ACIT, Cir-7, Nagpur V. M/s Simplex Chemopack Pvt. Ltd., Nagpur

ITA 377/NAG/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93304 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 18-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

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. 377 / N A G /2012 (A.Y. 200 7 - 08 ) ACIT, CIRCLE - 7, NAGPUR. VS. M/S. SIMPLEX CHEMOPACK PVT. LTD., C/O N - 1, MIDC, HINGNA ROAD, NAGPUR. (APPELLANT) PAN NO. AABCS 8623 H (RESPONDENT) ASSESSEE BY : SHRI R.V. LOYA C.A. DEPARTMENT B Y : SHRI NARENDRA KANE D.R. DATE OF HEARING : 0 8 / 0 4 /201 5 . DATE OF PRONOUNCEMENT : 10 /0 4 /201 5 . O R D E R PER SHAMIM YAHYA , A.M TH IS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF L D . CIT(A) - II , NAGPUR DATED 31/07/2012 AND PERTAINS TO A.Y. 2007 - 08 . 2 THE ISSUE RAISED , IN THIS APPEAL , IS THAT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 18,55,010/ - AS DEEMED DIVIDEND U / S . 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT', FOR SHORT) . 2 I.T.A.NO. 377/NAG/2012 3. IN THIS CASE, ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY HAS RECEIVED UNSECURED LOAN OF RS. 18,55,010/ - FROM M/S. SHREE GAJANAND PLASTICS PVT. LTD. , WHICH IS A COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED AND THAT ONE MR. DAMODAR SARDA HOLDS 26.31% SHARES IN THE LENDER COMPANY AND ALSO HOLDS 25.72% SHARES IN THE ASSESSEE COMPANY. THE LENDER COMPANY HAD RESERVES AND SURPLUS OF RS. 89,97,020/ - AT 31/03/2007. IN THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS OF THE OPINION THAT LOAN OBTAINED BY THE ASSESSEE - COMPANY FROM M/S. SHREE GAJANAND PLASTICS PVT. LTD. IS HIT BY THE FICTION CR EATED BY SEC. 2(22)(E) OF THE ACT. HENCE , THE SAME WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. 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 THE ORDER OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V ANKIT EK PVT. LTD. (340 ITR 14) 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 CONCERN BECAME DEEMED SHARE HOLDER OF COMPANY AND HENCE THE DEEMED 3 I.T.A.NO. 377/NAG/2012 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 ARIS E 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. 1 AND 2 ARE TAKEN TOGETHER AS THEY DEEMED TO THE SAME ISSUE OF DEEMED DIVIDEND. IT IS SEEN THAT THE ASSESSEE HAS GOT LOAN FROM SHREE GAJANAND PLASTICS PVT. LTD. AND SHRI DAMODHAR SARDA TOLD MORE T HAN 10% SHARES OF THE AFORESAID COMPANY SHRI DAMODHAR SARDA 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 CLAUSE B ABOVE AND HENCE THE DEEMED DIVIDEND IS TO BE TAXED IN THE HANDS OF SHRI DAMODHAR SARDA. THE AO IS FREE TO BRING THIS DEEMED DIVIDEND TO TAX AND IF HE IS NOT THE AO OF SHRI DAMODHAR SARDA 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. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE RECORD. 6 . LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AS THE ASSESSEE - COMPANY IS NOT 4 I.T.A.NO. 377/NAG/2012 A SHAREHOLDER OF THE COMPANY FROM WHOM LOAN HAS BEEN OB TAINED. HENCE, LEARNED COUNSEL SUBMITTED THAT IN VIEW OF THE HON'BLE JURISDICTIONAL HIGH COURT S DECISION IN THE CASE OF CIT V IMPACT CONTAINERS PVT. LTD. REPORTED IN 367 ITR 346 , DEEMED DIVIDEND CANNOT BE CONSIDERED IN THE HANDS OF THE ASSESSEE COMPANY. 7 . 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 COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT AS CITED ABOVE. 8 . UPON CAREFUL CONSIDERATION, WE FIND THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER OF THE COMPANY FROM WHOM THE UNSECURED LOAN HAS BEEN TAKEN. IN THIS VIEW OF THE MATTER, AS PER THE RATIO EMANATING FROM THE HON'BLE JURISDICTIONAL HIGH COURT DECISIONS AS CITED ABOVE, DEEMED DIVIDEND CAN BE TAXED ONLY IN THE HANDS OF THE SHAREHOLDER . A S THE ASSESSEE COMPANY IS NOT A SHAREHOLDER OF LENDER COMPANY , N O DEEMED DIVIDEND CAN BE TAXED IN THE HANDS OF THE ASSESSEE COMPANY. ACCORDINGLY, WE DO NOT FIND ANY INFIRMIT Y IN THE ORDER OF THE LD. CIT(A). THEREFORE, WE UPHO LD THE SAME. 5 I.T.A.NO. 377/NAG/2012 9 . IN THE RESULT, THIS APPEAL FILED BY THE REVENUE STANDS 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/ - 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 . 6 I.T.A.NO. 377/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