The ACIT- 3(1), Indore V. Shri Pravin C Pandya, Indore

ITA 309/IND/2013

• Counselvise Citation: 30922714 RSA 2013
• Duration Of Justice: 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 17-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G S GAUTAM
• Keywords: Deemed dividend

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 309/IND/2013 A.Y. 2008-09 ASSTT. COMMISSIONER OF INCOME TAX 3(1) INDORE :: APPELLANT VS PRAVIN C. PANDYA INDORE PAN ACJPP 3708K :: RESPONDENT APPELLANT BY SHRI G.S . GAUTAM RESPONDENT BY NONE DATE OF HEARING 20.8 .2013 DATE OF PRONOUNCEMENT 20.8 .2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 23.1.2013 PASSED BY THE LEARNED FIRST APPELLATE AUT HORITY. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO DELETING T HE ADDITION OF RS.14,63,400/- MADE BY INVOKING SECTION 2(22)(E) OF THE ACT 2 ALLEGEDLY TREATING THE TRADE ADVANCE OUTSIDE THE PU RVIEW OF THE SECTION. 2. DURING HEARING OF THIS APPEAL, THE CRUX OF ARGUM ENT ON BEHALF OF THE REVENUE IS IN SUPPORT TO THE ASSESSMENT ORDE R. HOWEVER, NOBODY IS PRESENT FOR THE ASSESSEE. REGISTERED AD N OTICE WAS SENT TO THE ASSESSEE ON 16 TH JULY, 2013. IN SPITE OF THAT, THE ASSESSEE NEITHER PRESENTED HIMSELF NOR MOVED ANY ADJOURNMENT PETITION, THEREFORE, WE HAVE NO OPTION BUT TO PROCEED EX PART E QUA THE ASSESSEE AND TEND TO DISPOSE OF THIS APPEAL ON THE BASIS OF MATERIAL AVAILABLE ON RECORD. 3. WE HAVE CONSIDERED THE SUBMISSIONS PUT FORTH BY THE LEARNED SENIOR DR AND HAVE GONE THROUGH THE MATERIAL AVAILA BLE ON RECORD. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS ENGAG ED IN THE BUSINESS OF TRADING OF PESTICIDES, BIO-FERTILIZERS, ORGANIC MANURE AND C&F ACTIVITIES, DECLARED INCOME OF RS.34,72,400/- IN IT S RETURN FILED ON 25 TH SEPTEMBER, 2008. SINCE THE CASE OF THE ASSESSEE W AS SELECTED FOR SCRUTINY, THEREFORE, REQUIRED NOTICES ALONG WIT H QUESTIONNAIRE WERE SERVED UPON THE ASSESSEE TO WHICH THE ASSESSEE FURNISHED VARIOUS DETAILS AND ATTENDED ASSESSMENT PROCEEDINGS . THE ASSESSEE 3 WAS HAVING SHARE HOLDING IN M/S JAYVIN SALES PRIVAT E LIMITED TO THE EXTENT OF 60%. THE ASSESSEE WAS ASKED TO PRODUCE T HE LEDGER OF M/S JAYVIN SALES PRIVATE LIMITED IN ITS BOOKS. THE ASSESSEE FURNISHED NECESSARY DETAILS. ON PERUSAL OF SUCH DE TAILS, THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ASSESSEE RECEIV ED PAYMENT AS ADVANCE FROM M/S JAYVIN SALES PRIVATE LIMITED. THE LEARNED ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ADDING RS.14,63,400/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 3.1 ON APPEAL, THE LEARNED CIT(A) CONSIDERED THE SU BMISSIONS OF THE ASSESSEE ALONG WITH CERTAIN JUDICIAL PRONOUNCEM ENTS AND HELD THAT THE LEARNED ASSESSING OFFICER WAS NOT JUSTIFIE D IN INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND DELET ED THE ADDITION. THE AGGRIEVED REVENUE IS IN APPEAL BEFORE THE TRIBU NAL. 3.2 IF THE TOTALITY OF FACTS AVAILABLE ON RECORD, O BSERVATIONS MADE IN THE ASSESSMENT, CONCLUSION DRAWN IN THE IMPUGNED OR DER AND THE ARGUMENTS OF THE LEARNED SENIOR DR ARE KEPT IN JUXT APOSITION AND ANALYSED, WE FIND THAT THE IMPUGNED ADDITION WAS MA DE BY THE LEARNED ASSESSING OFFICER ON THE OBSERVATION THAT T HE ASSESSEE 4 RECEIVED LOANS/ADVANCES AMOUNTING TO RS. 15,80,965/ - FROM M/S JAYVIN SALES PRIVATE LIMITED AND BY APPLYING THE PR OVISIONS OF SECTION 2(22)(E) OF THE ACT THE ADDITION OF RS.14,6 3,400/- WAS MADE TO THE TOTAL INCOME OF THE ASSESSEE BEING DEEMED DI VIDEND. THE STAND OF THE ASSESSEE RIGHT FROM THE ASSESSMENT STA GE HAD BEEN THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE TO TRADE TRANSACTIONS MORE SPECIFICALLY WHEN SUCH ADVA NCE IS MADE DURING THE COURSE OF BUSINESS OF THE ASSESSEE. THE STAND OF THE REVENUE IS THAT IF THE COMPANY MAKES ANY PAYMENT TO ANY SHARE HOLDER EITHER BY LOAN OR ADVANCE, IN BOTH SITUATION S, THE PROVISION OF SECTION 2(22)(E) OF THE ACT IS ATTRACTED. THE ASSE SSEE DULY FILED THE COPY OF LEDGER ACCOUNT OF M/S JAYVIN SALES PRIVATE LIMITED EVIDENCING THAT THE AMOUNTS WERE PAID IN THE REGULA R COURSE OF BUSINESS. WE ARE OF THE VIEW THAT UNDER THE FACTS AVAILABLE ON RECORD, THE TRADE ADVANCES DO NOT FALL WITHIN THE A MBIT OF SECTION 2(22)(E) OF THE ACT AS THE BUSINESS TRANSACTIONS AR E OUTSIDE THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. SECTION 2( 22)(E) OF THE INCOME TAX ACT, 1961 SHOWS THAT A PAYMENT WOULD ACQUIRE TH E ATTRIBUTES OF A DIVIDEND IF THE FOLLOWING CONDITIONS ARE SATISFIE D 5 (A) THE COMPANY MAKING THE PAYMENT IS ONE IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED; (B) MONEY SHOULD BE PAID BY THE COMPANY TO A SHARE HOLDER HOLDING NOT LESS THAN 10% OF THE VOTING POWER OF TH E COMPANY. IT WOULD MAKE NO DIFFERENCE IF THE PAYMEN T WAS OUT OF THE ASSET OF THE COMPANY OR OTHERWISE; (C) THE MONEY SHOULD BE PAID EITHER BY WAY OF ADVAN CE OF LOAN OR IT MAY BE ANY PAYMENT WHICH THE COMPANY MAKE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF ANY SHARE HOLDER OR ALSO TO ANY CONCERN IN WHICH SUCH S HARE HOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE IS SUBSTANTIALLY INTERESTED AND (D) THE LIMITING FACTOR BEING THAT THESE PAYMENTS M UST BE TO THE EXTENT OF ACCUMULATED PROFITS, POSSESSED BY SUC H COMPANY. KEEPING IN VIEW RULE/OBSERVATION IN MIND, WE ARE OF THE OPINION THAT THE WORD ADVANCE WHICH APPEARS IN THE COMPANY OF THE WORD LOAN COULD ONLY MEAN SUCH ADVANCE WHICH CARRIES W ITH IT AN 6 OBLIGATION OF REPAYMENT. TRADE ADVANCE WHICH ARE I N THE NATURE OF MONEY TRANSACTED TO GIVE EFFECT TO COMMERCIAL TRANS ACTION WOULD NOT, IN OUR VIEW, FALL WITHIN THE AMBIT OF THE PROV ISIONS OF SECTION 2(22)(E) OF THE ACT. THIS INTERPRETATION WOULD ALL OW THE RULE OF PURPOSIVE CONSTRUCTION WITH NOSCITUR A SOCIIS, AS W AS DONE BY HONBLE APEX COURT IN THE CASE OF LIC OF INDIA VS. RETIRED LIC OFFICERS ASSOCIATION (2008) 3 SCC 321. THE OBSERVAT ION MADE IN PARA 24 IS EXTRACTED HEREUNDER :- EACH WORD EMPLOYED IN A STATUTE MUST TAKE COLOUR F ROM THE PURPORT AND OBJECT FOR WHICH IT IS USED. THE PRINCI PLE OF PROPOSIVE INTERPRETATION, THEREFORE, SHOULD BE TAKE N RECOURSE TO. A CLOSE EXAMINATION OF THE DECISION FROM HONBLE BO MBAY HIGH COURT IN THE CASE OF NAGINDAS M. KAPADIA (1989) 177 ITR 393 WOULD SHOW THAT THE COURT EXCLUDED FROM THE AMBIT OF DIV IDEND, MONIES WHICH THE ASSESSEE RECEIVED TOWARDS PURCHASES. IDE NTICAL RATIO WAS LAID DOWN BY HONBLE DELHI HIGH COURT IN CIT VS.CR EATIVE DYEING & PRINTING P LTD.; (2009) 318 ITR 476. IN VIEW OF TH E CLEAR FACTS, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN IN THE IM PUGNED ORDER. IT IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. 7 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LEARNED SENIOR DR AT THE CONCLUSION OF THE HEARI NG ON 20.8.6.2013. SD SD (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 20.8.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-2020