIRCUMSTANCES, IN OUR OPINION, THE PROVISIONS SECTION 2(22)(E) OF THE ACT I S APPLICABLE TO THE AMOUNT RECEIVED BY THE ASSESSEE FROM THE SAID COMPANY AND IN THIS REGA RD, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(APPEALS) . THE VARIOUS CASE LAWS RE LYING BY THE LD.A.R HAVE NO APPLICATION TO THE FACTS OF THE CASE. AS IN THIS CASE, THERE IS NO BOARD RESOLUTION PASSED BY THE COMPANY TO GIVE MONEY TO THE ASSESSEE. FURTHER, LD. A.R MADE A PLEA THAT UNDER THE SCHEME OF AMALGAMATION M/S.MIND WARE PVT LTD., WAS A MALGAMATED WITH M/S.CHROMA PRINT INDIA PVT LTD. APPOINTMENT DATE WAS 01.04.2009. THE BALANCE IN THE NAME OF ASSESSEE ON THE SAID DATE IN THE BOOKS OF ACCOUNT OF M/S.MIND WA RE PVT LTD., WAS TO BE CONSIDERED AS BALANCE IN THE BOOKS OF ACCOUNT OF THE AMALGAMATED COMPANY ON THE APPOINTED DATE. HOWEVER, IT IS OBSERVED THAT BOARD OF DIRECTORS OF THE AMALGAMATED COMPANY HAD A BOARD MEETING ON 30.06.2010 APPROVING THE SCHEME OF AMALG AMATION. THE PETITION OF AMALGAMATION WAS DATED 23.07.2010. HENCE, THE STATE MENT OF THE ASSESSEE IS THAT THE BALANCE IN THE BOOKS OF ACCOUNT OF M/S.MIND WARE PVT LTD., WAS TO BE CONSIDERED HAVE NO MERIT. MORE SO, THE BALANCE APPEARED IN THE BOOKS O F ACCOUNT OF M/S.CHROMA PRINT INDIA PVT LTD. WAS BEFORE FILING THE AMALGAMATION PETITION DT .23.07.2010. BEING SO, THIS ARGUMENT CANNOT HOLD ANY MERIT. THIS ARGUMENT IS ALSO REJECT ED. 8. FURTHER, LD.A.R ARGUED THAT DAY TO DAY CUMULATIV E BALANCE TO BE CONSIDERED TO DETERMINE THE DEEMED DIVIDEND. WE HAVE NO DISPUTE REGARDING T HIS ARGUMENT. HOWEVER, THE AO ONLY CONSIDERED THE DAY TO DAY DEBIT BALANCE IN THE BOOK S OF ACCOUNT OF THE COMPANY, M/S.CHROMA PRINT INDIA PVT LTD. IN THE NAME OF ASSES SEE AND HE HAS ALREADY EXCLUDED THE OTHER AMOUNT PAYABLE TO THE ASSESSEE. BEING SO, WE DO NOT FIND ANY MERIT IN THIS ARGUMENT. HENCE, THIS GROUND RAISED BY THE ASSESSEE STANDS DI SMISSED. 4. IT WAS A SUBMISSION THAT THE CO-ORDINATE BENCH O F THIS TRIBUNAL HAD NOT CONSIDERED THE DECISION OF THE HONBLE KOLKATTA HIGH COURT IN THE CASE OF SHRI PRADIP KUMAR MALHOTRA REPORTED IN [2011] 15 TAXMANN.COM 66 (CAL.), WHEREIN, IN PARA NO.10, IT HAS BEEN HELD AS FOLLOWS: 10. AFTER HEARING THE LEARNED COUNSEL FOR THE PA RTIES AND AFTER GOING THROUGH THE AFORESAID PROVISIONS OF THE ACT, WE ARE OF THE OPIN ION THAT THE PHRASE 'BY WAY OF ADVANCE OR LOAN' APPEARING IN SUB-CLAUSE (E) MUST BE / CONSTRUED TO MEAN THOSE ADVANCES OR LOANS WHICH A SHARE HOLDER ENJOYS FOR SIMPLY ON ACCOUNT O F BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIX ED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING N OT LESS THAN TEN PER CENT OF THE VOTING POWER; BUT IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHARE HOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE CO MPANY RECEIVED FROM SUCH A SHARE HOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CANNOT BE SAID T O A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, FOR GRATUITOUS LOAN OR AD VANCE GIVEN BY A COMPANY TO THOSE CLASSES OF SHARE HOLDERS WOULD COME WITHIN THE PURV IEW OF SECTION 2(22) BUT NOT TO THE CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHARE HOLDER. 5. IT WAS A SUBMISSION THAT THE ADDITION MADE WAS L IABLE TO BE DELETED. ITA NO.2783/CHNY/2018 :- 4 -: 6. IN REPLY, THE LD.DR VEHEMENTLY SUPPORTED THE ORD ER OF THE LD.CIT(A). IT WAS A SUBMISSION THAT THE TRIBUNAL HA D ALREADY HELD THE ISSUE AGAINST THE ASSESSEE IN THE EARLIER ASSESSMEN T YEARS AND NO NEW FACTS HAVE BEEN BROUGHT OUT TO DISTINGUISH THE SAID ORDER. IT WAS A FURTHER SUBMISSION THAT THE DECISION IN THE CASE OF SHRI PR ADIP KUMAR MALHOTRA WAS NOT APPLICABLE AND THE FACTS HAVE ALSO NOT BEEN BROUGHT OUT TO SHOW AS TO HOW THE DECISION APPLIED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 8. A PERUSAL OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF SHRI PRADIP KUMAR MALHOTRA SHOWS THAT IN THE SAID DECISI ON, IT WAS HELD THAT IF THE ADVANCE GIVEN BY THE COMPANY TO THE ASSESSEE SH AREHOLDER BY WAY OF COMPENSATION, WAS FOR KEEPING HIS PROPERTY ON MORTG AGE ON BEHALF OF THE COMPANY TO REAP THE BENEFIT OF A LOAN, IT COULD NOT BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SEC.2(22)(E) OF THE ACT. IN THE PRESENT CASE, NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW TH AT THE AMOUNTS RECEIVED BY THE ASSESSEE WAS COMPENSATION FOR KEEPI NG HIS PROPERTY ON MORTGAGE ON BEHALF OF THE COMPANY TO REAP THE BENEF IT OF A LOAN. IN FACT, THE FACTS IN THE PRESENT CASE CLEARLY SHOW THAT THE ASSESSEE HAS BEEN DRAWING FUNDS IN THE FORM OF LOANS FOR EARLIER YEAR S ALSO. THIS BEING SO, CLEARLY, THE DECISION OF THE HONBLE CALCUTTA HIGH COURT HAS NO APPLICATION IN THE FACTS OF THE ASSESSEES CASE. FURTHER, NO F RESH FACTS HAVE BEEN BROUGHT OUT BY THE ASSESSEE TO DISLODGE THE FINDING S ARRIVED AT BY THE CO- ITA NO.2783/CHNY/2018 :- 5 -: ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE AY 2010-11. THIS BEING SO, RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, REFERRED TO SUPRA, THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 03 RD DAY OF JULY, 2019 IN CHENNAI. SD/- SD/- ( $% & ) ( VIKRAM SINGH YADAV ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 5 /DATED: 03 RD JULY, 2019. TLN . ,&$ 6$ /COPY TO: 1. + /APPELLANT 4. 7 /CIT 2. ,-+ /RESPONDENT 5. $ , /DR 3. 7 ( ) /CIT(A) 6. /GF