M/s Amco Fabrics (P) Limited, Ludhiana V. ACIT, Ludhiana

ITA 297/CHANDI/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60841 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI H.L. KARWA, V.P. AND SHRI T.R. SOOD, AM ITA NO. 297/CHD/2012 ASSESSMENT YEAR: 2005-06 M/S AMCO FABRICS (P) LTD. V. A.C.I.T. D-156, PHASE IV-A CIRCLE I, LUDHIANA FOCAL POINT, LUDHIANA PAN: AABCA 4253 B (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR RESPONDENT BY: SHRI AKHILESH GUPTA DATE OF HEARING: 07.05.2012 DATE OF PRONOUNCEMENT: 11.05.2012 ORDER PER T.R. SOOD, A.M IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING G ROUND. THAT ORDER PASSED U/S 250(6) OF THE INCOME-TAX ACT , 1961 IS AGAINST LAW AND FACTS ON THE FILE IN AS THE LD. CIT(A) WAS NOT JUSTIFIED TO UPHOLD THE ACTION OF THE ASSESSING OFFICER IN ARBITRARILY TREA TING A SUM OF RS. 1,26,000/- AS DEEMED DIVIDEND IN THE HANDS OF THE A PPELLANT COMPANY. 2. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD ADVANCED LOAN OF RS. 1,26,000/- TO SHRI RAVINDER PAL ARORA W HO IS A SHAREHOLDER OF THE COMPANY. ON A QUERY IT WAS SUBMITTED THAT LOAN WAS GIVEN BASICALLY TO SMT. SAVINDER KAUR. HOWEVER, THE LOAN WAS ROUTED THROUG H SHRI RAVINDER PAL ARORA. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THIS CONTENTION AND SUBJECTED THE SOME AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT . 3. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION O F THE ASSESSING OFFICER. 4. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT DEEMED DIVIDEND COULD HAVE BEEN POSSIBLY TAXED IN THE HAND S OF THE RECIPIENTS OF THE DIVIDEND AND NOT IN THE HANDS OF THE ASSESSEE-COMPA NY. 5. ON THE OTHER HAND, LD. DR FOR THE REVENUE SUBMIT TED THAT NO EVIDENCE WAS FILED BEFORE THE LD. CIT(A),THEREFORE, THE ADD ITION NEEDS TO BE CONFIRMED. 2 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND FORCE IN THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS A BASIC PRINCIPLE OF TAXATION THAT INCOME IS TO BE TAXED IN THE HANDS OF THE RECIPIENT S OF THE INCOME. DIVIDEND IS ALSO TYPE OF INCOME WHICH GETS GENERATED BY WAY OF DISTRIBUTION OF PROFITS TO THE SHARE HOLDERS OF A COMPANY. SECTION 2(22)(E) OF TH E ACT HAS ENLARGED THE DEFINITION BY MAKING CERTAIN PAYMENTS BY CLOSELY HE LD COMPANIES TO SHARE HOLDERS OUT OF THE ACCUMULATED PROFITS AS DEEMED DI VIDEND. HOWEVER, EVEN DEEMED DIVIDEND CAN BE TAXED ONLY IN THE HANDS OF T HE RECIPIENTS I.E. SHARE HOLDERS. BY NO STRETCH OF IMAGINATION, THE SAME CA N BE TAXED IN THE HANDS OF THE PAYEE. SINCE THE ASSESSEE-COMPANY HAS ONLY GIV EN A LOAN WHICH COULD HAVE BEEN POSSIBLY TREATED AS DEEMED DIVIDEND IN TH E HANDS OF THE SHARE HOLDER I.E. SHRI RAVINDER PAL SINGH ARORA BUT THE S AME CAN NOT BE TREATED AS INCOME IN THE HANDS OF THE ASSESSEE-COMPANY. ACCOR DINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 11.05.2012 SD/- SD/- (H.L. KARWA) (T.R. SOOD) VICE PRESIDENT ACCOUNTANT MEMBER DATED: 11 .05.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR 3