ITO, New Delhi V. M/s. Chiranjiv Builders Pvt. Ltd., New Delhi

ITA 3403/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 6701 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-11-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 12-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: STEPHEN GEORGE
• Section: 143(3); 12

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SHRI C.L. SETHI AND SHRI K.G. BANSAL ITA NO. 3403(DEL)/2010 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER, M /S CHIRANJIV BUILDERS PVT. LTD., WARD 3(3), NEW DELHI. VS. SU 12 & 13, BHIKAJAI CAMA PLACE, NEW DELHI-110066. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI STEPHEN GEORGE, CIT, DR RESPONDENT BY: SHR I K. SAMPATH, ADVOCATE ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE REVENUE EMANATES FROM THE OR DER OF COMMISSIONER OF INCOME- TAX (APPEALS)-V, NEW DELH I, PASSED IN APPEAL NO. 209/09-10 ON 27.04.2010 RELATING TO ASSESS MENT YEAR 2006-07. THE CORRESPONDING ASSESSMENT ORDER WAS FRAMED BY TH E INCOME-TAX OFFICER, WARD 3(3), NEW DELHI ON 30.12.2008 UNDER THE P ROVISIONS OF SECTION 143(3) OF THE INCOME-TAX ACT, 1961. THE ONLY S UBSTANTIVE GROUND TAKEN BY THE REVENUE IS THAT THE LD. CIT(APPEALS) ER RED IN DELETING THE ADDITION OF ` 4,06,85,000/- MADE BY THE AO U/S 2(22)(E) OF THE INCOME- TAX ACT, 1961, IGNORING THE FACT THAT SHRI P ANKAJ BAJAJ HAD SUBSTANTIAL ITA NO.3403(DEL)/2010 2 COMMON SHAREHOLDING IN THE ASSESSEE COMPANY AS WELL AS IN ELDECO INFRASTRUCTURE & PROPERTIES LTD. (ELDECO FOR SH ORT). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSE E RECEIVED A SUM OF ` 4,06,85,000/- ON VARIOUS DATES FROM ELDECO. SHRI PANKAJ BAJAJ WAS HOLDING 28.79% SHARES IN THE ELDECO AND 49. 90% SHARES IN THE ASSESSEE COMPANY. THE ACCUMULATED PROFITS OF THE ELDECO WERE FAR GREATER THAN THE AMOUNT RECEIVED BY THE ASSESSEE FROM IT. I N VIEW THEREOF, THE AMOUNT WAS TAXED AS DIVIDEND UNDER THE PROVI SIONS OF SECTION 2(22)(E) BY THE AO. THIS ORDER WAS UPHELD BY THE LD. CIT(APPEALS). 3. THE LIMITED ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE BEFORE US IS THAT THE ASSESSEE- COMPANY IS NOT A SHAREHOL DER IN ELDECO. IT IS ALSO NOT HAVING ANY BENEFICIAL HOLDING IN THAT CO MPANY. THEREFORE, THE AFORESAID PROVISION IS NOT APPLICABLE AT ALL. I N REPLY, THE LD. DR RELIED ON THE CONCURRENT FINDINGS OF THE LOWER AUTHORITIES . 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. THE PROVISION, RELIED UPON BY THE LOWER AUTHORITIES, CONTAINED IN SECTION 2(22)(E), READS AS OVERL EAF:- ITA NO.3403(DEL)/2010 3 ANY PAYMENT BY A COMPANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTEREST, OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPAN Y OR OTHERWISE) MADE AFTER THE 31 ST DAY OF MAY, 1987, BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSO N WHO IS THE BENEFICIAL OWNER OF SHARES (NOT BEING SHARES E NTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER, OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN W HICH HE HAS A SUBSTANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN) OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE INDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS; 4.1 IT WILL BE SEEN THAT ANY AMOUNT PAID BY WAY O F ADVANCE OR LOAN BY A COMPANY, NOT BEING A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED, TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFICIAL OWNERS OF SHARES HOLDING NO LESS THAN 10% OF THE VOTING POWER, OR TO A CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER AND IN WH ICH HE HAS A SUBSTANTIAL INTEREST, SHALL BE DEEMED TO BE DIVIDEND TO THE EXTENT OF ACCUMULATED PROFITS. IT IS A MATTER OF RECORD THAT THE ASSESSEE IS NOT A SUBSTANTIAL SHAREHOLDER IN ELDECO. THE PAYMENT HAS BEEN MA DE TO THE ASSESSEE AND NOT TO ANY CONCERN IN WHICH THE ASSESSEE IS A ME MBER. ACCORDINGLY, THE BASIC CONDITION FOR INVOKING THE AFORESAID PROV ISION IS NOT SATISFIED IN ITA NO.3403(DEL)/2010 4 THIS CASE. THEREFORE, IT IS HELD THAT THE LOWER AUTHORITIES ERRED IN INVOKING THE AFORESAID PROVISION. 5. IN THE RESULT, THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 2 6TH NOVEMBER, 2010. SD/- SD/- (C.L. SETHI) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 26 TH NOVEMBER, 2010. SP SATIA COPY OF THE ORDER FORWARDED TO: M/S CHIRANJIV BUILDERS PVT. LTD., NEW DELHI. ITO, WARD 3(3), NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.