ESJAY HORTICULTURE P.LTD, MUMBAI V. ASST CIT RG 6(30, MUMBAI

ITA 3725/MUM/2011

• Counselvise Citation: 372519914 RSA 2011
• Duration Of Justice: 2 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 22-08-2013
• Assessment Year: 1998-1999
• Appeal Filed On: 09-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

E IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI .. , !'# $ $ $ $ %&. !.'.. $( ) !'# !* BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM !./ I.T.A. NO. 3725 /MUM/2011 ( )( , $-, )( , $-, )( , $-, )( , $-, / / / / ASSESSMENT YEAR : 200910) ESJAY HORTICULTURE PRIVATE LIMITED, (NOW MERGED WITH MAERSK INDIA PRIVATE LIMITED), 414, EMPIRE INDUSTRIES COMPLEX, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400 013. ( ( ( ( / VS. ASSTT. COMMISSIONER OF INCOME TAX RG. 6(3), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 #. !./ PAN : AAACM8741P ( ./ / // / APPELLANT ) .. ( 01./ / RESPONDENT ) ./ 2 3 ! / APPELLANT BY : SHRI NIRAJ SHETH 01./ 2 3 ! / RESPONDENT BY : SHRI SHISHIR SRIVASTAVA !($ 2 / // / DATE OF HEARING : 22-08-13 45- 2 / DATE OF PRONOUNCEMENT : 30-08-2013 '6 / O R D E R PER P.M. JAGTAP, A.M. : .. , !'# THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) - 12, MUMBAI DATED 29-12-2010 AND THE SOLITA RY ISSUE ARISING OUT OF THE SAME RELATES TO THE ADDITION OF RS. 48,22,975/- MADE BY THE A.O. AND ITA 3725/M/11 2 CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF DEEMED DI VIDEND U/S 2(22)(E) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF LEASING OF LAND. THE RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 19-11-2004 DECLARI NG TOTAL INCOME AT RS. NIL. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD RECEIVED INTEREST FREE ADVANCE OF RS. 71,51,000/- FROM M/S CMB TRANSPORT A GENCIES INDIA PVT. LTD. AS ONE OF THE DIRECTORS OF THE ASSESSEE COMPANY SHR I D.K. LAL WAS HAVING MORE THAN 20% SHAREHOLDING IN THE ASSESSEE COMPANY AND MORE THAN 10% SHAREHOLDING IN M/S CMB TRANSPORT AGENCIES INDIA PV T. LTD., THE A.O. INVOKED THE PROVISIONS OF SECTION 2(22)(E) OF THE A CT AND ADDED THE AMOUNT RECEIVED FROM M/S CMB TRANSPORT AGENCIES INDIA PVT. LTD. TO THE EXTENT OF RS. 48,22,975/- BEING THE ACCUMULATED PROFITS OF THE SA ID COMPANY AS DEEMED DIVIDEND. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID ADDITION MADE BY THE A.O. U/S 2(22(E) OF THE ACT. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LD. COUN SEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE (P.) LTD. (2010) 190 TAX MAN 144 (BOM) WHEREIN IT WAS HELD THAT THE AMOUNT OF DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) COULD BE TAXED ONLY IN THE HANDS OF THE AS SESSEE WHO IS A SHAREHOLDER. IT WAS HELD THAT THE EFFECT OF CLAUSE (E) OF SECTION 2(22) IS TO BROADEN THE AMBIT OF EXPRESSION DIVIDEND BY INCL UDING CERTAIN PAYMENTS WHICH THE COMPANY HAD MADE BY WAY OF LOAN OR ADVANC E OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHA REHOLDER. IT WAS HELD THAT THE SAID DEFINITION, HOWEVER, DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO ITA 3725/M/11 3 BE TAXED ONLY IN THE HANDS OF THE SHAREHOLDER. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE COMPANY IN THE PRESENT CASE WAS NOT A SHAREHOLDER IN M/S CMB TRANSPORT AGENCIES IND IA PVT. LTD. DURING THE YEAR UNDER CONSIDERATION AND THEREFORE THE AMOUNT R ECEIVED BY THE ASSESSEE FROM THE SAID COMPANY CANNOT BE ADDED IN ITS HANDS AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT AS HELD BY THE HONBLE BOMBAY H IGH COURT IN THE CASE OF M/S CMB TRANSPORT AGENCIES INDIA PVT. LTD. THE LD. D.R., ON THE OTHER HAND, HAS RELIED ON THE ORDERS OF THE AUTHORITIES BELOW I N SUPPORT OF THE REVENUES CASE ON THIS ISSUE. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL AVAILABLE ON RECORD, WE FIND THAT THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE (P.) LTD. (SUPRA) IS CLEARLY TO THE EFFECT THAT THE ADDITION U/S 2(22)(E ) OF THE ACT ON ACCOUNT OF DEEMED DIVIDEND CAN BE MADE ONLY IN THE CASE OF THE ASSESSEE WHO IS SHAREHOLDER OF THE COMPANY FROM WHOM THE AMOUNT IN QUESTION IS RECEIVED. THE CONTENTION RAISED BY THE LD. COUNSEL FOR THE AS SESSEE IN THIS REGARD IS THAT THE ASSESSEE NOT BEING A SHAREHOLDER IN M/S CMB TRA NSPORT AGENCIES INDIA PVT. LTD., THE AMOUNT IN QUESTION RECEIVED FROM THE SAID COMPANY CANNOT BE ADDED AS DEEMED INCOME IN HIS HANDS U/S 2(22)(E) OF THE ACT. IT IS, HOWEVER, OBSERVED THAT THERE IS NO FINDING GIVEN ON THIS ASP ECT EITHER IN THE ORDER OF THE A.O. OR IN THE ORDER OF THE LD. CIT(A) AS THE SAME WAS NOT SPECIFICALLY RAISED BEFORE THEM. WE, THEREFORE, CONSIDER IT FAIR AND P ROPER AND IN THE INTER INTEREST OF JUSTICE TO RESTORE THIS MATTER TO THE F ILE OF THE A.O. FOR THE LIMITED PURPOSE OF VERIFYING THIS ASPECT AND DECIDING THE I SSUE RELATING TO THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT KEEPING IN VIEW THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COU RT IN THE CASE OF UNIVERSAL MEDICARE (P.) LTD. (SUPRA). ITA 3725/M/11 4 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUG. 2013. . '6 2 45- 7'(8 30-8-13 5 2 SD- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP ) ) !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 7'( DATED 30-8-13 $.)(.!./ RK , SR. PS '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:- '6 2 0)9: ;:-/ COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. 01./ / THE RESPONDENT. 3. < () / THE CIT(A)- 12, MUMBAI 4. < / CIT CITY -6 MUMBAI 5. :$? 0))( , , / DR, ITAT, MUMBAI E BENCH 6. %, @ / GUARD FILE. '6(! '6(! '6(! '6(! / BY ORDER, !1: 0) //TRUE COPY// A A A A/ // /!B !B !B !B ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI