A.C.I.T.,Circle-3(1), Gwalior V. Smt. Julie Gupta, Gwalior

ITA 344/AGR/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0402 (ITAT-AGRA)
• Duration Of Justice: 7 year(s) 8 month(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 16-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 17-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 09-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L MAURYA
• Assessee Lawyers: MAHESH AGARWAL
• Keywords: Salary income; Deemed dividend; Assessment record
• Section: 2(22)(e); 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.344/AGRA/2011 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, VS. SMT. JULIE GUPTA, CIRCLE 3(1), GWALIOR. 61, LAXMI BAI COLONY, GWALIOR (M.P.) (PAN: ACOPG 5405 B). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.L. MAURYA, SR. D.R. RESPONDENT BY : SHRI MAHESH AGARWAL, C.A. DATE OF HEARING : 17.07.2013 DATE OF PRONOUNCEMENT : 26.07.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 20.06.2011 PASSED BY THE LD. CIT(A), GWALIOR FOR THE ASSESSMEN T YEAR 2006-07. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 18,90,581/- MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) ? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 88,000/- MADE ON ACCOUNT OF HOUSE HOLD EXPENSES? ITA NO.344/AGRA/2011 A.Y. 2006-07 2 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E DRIVES INCOME FROM SALARY SHARE DEALING AND ALSO ENJOYS INTEREST INCOME. A S EARCH OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAF TER) WAS CONDUCTED ON 28.03.2008. DURING THE ASSESSMENT PROCEEDINGS, ON EXAMINATION OF THE ACCOUNTS OF THE ASSESSEE MENTIONED ON TALLY SYSTEM OF COMPUTER SHOWED THAT THE ASSESSEE HAS RECEIVED THE FOLLOWING LOANS IN THE MONTH OF NOVEMB ER, 2004 :- (PAGE 2, A.O.) DATE AMOUNT 02.11.2004 8,00,000/- 05.11.2004 8,00,000/- 29.11.2004 14,00,000/- TOTAL 30,00,000/- 4. THE A.O. AFTER EXAMINING THE CONDITIONS OF SECTI ON 2(22)(E) FOUND THAT THE MAIN BUSINESS OF THE COMPANY IS RUNNING OF COACHING CLASSES AND LENDING OF MONEY IS NOT SUBSTANTIAL PART OF BUSINESS AS PER PR OVISIONS OF SECTION 2(22)(E), THEREFORE, THE A.O. MADE ADDITION OF RS.18,90,581/- . THE CIT(A) DELETED THE SAID ADDITION AS UNDER :- (PARAGRAPH NO.4.2, PAGE NOS.7 & 8). 4.2 APPELLANTS SUBMISSIONS ALONG WITH ASSESSME NT ORDER HAVE BEEN CONSIDERED CAREFULLY. ASSESSMENT RECORDS HAVE ALSO BEEN PERUSED. THE COMPANY VIZ. MASTERMIND CLASSES PVT. LTD. IS ENGAGED IN DIVERSE BUSINESS ACTIVITIES WHICH INCLUDES RUNNI NG OF COACHING CLASSES AND MONEY LENDING. AS PER CLAUSE 14 OF MEM ORANDUM OF ASSOCIATION OF THE SAID COMPANY, THE FOLLOWING OBJE CT HAS BEEN MENTIONED WHICH IS INCIDENTAL OR ANCILLARY TO THE A TTAINMENT OF MAIN OBJECTS OF THE COMPANY. ITA NO.344/AGRA/2011 A.Y. 2006-07 3 SUBJECT TO THE PROVISIONS OF THE COMPANIES ACT, 19 56 TO LEND MONEY TO SUCH PERSONS AND ON SUCH TERMS AND CONDITI ONS AS MAY SEEN EXPEDIENT WITH OR WITHOUT SECURITY AND IN PARTICULA R TO CUSTOMERS AND OTHER HAVING DEALINGS WITH THE COMPANY AND TO GIVE ANY GUARANTEE OR INDEMNITY AS MAY SEEM EXPEDIENT. BUT THE COMPANY W ILL NOT DO BANKING BUSINESS AS DEFINED UNDER THE BANKING REGUL ATIONS ACT, 1956. MASTERMIND CLASSES PVT. LTD. IS MAINLY ENGAGED IN R UNNING OF COACHING CLASSES AND PROVISION OF EDUCATIONAL CONSU LTANCY. MAJOR PORTION OF ITS RECEIPTS ARE GENERATED FROM STUDENTS FEE WHICH IS COLLECTED IN FIRST 3-4 MONTHS OF THE ENROLMENT. FO R THE INTERVENING PERIOD, IT UTILISES THE FUNDS IN GIVING LOANS AND A DVANCES ON INTEREST AS PART OF ITS BUSINESS ACTIVITIES. INTEREST EARNED T HEREFROM HAS ALSO BEEN DECLARED REGULARLY SINCE LAST 6-7 YEARS. IT IS ALS O SEEN FROM RECORDS THAT THE SAID COMPANY HAS RECEIVED INTEREST INCOME OF RS.3,78,330/- FROM THE BUSINESS OF MONEY LENDING OUT OF PROFIT OF RS.4,48,918/- DECLARED BY IT AS PER ITS RETURN. IT HAS BEEN HELD BY HON'BLE BOMBAY HIGH COURT IN CASE OF CIT VS. PARLE PLASTIC LTD. (2 010) 8 TAXMAN 155 THAT WHERE LENDING OF MONEY IS A SUBSTANTIAL PART O F THE BUSINESS OF THE COMPANY, EVEN IF NOT BEING THE MAIN OBJECT, THE MON EY GIVEN BY IT BY WAY OF ADVANCE OR LOAN TO THE DIRECTOR/SHARE HOLDER CANNOT BE REGARDED AS DIVIDEND, AS IT HAS TO BE EXCLUDED FROM THE DEFINITION OF DIVIDEND BY VIRTUE OF CLAUSE (II) OF SECTION 2(22) OF THE I.T. ACT. FURTHER THE TRANSACTION OF LOAN/ADVANCE BETWEEN THE APPELLANT AND THE COMPANY HAS TAKEN PLACE BECAUSE OF THE FACT OF BUY BACK OF EQUITY SHARES OF THE APPELLANT BY THE PRIVATE COMPANY. TH E APPELLANT HAS PRODUCED ALL THE DETAILS EVIDENCING THE BUY BACK TR ANSACTION IN FORM OF NOTICE TO SHAREHOLDERS BY THE PRIVATE COMPANY, B OARDS RESOLUTIONS DULY SIGNED SHARE TRANSFER DEED ETC. A CCORDING TO SEC.2(22)(IV) OF THE LT. ACT, ANY PAYMENT BY A COMP ANY ON PURCHASE OF ITS OWN SHARES FROM A SHAREHOLDER U/S 77A DOES N OT AMOUNT TO DIVIDEND WHICH IS THE FACT FOUND IN CASE OF THE APP ELLANT ON THE BASIS OF EVIDENCE FURNISHED. HON'BLE SUPREME COURT IN CA SE OF SHRI KARTIKEYA V. SARABHAI VS. CIT (1997) 94 TAXMAN 164 HAS ALSO HELD THAT BUY BACK OF SHARES IS NOT CONSIDERED AS DEEMED DIVIDEND BUT MAY BE CONSIDERED AS A TRANSFER FOR THE PURPOSE OF CAPI TAL GAINS AND TAXATION IN THE HANDS OF THE SHAREHOLDERS WOULD DEP END ON STATUS OF THE COMPANY, NATURE OF TRANSACTION, PRICES OFFERED AND SO ON. KEEPING IN VIEW ABOVE FACTS ALONG WITH THE FACT THAT THE SA ID ADDITION HAS BEEN ITA NO.344/AGRA/2011 A.Y. 2006-07 4 MADE IN CASE OF A SEARCH ASSESSMENT ON RE-APPRECIAT ION OF FACTS DECLARED EARLIER VIDE ORIGINAL RETURN FILED ON 31.1 0.06 IN DUE COURSE AND BEFORE THE SEARCH, A.O. IS NOT FOUND JUSTIFIED IN MAKING THE SAID ADDITION IN THE ABSENCE OF ANY INCRIMINATING MATERI AL FOUND DURING THE COURSE OF SEARCH OPERATIONS IN THE CASE OF THE APPE LLANT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION AND SOLELY ON T HE GROUND THAT MONEY LENDING IS NOT THE SUBSTANTIAL PART OF COMPAN YS BUSINESS BY APPLYING PROVISIONS OF SECTION 2(22)(E) IN CASE OF THE APPELLANT. ACCORDINGLY ADDITION OF RS.18,90,581/- IS, HEREBY, DELETED. 5. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. SECTION 2(22)(E) PROVIDES THAT ANY PAYMENT BY A COM PANY, NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED, OF A NY SUM BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER, BEING A PERSON WHO IS THE BENEFIC IAL OWNER OF SHARES HOLDING NOT LESS THAN TEN PERCENT OF THE VOTING POWER, OR TO AN Y CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER OR PARTNER AND IN WHICH HE HAS A SUBSTANTIAL INTEREST OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF, OR FOR THE I NDIVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER, TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS. SUCH PAYMENT BY A COMPANY IS DEEMED DIVIDEND AS PROVIDED UNDER SECTION 2(22)(E) OF THE ACT. THE CIT(A) HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE THAT THE ASSESSEE HAS FILED THE RETURN BEFORE THE SEARCH AND DURING THE COURSE OF SEARCH NO INCRIMINATING MATERIAL WAS FOUN D. FURTHER THAT THE MONEY LENDING IS NOT SUBSTANTIAL PART OF COMPANYS BUSINE SS BY APPLYING PROVISIONS OF SECTION 2(22)(E). ON PERUSAL OF A.O.S ORDER, WE N OTICE THAT THE LOANS WERE RECEIVED IN THE MONTH OF NOVEMBER, 2004 PERTAINING TO A.Y. 2005-06. THUS, IT IS ITA NO.344/AGRA/2011 A.Y. 2006-07 5 ADMITTED FACT THAT DURING THE F.Y. UNDER CONSIDERAT ION RELEVANT TO A.Y. 2006-07 THERE MAY BE OPENING BALANCE BUT DURING THE YEAR NO LOAN AMOUNT WAS RECEIVED BY THE ASSESSEE. ONE OF THE CONDITIONS FOR APPLYING S ECTION 2(22)(E) OF THE ACT IS THAT AMOUNT MUST BE RECEIVED DURING THE YEAR. SINCE IN THE CASE UNDER CONSIDERATION THE LOAN AMOUNT WAS NOT RECEIVED DURING THE YEAR, THERE FORE, PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS NOT APPLICABLE AND ACCORDING LY THE ADDITION IS NOT WARRANTED. THIS VIEW IS SUPPORTED BY THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. PARLE PLASTICS LIMITED, 332 ITR 63 (BOM.) WHEREIN IT HAS BEEN HELD THAT ONLY THAT AMOUNT OF LOANS AND ADVANCES, WHICH IS ACTUALLY RECEIVED BY ASSESSEE SHARE HOLDER FROM COMPANY DURING RELEVANT ASSESSMEN T YEAR, WOULD FALL WITHIN INCLUSIVE SUB-CLAUSE(E) OF DEFINITION OF DIVIDEND APPEARING IN SECTION 2(22)(E); OPENING WORDS ANY PAYMENT OCCURRING IN SUB-CLAUSE (E) OF SECTION 2(22) CONTEMPLATES ACTUAL PAYMENT MADE BY COMPANY TO ASSE SSEE FOR BEING REACTED AS A DIVIDEND IN COMPUTING INCOME OF ASSESSEE. THE OPEN ING BALANCE OR LOAN TAKEN IN EARLIER YEAR IS NOT LOAN RECEIVED BY THE ASSESSEE D URING THE RELEVANT PREVIOUS YEAR AND COULD, THEREFORE, BE NOT TREATED AS AMOUNT OF L OAN OR ADVANCE RECEIVED BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. SUCH A MOUNT, THEREFORE, COULD NOT BE INCLUDED AS DEEMED DIVIDEND UNDER CLAUSE (E) OF SEC TION 2(22) OF THE ACT. IN THE CASE UNDER CONSIDERATION, SINCE THE LOAN AMOUNT IS NOT ISSUED DURING THE YEAR, THEREFORE, WE FIND THAT THE CIT(A) HAS RIGHTLY DELE TED THE ADDITION OF ITA NO.344/AGRA/2011 A.Y. 2006-07 6 RS.18,90,581/- NOT ON THE REASONS MENTIONED BY THE CIT(A) BUT ON THE REASONS AND BASIS AS STATED ABOVE. 6. THE SECOND GROUND IS PERTAINING TO ADDITION OF R S.88,000/- ON ACCOUNT OF HOUSE HOLD EXPENSES. 7. AT THE OUTSET, THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF I.T.A.T., AGRA BEN CH IN ITA NOS.155/AGRA/2011 IN THE CASE OF SHRI PRAVEEN GUPTA VIDE ORDER DATED 23.03.2012. THE RELEVANT FINDING OF I.T.A.T. IS REPRODUCED AS UNDER :- ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE AO PURELY MADE ESTIMATED ADDITION WITHOUT BRINGING ANY MATERIAL AG AINST THE ASSESSEE FOR ESTIMATING HOUSEHOLD EXPENSES. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT IN OTHER CASES SIMILAR ADDITI ONS HAVE BEEN DELETED, HAS NOT BEEN REBUTTED THROUGH ANY MATERIAL ON RECORD. IN THE ABSENCE OF ANY MATERIAL ON RECORD IN FAVOUR OF THE REVENUE, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). SAME IS CONFIRMED AND THUS, THE APPEAL OF THE REVEN UE IS DISMISSED. NO OTHER POINT IS ARGUED OR PRESSED. IN THE RESULT , THE APPEAL OF HE REVENUE IN THE CASE OF PRAVEEN GUPTA IS DISMISSED. 8. THE ABOVE FINDING HAS BEEN FOLLOWED BY I.T.A.T. IN THE CASE OF SMT. POONAM GUPTA IN ITA NO.156/AGRA/2011 A.Y. 2005-06 VIDE ORD ER EVEN DATED. ITA NO.344/AGRA/2011 A.Y. 2006-07 7 9. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE FACTS OF THE CASE UNDER CONSIDERATION AND THE FACTS OF THE CASE DECIDED BY I.T.A.T., AGRA BENCH IN ITA NOS.155 & 156/AGRA/2011 IN THE CASE OF SHRI PRAVEEN GUPTA & SMT. POONAM GUPTA ARE IDENTICAL. THE LD. D.R. DID NOT CONTROVE RT THE FACTS POINTED OUT BY THE LD. A.R. SINCE THE FACTS ARE IDENTICAL, TO MAINTAIN CO NSISTENCY, WE FOLLOW THE SAID ORDER OF I.T.A.T., AGRA BENCH. IN THE LIGHT OF ABO VE, WE FIND THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.88,000/-. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTA NT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY