ITO WD 21(1)(1), MUMBAI V. BINAL SEVANTILAL KORADIA (HUF), MUMBAI

ITA 2900/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8595 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 12-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Advance ruling; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B BENCH BEFORE SHRI B.R.MITTAL(JUDICIAL MEMBER) AND SHRI B.R.JAIN (ACCOUNTANT MEMBER) ITA NO.2900/MUM/2011 ASSESSMENT YEAR: 2007-08 ITO WARD 21(1)(1), 6 TH FLOOR, PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI. BINAL SEVENTILAL KORADIA(HUF), C-402, DOKUL DIVINE, IRLA S.V.ROAD, VILE PARLE(W), MUMBAI. PA NO.AAFHK 5117 B (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN RESPONDENT BY: NONE DATE OF HEARING: 3 .10.2012 DATE OF PRONOUNCEMENT: 10 .10.2012 ORDER PER B.R.MITTAL, JM: THE DEPARTMENT HAS FILED THIS APPEAL FOR ASSESSMENT YEAR 2007-08 AGAINST ORDER DATED 31.1.2011 OF LD CIT(A) ON THE FOLLOWING GROU ND: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD CIT(A) ERRED IN ALLOWING THE CLAIM OF THE ASSESSEE THAT C APITAL OF RS.60,64,205 RECEIVED BY THE ASSESSEE FROM M/S. KARODIA CONSTRUC TION PVT LTD., WHERE IN THE KARTA OF THE ASSESSEE IS A SHARE HOLDER, IS NOT COVERED U/S.2(22)(E) AS DEEMED DIVIDEND. 2. NONE APPEARED ON BEHALF OF ASSESSEE IN SPITE OF NOTICE. HENCE, WE DECIDED TO DISPOSE OFF THE APPEAL BY HEARING LD D.R. AND CONSI DERING THE MATERIAL AVAILABLE ON RECORD. 3. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF AUTHO RITIES BELOW AND SUBMISSION OF LD D.R. ITA NO.2900/MUM/2011 ASSESSMENT YEAR: 2007-08 2 4. WE OBSERVE THAT THE AO CONSIDERED A SUM OF RS.60 ,64,205 RECEIVED FROM M/S. KARODIA CONSTRUCTIONS P. LTD., BY THE ASSESSEE AS D EEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. HOWEVER, LD CIT(A) HAS HELD T HAT ASSESSEE IS NOT AT ALL THE SHAREHOLDER OF M/S. KARODAI CONSTRUCTIONS P. LTD. SHRI BINAL S KARODIA IS A SHARE HOLDER IN HIS INDIVIDUAL CAPACITY ONLY AND, THEREFORE, ASS ESSEE HUF CANNOT BE SAID TO BE A SHAREHOLDER OR A BENEFICIAL SHARE HOLDER. LD CIT(A ) BY CONSIDERING THE DECISION OF ITAT SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOU R PVT LTD. 118 ITD 1/(313 ITR 146(AT), HELD THAT LOANS RECEIVED BY THE ASSESSEE F ROM M/S. KARODIA CONSTRUCTIONS PLTD., CANNOT BE TREATED AS DEEMED DIVIDEND U/S.2(2 2)(E) OF THE ACT AS RECIPIENT OF MONEY SHOULD BE A REGISTERED SHARE HOLDER AS WELL AS BENEFICIAL SHARE HOLDER WHEREAS IN THE CASE OF THE ASSESSEE NONE OF THE ABOVE CONDITIO NS ARE SATISFIED. 5. LD D.R. HAS NOT DISPUTED ABOVE FACTS AND AS MENT IONED ABOVE, BUT DUTIFULLY RELIED ON ORDER OF ASSESSING OFFICER. 6. THE ITAT, SPECIAL BENCH IN THE CASE OF BHAUMIK C OLOUR PVT LTD (SUPRA) HELD THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT CREATE A FICTION BRINGING ANY AMOUNT PAID OTHERWISE THAN AS DIVIDEND INTO NET OF DIVIDEND. T HEREFORE, THIS CLAUSE MUST BE GIVEN STRICT INTERPRETATION. IT WAS HELD THEREIN THAT IF THE PERSON IS A REGISTERED HOLDER BUT NOT THE BENEFICIARY SHARE HOLDER, THEN PROVISIONS OF SE CTION 2(22)(E) WILL NOT APPLY. SIMILARLY, IF A PERSON IS A BENEFICIARY SHARE HOLDE R BUT NOT A REGISTERED SHARE HOLDER, THEN ALSO THE FIRST LIMB OF PROVISIONS OF SECTION 2(22)( E) WILL NOT APPLY. THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF HOTEL HILL TOP (2009) 313 ITR 116(RAJ) HAS HELD THAT IN ORDER TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF TH E ACT, FOLLOWING FOUR CONDITIONS ARE THE SINE QUO NON I.E. (I) THE ASSESSEE SHOULD BE A SHAREHOLDER OF THE CO MPANY ; (II) THE COMPANY SHOULD BE A CLOSELY HELD COMPANY I N WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED ; (III) THERE MUST BE PAYMENT BY WAY OF ADVANCE OR LO AN TO A SHAREHOLDER OR ANY PAYMENT BY THE COMPANY ON BEHALF OF OR FOR THE INDI VIDUAL BENEFIT OF THE SHAREHOLDER ; AND (IV) THERE MUST BE SUFFICIENT ACCUMULATED PROFITS I N THE HANDS OF THE COMPANY UP TO THE DATE OF SUCH PAYMENT. ITA NO.2900/MUM/2011 ASSESSMENT YEAR: 2007-08 3 IT IS EVIDENT FROM THE ABOVE THAT THE RECIPIENT OF THE LOAN FROM A CLOSELY HELD COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED S HOULD BE A REGISTERED SHAREHOLDER AS WELL AS BENEFICIAL SHARE HOLDER IN THE LENDER COMPA NY. HOWEVER, IN THE CASE BEFORE US, ASSESSEE IS NEITHER A SHAREHOLDER NOR A BENEFICIAL SHAREHOLDER AS OBSERVED BY LD CIT(A) AND NOT DISPUTED BY LD D.R. AT THE TIME OF HEARING OF THE APPEAL. THEREFORE, THE VIEW TAKEN BY LD CIT(A) IS DIRECTLY COVERED BY THE DECIS ION OF ITAT SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR P. LTD. AS WELL AS DECISION OF HO NBLE RAJASTHAN HIGH COURT IN THE CASE OF HOTEL HILL TOP (SUPRA). IT IS RELEVANT TO S TATE THAT SAME VIEW HAS BEEN TAKEN BY HONBLE BOMBAY HIGH COURT IN THE CASE OF COMMISSION ER OF INCOME-TAX V. UNIVERSAL MEDICARE PRIVATE LIMITED, 324 ITR 263(BOM) AS WELL AS BY AUTHORITY OF ADVANCE RULING IN THE CASE OF MADURA COATS P. LTD., IN RE, 274 ITR 609. 7. IN VIEW OF ABOVE, WE DO NOT FIND ANY INFIRMITY I N THE ORDER OF LD CIT(A). HENCE, WE UPHOLD HIS ORDER BY REJECTING GROUND OF APPEAL T AKEN BY DEPARTMENT. 8. IN THE RESULT, APPEAL FILED BY DEPARTMENT IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON 10 TH OCTOBER, 2012 SD/- (B.R.JAIN) ACCOUNTANT MEMBER SD/- (B.R. MITTAL) JUDICIAL MEMBER MUMBAI, DATED 10 TH OCTOBER, 2012 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS),32, MUMBAI 4. COMMISSIONER OF INCOME TAX,CITY-21 , MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH B MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI