INNOVESTMENT E-LEARNING LTD, MUMBAI V. ITO-6(1)(3), MUMBAI

ITA 3345/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9155 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-12-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 27-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 14A

Judgement Text

. , IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI , BEFORE SHRI R.K.GUPTA , J M ITA NO. 3345 / MUM/ 20 1 1 ( ASSESSMENT YEA R : 200 7 - 20 0 8 ) INNOVESTMENT E - LEARNING LTD., 2, ESHA EKTA APARTMENTS, B.G.KHER ROAD, WORLI, MUMBAI - 400 018. VS. ITO 6(1)(3) MUMBAI PAN/GIR NO. : AAA CD 3764 F ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR. KETAN VAJANI /REVENUE BY : MR. MOHIT JAIN DATE OF HEARING : 4 TH DEC . , 2012 DATE OF PRONOUNCEMENT : 7 TH DEC. ,2012 O R D E R THIS IS AN APPEAL PREFER RED BY THE ASSESSEE AGAINST THE ORDER DATED 1 - 2 - 2011 OF LEANED CIT(A) - 14 , MUMBAI RELATING TO THE ASSESSMENT YEAR 200 7 - 0 8 . 2. THE ASSESSEE COMPANY IS OBJECTING THE ADDITION OF RS. 8,56,252/ - ADDED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)E OF T HE ACT. 3 . DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER NOTICED THAT M RS . DIVYAA KUM M AR IS A COMMON SHAREHOLDER IN THE ASSESSEE COMPANY AND OTHER COMPAN Y I.E. INNOVATION HANDICRAFTS (I) PVT. LIMITED. THE ASSESSING OFFICER NOTED THAT THE ASSESSE E COMPANY ITA NO. 3345 /20 1 1 2 HAD RECEIVED A SUM OF RS. 8,56,252/ - FROM THE INNOVATION HANDICRAFTS (I) PVT. LIMITED , A RELATED COMPANY. IT WAS ALSO NOTICED THAT M RS. DIVYAA KUM M AR WAS HAVING SHARE HOLDING IN BOTH THE COMPANIES AND THE SHARE HOLDING WAS MORE THAN 20%. ACCORDINGL Y, THE ASSESSING OFFICER ATTRACTED THE PROVISION OF SECTION 2(22)E OF THE ACT IN RESPECT OF THESE COMPANIES AND TREATED THE AMOUNT RECEIVED AS DEEMED DIVIDEND BY VIRTUE OF SECTION 2(22)E OF THE ACT. 4 . BEFORE THE LEARNED CIT(A), IT WAS CONTENDED BY THE A SSESSEE THAT THE CONDITION REQUIRED FOR THE APPLICAT ION OF THE PROVISIONS OF SECTION 2(22)E OF THE ACT IS NOT SATISFIED AS THE ASSESSEE COMPANY IS NOT HAVING SUBSTANTIAL INTEREST MEANS SHARE HOLDING AT LEAST 20% BEING THE ASSESSEE COMPANY HOLDS ONLY 2970 SH ARES OUT OF 37500 SHARES OF IN INNOVATION HANDICRAFTS (I) PVT. LIMITED (CONSTITUTING 7.92% OF SHAREHOLDING) . IT WAS ALSO SUBMITTED THAT SINCE THE SHARE HOLDING IS LESS THAN 20%, THEREFORE, THE PROVISION OF SECTION 2(22)E ARE NOT APPLICABLE. RELIANCE WAS PL ACED IN THE CASE OF MINNIE R.CAMA VS. ITO (1996) 17 ITD (AHD) 139 AND IN THE CASE OF SMT. GUNVANTI R. MEHTA VS. ITO (1993) 45 ITD (BOM) 382 . HOWEVER, THE LEARNED CIT(A) WAS ALSO NOT SATISFIED . HE NOTED THAT MRS DIVYAA KUMMAR, WHO IS A COMMON SHAREHOLDER , I S HAVING SHARES MORE THAN 20% IN BOTH THESE COMPANIES AND, THEREFORE, PROVISION OF SECTION 2(22)E ARE ATTRACTED. ACCORDINGLY, HE CONFIRMED THE ACTION OF THE ASSESSING OFFICER. HENCE, THE ASSESSEE IS IN APPEAL HERE BEFORE THE TRIBUNAL. ITA NO. 3345 /20 1 1 3 5 . THE CONTENTION RA ISED BEFORE THE LOWER AUTHORITIES ARE REITERATED HERE BEFORE THE TRIBUNAL BY LEARNED AR OF THE ASSESSEE. RELIANCE WAS PLACED ON THE DECISION OF THE HON BLE BOMABY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PRIVATE LIMITED, REPORTED IN [2010] 324 ITR 263 (BOM) . 6 . ON THE OTHER HAND, LEARNED DR PLACED RELIANCE ON THE ORDER OF THE LEARNED CIT(A) . 7 . AFTER CONSIDERING THE SUBMISSION AND PERUSING THE MATERIAL ON RECORD, I FOUND THAT THE ASSESSEE DESERVES TO SUCCEED ON THIS ISSUE. I NOTED THAT SHAREH OLDING OF THE COMPANY IS ONLY 7.92%, WHICH IS MUCH LESS THAN 20% ON WHICH BASIS THE PROVISION OF SECTION 2(22)E OF THE ACT CAN BE ATTRACTED. MRS. DIVYAA KUMMAR HAS NOT TAKEN ANY LOAN OR ADVANCE FROM THESE COMPANIES BUT THE ASSESSEE COMPANY HAS TAKEN ADVANC E. THE PROVISION OF SECTION 2(22)E OF THE ACT CAN BE ATTRACTED ONLY IN THE CASE OF SHAREHOLDERS , AS STATED ABOVE , THE SHAREHOLDING OF THE COMPANY IS LESS THAN PRESCRIBED LIMIT OF 20%. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BHAUMIK COLOU R PRIVATE LIMITED [2009] 313 ITR (AT) 146 , HAS HELD THAT THE PROVISION OF SECTION 2(22)E OF THE ACT CAN BE ATTRACTED IN THE CASE OF SHAREHOLDER ONLY. THIS DECISION WAS CONSIDERED BY THE HON BLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PRIVATE LI MITED (SUPRA) , WHEREIN IT HAS BEEN HELD THAT IF ANY INCOME CAN BE ASSESSED ON ACCOUNT OF DEEMED DIVIDEND, IT WOULD HAVE TO BE TAXED IN THE HANDS OF THE SHAREHOLDERS ITA NO. 3345 /20 1 1 4 ONLY. SINCE IN THE PRESENT CASE THE SHAREHOLDING IS LESS THAN 20%, THEREFORE, I HOLD THAT T HE PROVISION OF SECTION 2(22)E OF THE ACT ARE NOT ATTRACTED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS ALLOWED . 8 . THE SECOND GROUND RELATES TO ADDITION UNDER SECTION 14A , WAS NOT PRESSED BY THE LEARNED AR. THE REFORE, THE SAME IS DISMISSED AS NOT PRESSED. 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 7 TH DAY OF DEC . 2012. 2012 SD/ - ( ) ( R.K.GUPTA ) / JUDICIAL MEMBER MUMBAI ; DATED : 07 / 1 2 / 2012 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPOND ENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI