ACIT, Cir -8, Nagpur V. M/s Himalaya Builders & Erectors, Nagpur

ITA 375/NAG/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93308 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 16-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 37; 6; 2

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : NAGPUR BENCH : NAGPUR BEFORE SHRI MUKUL K. SHRAWAT JUDICIAL MEMBER & SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER. ITA NO S . 37 5 & 376 / N A G /2012 (A.Y S . 200 5 - 0 6 & 2006 - 07 ) ACIT, CIRCLE - 8 , NAGPUR. VS. M/S. HIMALAYA BUILDERS & ERECTORS, SHIVAJI NAGAR, NAGPUR. (APPELLANT) PAN NO. AA DFH 4543 C (RESPONDENT) ASSESSEE BY : SHRI K.P. DEWANI ADV. DEPARTMENT B Y : SHRI NARENDRA KANE D.R. DATE OF HEARING : 08 / 0 4 /201 5 . DATE OF PRONOUNCEMENT : 10 /0 4 /201 5 . O R D E R PER SHAMIM YAHYA , A.M TH E S E APPEAL S BY THE REVENUE ARE DIRECTED AGAINST THE SEPARATE ORDER S OF L D . CIT(A) - II , NAGPUR , EACH DATED 27 /07/2012 AND PERTAIN TO A.Y S . 200 5 - 0 6 & 2006 - 07 . SINCE, COMMON ISSUE IS RAISED AND THE APPEALS WERE HEARD TOGETHER, THESE ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 2 I.T.A.NO S . 375 & 376 /NAG/2012 2 THE COMMON ISSUE RAISED , IN TH E S E APPEAL S , IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 30,68,824/ - AND RS. 42,02,473/ - FOR A.YS. 2005 - 06 & 2006 - 07 RESPECTIVELY AS DEEMED DIVIDEND U / S . 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT', FOR SHORT) 3. IN THIS CASE, THE UNDISPUTED FACT IS THAT ASSESSEE FIRM HAS ACCEPTED ADVANCE FROM M/S. WADHWANI COLD STORAGE & ICE PLANT PVT. LTD. THE ASSESSEE FIRM CONSISTS OF TWO PARTNERS. DETAILS OF PARTNERS AND PROFIT SHARING RATIO OF THE PARTNERS ARE GIVEN AS UNDER: - S.NO. NAME OF THE PARTNER SHARE IN PROFIT & LOSS 1. SHRI RAJESH WADHWANI 60% 2. SHRI SUNIL DUDDALWAR 40% ONE OF THE PARTNERS SHRI RAJESH WADHWANI WHO IS HOLDING 60% SHARE IN FIRM IS ALSO A SHAREHOLDER IN M/S. WADHWANI COLD STORAGE & ICE PLANT PVT. LTD. HAVING THE SHARE HOLDING OF MORE THAN 10% . 4. FROM THE ABOVE , IT IS CLEAR THAT THE ASSESSEE FIRM IS NOT A SHAREHOLDER OF M/S. WADHWANI COLD STORAGE & ICE PLANT PVT. LTD. H OWEVER, ASSESSING OFFICER WAS OF THE OPINION THAT LOAN FROM M/S. WADHWANI COLD STORAGE & ICE PLANT PVT. LTD. TO THE ASSESSEE FIRM WAS 3 I.T.A.NO S . 375 & 376 /NAG/2012 DEEMED DIVID END U/S. 2(22)(E) OF THE ACT . ACCORDINGLY, THE ASSESSING OFFICER HELD THAT ASSESSEE HAS RECEIVED DEEMED DIVIDEND OF RS. 30,68,824/ - FOR A.Y. 2005 - 06 AND RS. 47,02,473/ - FOR A.Y. 2006 - 07 . 5. UPON ASSESSEES APPEAL , LD. CIT(A) ELABORATELY CONSIDERED THE ISSUE. HE REFERRED TO THE CASE - LAWS OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S. NATIONAL TRAVEL SERVICES VIDE ORDER DATED 11/07/2011 AND CIT V. UNIVERSAL MEDICARE PVT. LTD. AND SEVERAL OTHER CASE LAWS AND CONCLUDED AS UNDER: - THUS FROM THE ABOVE DISCUSSION WITH EMERGES THAT - A. WHEN THE SHARES ARE HELD BY SHAREHOLDERS FROM THEIR FUND OF CONCERN I.E. CONCERN RECEIVING LOAN IS BENEFICIAL OWNER OF SHARE THEN UNDER SECTION 41(3) AND SECTION 187C OF COMPANIES ACT SUCH CO NCERN BECAME DEEMED SHARE HOLDER OF COMPANY AND HENCE THE DEEMED DIVIDEND IS TO BE TAXED IN THE HANDS OF SUCH CONCERN CIT V. NATIONAL TRAVEL SERVICES ITA NO. 223 OF 2010 (SUPRA) . B. IN ANY OTHER CASE WHEN SHARES ARE HELD BY SHARE HOLDER OUT OF THEIR OWN FUND DEEMED DIVIDEND DOES ARISE AND IT IS TO BE TAXED BUT IT IS TO BE TAXED IN THE HANDS OF SUCH SHAREHOLDER AND CONCERN CANNOT BE TAXED FOR DEEMED DIVIDEND AS IT IS FOR BENEFIT OF SUCH SHARE HOLDER HAVING SUBSTANTIAL INTEREST IN CONCERN COMPANY. HENCE HE IS RESPONSIBLE TO PAY TAX ON SUCH DEEMED DIVIDEND WHICH HAS ARISEN DUE TO THE DEEMING PROVISIONS OF SEC. 2(22)(E). GROUND NO. 3 TO 7 ARE TAKEN TOGETHER AS THEY DEEMED TO THE SAME ISSUE OF DEEMED DIVIDEND. IT IS SEEN THAT THE ASSESSEE HAS GOT LOAN FROM WADHWANI COLD STORAGE AND ICE PLANT PVT. LTD. AND SHRI RAJESH WADHWANI TOLD MORE THAN 10% SHARES OF THE AFORESAID COMPANY MR. RAJESH WADHWANI IS HOLDING 60% SHARE OF ASSESSEE FIRM. THE AO HAS NOT BROUGHT NOTHING ON RECORD TO SHOW THAT SHRI DAMODHAR SARDA AS USED THE MONEY OF ASSESSEE FIRM TO PURCHASE THE SHARE OF ABOVE COMPANY . HENCE THIS CASE FALLS IN 4 I.T.A.NO S . 375 & 376 /NAG/2012 CLAUSE B ABOVE AND HENCE THE DEEMED DIV IDEND IS TO BE TAXED IN THE HANDS OF MR. RAJESH WADHWANI . THE AO IS FREE TO BRING THIS DEEMED DIVIDEND TO TAX AND IF HE IS NOT THE AO OF SHRI RAJESH WADHWANI THEY HE MUST INFORMED THE CONCERNED A.O. AND AS HELD BY DELHI HIGH COURT IN THE CASE OF ANKITACT PVT. LTD 340 ITR 14 (DELHI). ACCORDINGLY, LD. CIT(A) DELETED THE ADDITION AS DEEMED DIVIDEND . AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 6 . WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE RECORD S . 7 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT A SHAREHOLDER OF M/S. WADHWANI COLD STORAGE AND ICE PLANT PVT. LTD. AND THIS IS UNDISPUTED FACT ON RECORD. HENCE, THE ASSESSEE BEING NOT A SHAREHOLDER, NO DEEMED DIVIDEND INCOME U / S 2(22)(E) OF THE ACT CAN BE ASSESSED IN THE CASE OF THE ASSESSEE. L EARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING CASE LAWS: - 1) CIT V . IMPACT CONTAINERS PVT. LTD. REPORTED IN 367 ITR 346 . 2) CIT V. UNIVERSAL MEDICARE (P) LTD. REPORTED IN 324 ITR 263. 8 . LEARNED D.R. , ON THE OTHER HAND , SUPPORTED THE ORDER OF THE ASSESSING OFFICER . B UT , HE COULD NOT DISPUTE THE FACT THAT THE ISSUE IS 5 I.T.A.NO S . 375 & 376 /NAG/2012 COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AS CITED ABOVE. 9 . UPON CAREFUL CONSIDERATION, WE FIND THAT AS PER THE RATIO EMANATING FROM THE AFORESAID CASE LAWS, DEEMED DIVIDEND CAN BE TAXED ONLY IN THE HANDS OF THE SHAREHOLDER S AS T HE PURPOSE OF THIS SECTION IS TO TAX DEEMED DIVIDEND IN THE HANDS OF THE SHAREHOLDERS . A S ADMITTED LY IN THIS CASE ASSESSEE FIRM IS NOT A SHAREHOLDER IN M/S. WADHWANI COLD STORAGE AND ICE PLANT PVT. LTD , WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) DELETING THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND . THEREFORE, WE UPH O LD THE ORDER OF LD. CIT(A) . 10 . IN THE RESULT, APPEAL S FILED BY THE REVENUE STAND DISMISSED. ( ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH APRIL , 201 5 ) . SD/ - SD/ - ( MUKUL K. SHRAWAT ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10 TH APRIL , 201 5 . VR/ - 6 I.T.A.NO S . 375 & 376 /NAG/2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R . 6. GUARD FILE . ASSISTANT REGISTRAR , ITAT, NAGPUR . 7 I.T.A.NO S . 375 & 376 /NAG/2012 DATE INITIAL ORIGINAL DICTATION PAID IS ENCLOSED AT THE END OF FILE 1. DRAFT DICTATED ON 8.4.2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 8.4.2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. DATE OF PRONOUNCEMENT SR.PS 7. FILE SENT TO THE BENCH CLERK SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER