Dy.CIT, Central Circle-2, Hyderabad V. M/s/ Ind Barath Power Infra Pvt Ltd, Hyderabad

ITA 299/HYD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6264 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2017
• Appeal Filed By: Department
• Bench Allotted: B
• Next Hearing Date: 06-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2013
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 299/HYD/2013 ASSESSMENT YEAR: 2007-08 THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD VS M/S. IND BARATH POWER INFRA PVT LTD., HYDERABAD [PAN: AABCK3883B] (APPELLANT) (RESPONDENT) FOR REVENUE : SMT U. MINICHANDRAN, DR FOR ASSESSEE : SHRI SAMUEL NAGADESI, AR DATE OF HEARING : 19-12-2016 DATE OF PRONOUNCEMENT : 11-01-2017 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-VIJAYAWADA, DA TED 27-12-2012. THE ISSUE IN THIS APPEAL IS WITH REFERENC E TO ASSESSMENT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE IN COME TAX ACT [ACT] OF RS. 2,25,14,778/- DELETED BY THE CIT(A). TH E REVENUE HAS RAISED THE FOLLOWING GROUNDS: 2. THE ORDER OF THE CIT(A) IS PERVERSE AS NO REASO NS WERE GIVEN FOR THE DELETION OF SUCH A HUGE SUM OF MORE THAN RS. 2 CROR ES ADDED BY THE AO FOR THE DETAILED REASONS GIVEN IN THE ASSESSMENT ORDER. 3. THE CIT(A) ERRED IN IGNORING THE UNSECURED LOAN AS EXTRACTED AT PAGES 6 & 7 OF THE ASSESSMENT ORDER. ITA NO. 299/HYD/2013 :- 2 -: 4. THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDI TION OF RS. 1,05,00,000/- RECEIVED BY THE ASSESSEE COMPANY IN CASH FROM M/S I ND BARATH ENERGIES LTD DURING THE YEAR AS LONG AS ALL THE CONDITIONS W ERE SATISFIED U/S. 2(22)(E) TO TREAT THE SAME AS DEEMED DIVIDEND. 5. THE LEARNED CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF RS. 4,50,496/- BEING AMOUNT PAID BY M/S. IND BARATH ENE RGIES LTD ON BEHALF OF THE ASSESSEE COMPANY TOWARDS AUDIT EXPENSES WHIC H SHOULD BE TREATED AS DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT. 6. THE CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDI TION OF RS. 1,15,64,282/- REPRESENTING ACTUAL PAYMENT OF CASH BY M/S. IND BAR ATH ENERGIES LTD. ON BEHALF OF THE ASSESSEE BEING UNSECURED LOAN AND HEN CE DEEMED DIVIDEND U/S. 2(22)(E) OF THE IT ACT. GROUND NOS. 1 & 7 ARE GENERAL IN NATURE. 2. BRIEFLY STATED, THERE WERE CERTAIN TRANSACTIONS BETWEE N ASSESSEE AND ITS SUBSIDIARY COMPANY M/S. IND BHARAT E NERGIES LTD., IN WHICH ASSESSEE HELD 23% SHARES INITIALLY AN D LATER BECAME OWNER TO AN EXTENT OF 97.42% ON 30-09-2006. 3. ASSESSING OFFICER (AO) HAS EXAMINED THE TRANSACTION S BETWEEN THESE TWO COMPANIES AND FOUND THAT THERE ARE I NTER CORPORATE DEPOSITS TO AN EXTENT OF RS. 1,05,00,000/- MAD E BY THE SUBSIDIARY COMPANY AND ALSO LOAN TRANSACTIONS TO AN EXTENT OF RS. 1,15,64,282/- AND ALSO REIMBURSEMENT OF EXPENSES TO A THIRD PARTY TO AN EXTENT OF RS. 4,50,496/-. THUS, TOTAL AMOUNT OF R S. 2,25,14,778/- WAS CONSIDERED AS DEEMED DIVIDEND. ASSESSEE MADE DETAILED SUBMISSIONS BEFORE THE LD. CIT(A) THAT I NTER CORPORATE DEPOSITS CANNOT BE CONSIDERED AS DEEMED DIV IDEND AND FURTHER THE TRANSACTIONS ARE NOT IN THE NATURE OF LOAN OR ADVANCES. LD. CIT(A) SUMMARISED THE SUBMISSIONS IN PARA 5.C(I) AS UNDER: 5C(I). THE AR DURING THE COURSE OF THE APPELLATE P ROCEEDINGS HAS PROTESTED THE MANNER IN WHICH THE ALLEGED DEEMED DI VIDEND HAS BEEN ITA NO. 299/HYD/2013 :- 3 -: BROUGHT TO TAX. AS PER HIM FOR APPLYING SECTION 2( 22)(E), THE FOLLOWING CONDITIONS ARE NECESSARY, VIZ: 1. UNDER SECTION 2(22)(E), IT SHOULD BE A PAYMENT 2. TO ANY PERSON BEING A SHAREHOLDER, WHO IS THE BENEF ICIAL OWNER OF SHARES, HOLDING NOT LESS THAN 10% OF THE V OTING POWER. (THE VOTING POWER MUST BE HELD IN THE COMPAN Y WHICH IS MAKING THE PAYMENT). 3. OTHERWISE, PAYMENT TO ANY CONCERN I.E., HUF, FIRM, BODY OF INDIVIDUALS, ASSOCIATION OF PERSONS OR A COMPANY IN WHICH, SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WH ICH HE HAS A SUBSTANTIAL INTEREST. SUBSTANTIAL INTEREST I N THE CONCERN IS DEFINED 20% IN THE CASE OF HUF, FIRM, AOP AND BO I AND 10% IN THE CASE OF COMPANY. THAT IS, IF A CONCERN IS A COMPANY, THE SHAREHOLDER SHOULD HOLD 10% IN THE PAY ING COMPANY AND ALSO IN THE CONCERN RECEIVING THE PAYME NT FROM THAT, IS A COMPANY. 4. ANY PAYMENT BY SUCH COMPANY ON BEHALF OR FOR THE IN DIVIDUAL BENEFIT OF SUCH SHAREHOLDER TO BE DEEMED TO BE A DI VIDEND IN THE HANDS OF A SHAREHOLDER WHO IS HOLDING SUBSTANTI AL INTEREST OF 10% IN THE COMPANY AND 20% OR 10% IN TH E CONCERN AS THE CASE MAY BE. 3.1. AFTER THAT IN A BRIEF ORDER IN 5.C(II), LD. CIT( A) DELETED THE ENTIRE AMOUNT STATING AS UNDER: 5C(II) BUT, HOWEVER, CONSIDERING THE OVERALL FACT S AND CIRCUMSTANCES OF THE CASE, A LOOK AT AS TO WHAT HAD ACTUALLY HAPPENED AND WHAT OUGHT TO HAVE BEEN HAPPENED REVEALS THAT I N THE CHANGES THAT HAVE BEEN OCCURRED ON 30.09.2006 WOULD NOT GIVE RIS E TO DEEMED DIVIDEND. IN THE CIRCUMSTANCES, THE AO IS DIRECTED TO DELETE THE SAME. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE UNAB LE TO UNDERSTAND ON WHAT BASIS LD. CIT(A) HAS CONCLUDED THAT THE AMOUNTS WOULD NOT GIVE RISE TO DEEMED DIVIDEND. THE ORDER OF THE AO INDICATES THAT AMOUNTS OF INTER CORPORATE DEPOSITS/UNSE CURED LOANS WERE RECEIVED ON 19-10-2006, 29-12-2006, 08-0 1-2007, 10-01-2007 AND 16-01-2007. THIS AMOUNT WAS CATEGORIS ED AS ITA NO. 299/HYD/2013 :- 4 -: UNSECURED LOAN WHEREAS IT WAS STATED AS INTER CORPOR ATE DEPOSIT. THE REFERENCE TO 30-09-2006 BY THE CIT(A) DOES NOT AP PLY TO THESE TRANSACTIONS. IN ADDITION, CIT(A) HAS NOT EXAMINED THE CONTENTIONS OF THE AO AT ALL. HE HAS NOT EVEN DISCUSSED ABOUT THE PAYMENT MADE ON BEHALF OF ASSESSEE TO A THIRD PARTY WHICH WAS CONTESTED IN GROUND NO. 5 ABOVE. SINCE HIS ORDER IS NON-SPEAKIN G ORDER AND THE REASONING GIVEN DOES NOT SEEMS TO BE BASED EITHER O N FACTS OR ON LAW, WE ARE UNABLE TO APPRECIATE HIS DECISION DEL ETING THE ADDITION SO MADE. SINCE THE CONTENTIONS OF ASSESSEE OR THE AO HAVE NOT BEEN EXAMINED AT ALL, WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) CANNOT BE UPHELD AS SUCH. ACCORDINGLY, THE ORDER IS SET ASIDE AND THE ENTIRE ISSUE IS RESTORED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. LD. CIT(A) IS ALSO DIRECTED TO KEEP IN MIND THE GROUNDS RAISED BEFORE HIM, CONTENTIONS OF THE PARTIES, FACTS PERTAINING TO THE TRANSACTIONS AND ADJUDICATE AFRESH AF TER GIVING DUE OPPORTUNITY TO ASSESSEE. WITH THESE DIRECTIONS, R EVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JANUARY, 2017 SD/- SD/- (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMB ER HYDERABAD, DATED 11 TH JANUARY, 2017 TNMM ITA NO. 299/HYD/2013 :- 5 -: COPY TO : 1. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, HYDERABAD. 2. M/S. IND BARATH POWER INFRA PVT LTD., PLOT NO. 3 0A, ROAD NO. 1, JUBILEE HILLS, HYDERABAD. 3. CIT (APPEALS)-VIJAYAWADA. 4. CIT-II, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.