DCIT, Gurgaon V. M/s Machino Polymers Ltd., Gurgaon

ITA 348/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3488 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 22-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: J C BHALLA
• Keywords: Deemed dividend
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , DELHI A BENCH , NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAV A , JUDICIAL MEMBER ITA NO. 348 /D EL /20 1 6 [ ASSESSMENT YEAR : 20 12 - 13 ] THE D.C. I.T . VS. M/S MACHINE POLYMERS LTD CIRCLE 2 PLOT NO. 2, SECTOR 33, NH - 8 GURGAON GURGAON, HARYANA PAN : A ABCM 9618 E [APPELLANT] [RESPONDENT] DATE OF HEARING : 06 . 1 1 . 201 7 DATE OF PRONOUNCEMENT : 07 . 1 1 .201 7 ASSESSEE BY : SHRI J.C. BHALLA, CA REVENUE BY : SHRI S .K. JAIN, SR. DR ORDER PER B.P. JAIN, ACCOUNTANT MEMBER, T H IS APPEAL FILED BY THE REVENUE ARISE S FROM THE ORDER OF THE CIT(A) - 2 , GURGAON VIDE ORDER DATED 26 / 11 /201 5 FOR A.Y 20 12 - 13 . 2 3. T HE REVENUE HAS RAISED THE FOLLOWING GROUND S OF APPEAL: 1. LD. CIT(A) HAS ERRED ON FACTS AND IN LAW IN DELETING THE ADDITION OF RS.2,35,00,000/ - MADE BY THE AO AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE EVEN THE CASE OF THE ASSESSEE IS VERY WELL COVERED UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. 2. LD CIT(A) HAS ERRED ON F ACTS AND IN LAW IN HOLDING THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT ATTRACTED IN THIS CASE EVEN ALL THE CONDITIONS LAID DOWN IN SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 ARE SATISFIED, AS EXPLAINED BY CBDT CIRCULAR NO.495 DATED 22.09.1987. 3. THE APPELLANT CRAVES FOR THE PERMISSION TO ADD, DELETE OR AMEND THE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL . 4. BRIEFLY STATED, THE FACTS OF THE CASE AS EMANATING FROM THE ORDER OF THE AO AS NARRATED BY THE CIT(A) ARE THAT DURING THE YEAR THE ASSESSEE COMPANY M/S MACHINO TRANSPORT PVT. LTD. THE ASSESSEE WAS SPECIFICALLY ASKED THAT WHY NOT THE SAID AMOUNT B E TREATED AS DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. THE ASSESSEE V IDE REP LY DATED 19/02/2015 S T ATED THAT THE ASSESSEE COMPANY HAS OBTAINED UNSECURED LOAN FROM 3 M/S MACHINO TRANSPORT PVT. LTD. AND NOT GIVEN THE LOAN. THE SUBMISSIONS GIVEN WERE CONSIDERED B Y THE ASSESSING OFFICER BUT NOT ACCEPT ED . MR. MD JINDAL AND MR. SANJIV JINDAL WERE THE MEMBERS HOLDING SUBSTANTIAL INTERESTS IN M/S MACHINO TRANSPORT PVT. LTD. WHICH HAD PROVIDED LOANS AND ADVANCES TO THE ASSESSEE COMPANY AND THEY ALSO HAD SUBSTANTIAL INTERE ST EVEN IN THE ASSESSEE COMPANY. ACCORDINGLY, THE AO TREATED THE SAI D LOAN OF RS. 2,35,00,000/ - AS DEEMED DIVIDEND U/S 2(22)(E) OF THE INCOME - TAX ACT, 1961 [HEREINAFTER REFERRED TO AS 'THE ACT' AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE . 5. BEFORE THE CIT(A), THE LD. AR ARGUED THAT THE SAID LOAN WAS TAKEN ONLY FOR COMMERCIAL PURPOSES WHICH WAS EXPLAINED BEFORE THE CIT(A). HE FURTHER SUBMITTED THAT THE SHARE HOLDING PATTERN WHEREIN IT WAS STATED THAT THE ASSESSEE IS NOT A SHAREHOLDER IN THE SAID COMPANY AND HENCE THE LOAN TAKEN BY THE ASSESSEE CANNOT BE TAXED IN THE HANDS OF THE ASSESSEE SINCE HE IS NOT A SHARE HOLDER . HE RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANKITECH PVT . LTD. ITA NO. 462 OF 2009 IN THIS REGARD AND OTHER DECISIONS OF VARIOUS HIGH COURTS OF LAW, AS MENTIONED IN THE 4 ORDER OF THE CIT(A). AFTER CONSIDERING THE ARGUMENTS AND SUBMISSIONS OF THE ASSESSEE, THE CIT(A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE, RELEVANT PART OF WHICH READS AS UNDER: I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBMISSIONS . IT IS A FACT ON RECORD THE APPELLANT FIRM IS NOT A SHARE HOLDER OF THE PAYER COMPANY, M/S MACHINO TR ANSPORT PVT. LTD. IN THESE CIRCUMSTANCES THE PROVISIONS OF SECTION 2(22)(E) ARE NO T ATTRACTED IN T HE HANDS OF THE APPELLANT FI RM. THE ISSUE IS SQUARELY COVE RED BY THE DECISIONS RELIED U PON BY THE APPELLANT. REFERENCE IN THIS REGARD MAY ALSO BE MADE TO THE ORDER OF HON'BLE P&H HIGH COURT IN THE CASE OF CIT - 1I VS. SHAR MAN WOOLEN MILLS LTD . 12 204 TAXMAN 82 (2011) 16 TAXMAN.COM 171 (P&H). THE HON'BLE PUNJAB & HARYA NA HIGH COURT, THE JURISDICTIONAL HIGH COURT, IN THE ABOVE NOTED CASE HAS HELD THAT ADDITION U/S 2 (22)(E) ON A CCOUN T OF DEEMED DIVIDEND CA N BE MADE IN THE CASE OF A SSESSEE COMPANY WHICH IS NOT A SHAREHOLDER O F THE PAYING COMPANY. RESPECTFULLY FOLLOWIN G THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT, I HOLD THAT, NO ADDITION U/S 2 ( 22 ) (E) CAN BE MADE IN THE CASE OF THE APPELLANT AS THE APPELLANT IS NOT A SHAREHOLDER THE PAYER COMPANY. THE ADDITION MADE BY THE AO IS DELE TED. THIS GROUND OF APPEAL IS ALL OWED. 5 6. THE LD. AR, AT THE VERY OUTSET, SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MADHUR HOUSING AND DEVELOPMENT COMPANY IN ITA NO. 3961/2013 TO WHICH THE LD. DR DID NOT RAISE ANY OBJECTION AND HE CONCEDED THAT THE ISSUE IS COVERED. 7. WE HAVE HEARD THE RIVAL ARGUMENTS AND PERUSED THE ORDERS OF THE A.O AND THE LD. CIT(A). THE ISSUE IN THE PRESENT CASE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MADHUR HOUSING AND DEVELOPMENT COMPANY [SUPRA] WHEREIN IT HAS BEEN HELD AS UNDER: THE IMPUGNED JUDGMENT AND ORDER DATED 11.05.2011 HAS RELIED UPON A JUDG MENT OF THE SAME DATE BY A DIVISION BENCH OF THE HIGH COURT OF DELHI IN ITA NO. 462 OF 2009. HAVING PERUSED THE JUDGMENT AND HAVING HEARD ARGUMENTS, WE ARE OF THE VIEW THAT THE JUDGMENT IS A DETAILED JUDGMENT GOING INTO SECTION 2(22) (E) OF THE INCOME TAX ACT WHICH ARISES AT THE CORRECT CONSTRUCTION OF THE SAID SECTION. WE DO NOT WISH TO ADD ANYTHING TO THE JUDGMENT EXCEPT TO SAY THAT WE AGREE THEREWITH . 6 8. IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE IS NOT A SHARE HOLDER IN THE SAID COMPANY AND HENCE THE LOAN TAKEN BY THE ASSESSEE WHICH HAS BEEN CHARACTERISED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT CANNOT BE TAXED IN THE HANDS OF THE APPELLANT BEING NOT A SHARE HOLDER. RELIANCE I S PLACED ON THE DECISION OF THE H ON'BLE DELHI HIGH COURT IN THE CASE OF ANKITECH PVT LTD. [SUPRA] AND MADHUR HOUSING AND DEVELOPMENT CO. [SUPRA] WHICH SUPPORT THE SUBMISSIONS OF THE LD. AR . UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CI T(A). THUS ALL THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 0 7 .1 1 .2017. S D / - S D / - [ SUDHANSHU SRIVASTAV A] [B.P. JAIN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 7 T H NOVEM BER , 201 7 VL/ 7 COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI