Kerala Transport Co., Calicut V. ACIT, Calicut

ITA 382/COCH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1024 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2013
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 07-01-2013
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2011
• Court: TRIBUNAL
• Department Lawyers: SUSAN GEORGE VARGHESE
• Assessee Lawyers: S RAGHUNANDAN
• Keywords: Deemed dividend; Validity of assessment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A. NO. 382/COCH/2011 ASSESSMENT YEAR : 2005-06 M/S. KERALA TRANSPORT COMPANY, K.T.C. BUILDING, Y.M.C.A. ROAD, CALICUT-673 001. [PAN: AADFK 0173H] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1), CALICUT. (ASSESSEE -APPELLANT) (REVENUE-R ESPONDENT) ASSESSEE BY SHRI S.RAGHUNANDAN, CA REVENUE BY SMT. SUSAN GEORGE VARGHESE, SR. DR DATE OF HEARING 07/01/2013 DATE OF PRONOUNCEMENT 11/01/2013 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 23-02-2011 PASSED BY THE LD. CIT(A)-I, CALICUT AND IT RELATES TO THE ASSESSMENT YEAR 2005-06. 2. THE GROUNDS URGED BY THE ASSESSEE GIVE RISE TO T HE FOLLOWING TWO ISSUES:- (A) VALIDITY OF ASSESSMENT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT. (B) DISALLOWANCE OF ESI CLAIM. 3. THE FACTS RELATING TO THE ABOVE SAID ISSUES ARE STATED IN BRIEF. THE ASSESSEE IS A PARTNERSHIP FIRM AND IT FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS. 9,10,929/-. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE-FIRM HAD RECEIVED AN ADVANCE OF RS.28,36,351/- FROM A CLOSELY HELD COMPA NY NAMED M/S. K.T.C. AUTOMOBILES P. LTD. THE ASSESSING OFFICER FURTHER NOTICED THAT EACH OF THE PARTNERS OF THE ASSESSEE- FIRM VIZ. SHRI P.V. CHANDRAN, SHRI P.V. GANGADHARAN AND SHRI P.V. NIDHEESH HELD 30% OF THE SUBSCRIBED SHARE CAPITAL OF THE ABOVE SAID COMP ANY, WHICH HAD ALSO ACCUMULATED I.T.A. NO.382/COCH/2011 2 PROFIT TO THE TUNE OF RS. 15,66,410/-. ACCORDINGLY , THE ASSESSING OFFICER TOOK THE VIEW THAT THE ADVANCE RECEIVED BY THE ASSESSEE-FIRM TO T HE EXTENT OF THE ACCUMULATED PROFIT REFERRED ABOVE IS ASSESSABLE U/S. 2(22)(E) OF THE A CT. ACCORDINGLY, HE ASSESSED RS. 15,66,410/- AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE-FIRM U/S. 2(22)(E) OF THE ACT. 4. THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSE SSEE HAS PAID ESI CONTRIBUTIONS AMOUNTING TO RS.1,73,938/- BEYOND THE DUE DATE PRES CRIBED UNDER THE ESI ACT. ACCORDINGLY, HE DISALLOWED THE ABOVE SAID CLAIM OF RS. 1,73,938/-. IN THE APPEAL FILED BY THE ASSESSEE, THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER ON THE ABOVE SAID TWO ISSUES. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE FIRST ISSUE RELATES TO THE ASSESSMENT OF DEE MED DIVIDEND U/S. 2(22)(E) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIA NCE ON THE DECISION OF THE MUMBAI SPECIAL BENCH IN THE CASE OF CIT VS. BHAUMIK COLOUR P. LTD. (313 ITR (AT) 146) AND SUBMITTED THAT THE DEEMED DIVIDEND SHOULD BE ASSESS ED IN THE HANDS OF THE SHAREHOLDERS ONLY AND NOT IN THE HANDS OF THE CONCE RN, WHICH HAS TAKEN ADVANCE FROM THE COMPANY. ON THE CONTRARY, THE LD. DR SUBMITTED THAT THE ASSESSEE-FIRM HAS RECEIVED ADVANCE AND HENCE, DEEMED DIVIDEND CAN BE ASSESSED IN ITS HANDS ONLY. 6. WE HAVE HEARD THE RIVAL CONTENTIONS ON THIS ISSU E. THE MUMBAI SPECIAL BENCH IN THE CASE OF CIT VS. BHAUMIK COLOUR P. LTD. (REFERRE D SUPRA) HAS HELD THAT DEEMED DIVIDEND COULD BE ASSESSED ONLY IN THE HANDS OF THE PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE PERSON O THER THAN THE SHAREHOLDER. IN THE INSTANT CASE, THE ASSESSING OFFICER HAS GIVEN A SPE CIFIC FINDING THAT THE PARTNERS OF THE ASSESSEE-FIRM ARE HOLDING SHARES IN M/S. K.T.C. AUT OMOBILES P. LTD., I.E., THE LENDER COMPANY. HENCE, BY FOLLOWING THE DECISION OF THE S PECIAL BENCH REFERRED ABOVE, WE HOLD THAT THE DEEMED DIVIDEND REFERRED ABOVE CANNOT BE ASSESSED IN THE HANDS OF THE ASSESSEE FIRM. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE ASSESSING OFFICER TO DELETE THE ASSESSME NT MADE U/S. 2(22)(E) OF THE ACT IN THE HANDS OF THE ASSESSEE FIRM. I.T.A. NO.382/COCH/2011 3 7. THE NEXT ISSUE RELATES TO THE DEDUCTION RELATING TO THE ESI CONTRIBUTIONS. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSE E-FIRM HAS PAID THE ESI AMOUNTS BEFORE THE DUE DATE FOR FILING THE RETURN OF INCOME . ACCORDINGLY, HE SUBMITTED THAT THE ENTIRE AMOUNT IS ALLOWABLE. HOWEVER, HE COULD NOT FURNISH THE DETAILS OF THE DATES OF PAYMENT OF ESI CONTRIBUTIONS. THE INSTANT ISSUE HAS SINCE BEEN SETTLED BY THE HON. SUPREME COURT IN THE CASE OF CIT VS. VINAY CEMENT L TD. ( 213 CTR 268) AND CIT VS. ALOM EXTRUSIONS LTD. (319 ITR 306) AND ALSO BY HONB LE DELHI HIGH COURT IN THE CASE OF CIT VS. DHARMENDRA SHARMA (297 ITR 320). IN VIEW O F THE ABOVE SAID DECISIONS, THIS ISSUE NEEDS FRESH EXAMINATION AT THE END OF THE ASS ESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE T HE ISSUE AFRESH IN ACCORDANCE WITH THE DECISIONS REFERRED SUPRA. 8. IN THE RESULT, THE APPEAL FILED BY THE ASS ESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 11-01-2013. SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 11TH JANUARY, 2013 GJ COPY TO: 1. M/S. KERALA TRANSPORT COMPANY, K.T.C. BUILDING, Y.M.C.A. ROAD, CALICUT-673 001. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1(1), CALICUT. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, CALI CUT. 4.THE COMMISSIONER OF INCOME-TAX, CALICUT. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN