ACIT, CHENNAI V. S.Ravindranathan, CHENNAI

ITA 2841/CHNY/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9165 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.2841/MDS/2014 ( )( / ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(3), CHENNAI 600 034. V. SHRI S. RAVINDRANATHAN, NEW NO.10, OLD NO.5, SARADAMBAL STREET, GOKULAM COLONY, T. NAGAR, CHENNAI 600 017. PAN : AABPR 7924 H (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI B. KOTESWARA RAO, CIT -.+, / 0 / RESPONDENT BY : NONE 1 / 2% / DATE OF HEARING : 05.05.2016 3') / 2% / DATE OF PRONOUNCEMENT : 09.06.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IV, CHEN NAI, DATED 21.08.2014 AND PERTAINS TO ASSESSMENT YEAR 2008-09. 2 I.T.A. NO.2841/MDS/14 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION MADE BY THE ASSESSING OFFICER UNDER SECTIO N 2(22)(E) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT). 3. NO ONE APPEARED FOR THE ASSESSEE INSPITE OF SERV ICE OF NOTICE. THEREFORE, WE HEARD SHRI B. KOTESWARA RAO, THE LD. DEPARTMENTAL REPRESENTATIVE AND PROCEED TO DISPOSE THE APPEAL ON MERIT. 4. ACCORDING TO THE LD. D.R., THE ASSESSEE IS THE M ANAGING DIRECTOR OF M/S MPL PARTS PVT. LTD. AND M/S MPL CAR S PVT. LTD. ACCORDING TO THE LD. D.R., THE ASSESSEE BEING A COM MON DIRECTOR IN BOTH THE COMPANIES, RECEIVED LOAN AND ADVANCE FROM M/S MPL CARS PVT. LTD. TO THE EXTENT OF ` 13,66,50,599/-. THE LD. D.R. FURTHER SUBMITTED THAT M/S MPL CARS PVT. LTD. IS A SUBSIDIA RY COMPANY OF M/S MPL PARTS PVT. LTD. ACCORDING TO THE LD. D.R., THE ASSESSEE BEING THE DIRECTOR, IS HOLDING MORE THAN 50% SHARES IN THE HOLDING COMPANY, NAMELY, M/S MPL PARTS PVT. LTD. BY VIRTUE OF MAJORITY SHAREHOLDER IN THE PARENT COMPANY, THE ASSESSEE VIR TUALLY CONTROLLED THE ENTIRE ADMINISTRATION OF M/S MPL CARS PVT. LTD. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSEE IS A BENEFI CIAL SHAREHOLDER 3 I.T.A. NO.2841/MDS/14 OF M/S MPL CARS PVT. LTD. THEREFORE, THE CIT(APPEA LS) IS NOT CORRECT IN DELETING THE ADDITION MADE BY THE ASSESS ING OFFICER. 5. WE HAVE HEARD LD. DEPARTMENTAL REPRESENTATIVE AN D ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. M/S MPL CARS PVT. LTD. IS ADMITTEDLY A SUBSIDIARY COMPANY OF M/S MPL PARTS PV T. LTD. IT IS ALSO NOT IN DISPUTE THAT THE PRESENT ASSESSEE IS HO LDING MORE THAN 50% SHARES IN M/S MPL PARTS PVT. LTD. ADMITTEDLY, THE ASSESSEE RECEIVED LOAN FROM M/S MPL CARS PVT. LTD. IN WHICH THE ASSESSEE IS NOT A SHAREHOLDER. THIS IS NOT IN DISPUTE. THE QU ESTION ARISES FOR CONSIDERATION IS - WHEN THE ASSESSEE RECEIVED ADVA NCE FROM M/S CARS PVT. LTD. IN WHICH HE IS NOT SHAREHOLDER, HOWE VER, THE PARENT COMPANY IS A SHAREHOLDER, WHETHER ADVANCE RECEIVED BY THE ASSESSEE HAS TO BE TREATED AS DEEMED DIVIDEND IN HI S HANDS? 6. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. UNDER THE SCHEME OF INCOME-TA X ACT, DIVIDEND HAS TO BE ASSESSED ONLY IN THE HANDS OF THE SHAREHO LDER AND NOT IN THE HANDS OF THIRD PARTY. ADMITTEDLY, THE ASSESSEE IS NOT A SHAREHOLDER OF M/S MPL CARS PVT. LTD. THE ADVANCE MADE BY M/S MPL CARS PVT. LTD. CAN BE FOR THE BENEFIT OF M/S MP L PARTS PVT. LTD., THE PARENT COMPANY. IN OTHER WORDS, THE ADVA NCE RECEIVED BY 4 I.T.A. NO.2841/MDS/14 THE ASSESSEE MAY BE FOR THE BENEFICIAL INTEREST OF M/S MPL PARTS PVT. LTD. WHEN THE ADVANCE MADE AT THE INSTANCE OF M/S MPL PARTS LTD., THIS TRIBUNAL IS OF THE CONSIDERED OPINION TH AT UNDER THE SCHEME OF INCOME-TAX ACT, THE DIVIDEND INCOME HAS T O BE ASSESSED ONLY IN THE HANDS OF SHAREHOLDER EVEN THOUGH THE MO NEY WAS ADVANCED TO THIRD PARTY FOR THE BENEFIT OF THE SHAR EHOLDER. IN THIS CASE, THE MONEY WAS ADVANCED TO THE ASSESSEE. HOWE VER, THE ASSESSEE IS NOT A SHAREHOLDER OF M/S MPL CARS PVT. LTD. THEREFORE, THERE IS NO QUESTION OF ASSESSING THE ADVANCE AS DE EMED DIVIDEND IN THE HANDS OF THE PRESENT ASSESSEE. THEREFORE, T HIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED ON 9 TH JUNE, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 9 TH JUNE, 2016. KRI. 5 I.T.A. NO.2841/MDS/14 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-IV, CHENNAI-34 4. 1 92 /CIT, CHENNAI-IV, CHENNAI-34 5. 7: -2 /DR 6. ;( < /GF.