The DCIT(OSD)Range-1, Ahmedabad V. Bar Magnet Investment Pvt. Ltd., Ahmedabad

ITA 383/AHD/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1018 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 08-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Business income; Wrong claim; Deemed dividend; Sham transactions

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI S.K. YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 3370/AHD/2010 & 383/AHD/2013 (ASSESSMENT YEARS: 2006-07 & 2008-09) DCIT, (OSD), RANGE-1, AHMEDABAD V/S M/S. BAR MAGNET INVESTMENTS PVT. LTD. MANGLAM, B/H. APANG MANAV MANDAL, DR. V.S. ROAD, AHMEDABAD-380015 (APPELLANT) (RESPONDENT) PAN: AABCB9105E APPELLANT BY : SHRI JAMES KURIAN, SR. D.R . RESPONDENT BY : SHRI TUSHAR P. HEMANI, A.R. ( )/ ORDER DATE OF HEARING : 20 -07-201 6 DATE OF PRONOUNCEMENT : 22 -07-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. ITA NOS. 3370/AHD/2010 & 383/AHD/2013 ARE APPEALS B Y THE REVENUE PREFERRED AGAINST TWO SEPARATE ORDERS OF THE LD. CI T(A)-VI, ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 2 AHMEDABAD DATED 15.10.2010 & 23.11.2012 PERTAINING TO A.YS. 2006- 07 & 2008-09. 2. SINCE, ONE OF THE GRIEVANCE OF THE REVENUE IS COMMO N IN BOTH THESE APPEALS, THESE WHERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 3370/AHD/2010 FOR A.Y. 2006-07 3. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 1,02,71,681/- ON ACCOU NT OF TREATING SHORT TERM CAPITAL GAIN AS BUSINESS PROFIT. 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF LEASING AND HIRING. THE RETURN OF INCOME WAS FILED ON 30.12.200 6 DECLARING TOTAL INCOME AT RS. 67,52,004/-. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE I SSUED AND SERVED UPON THE ASSESSEE. 5. WHILE SCRUTINIZING THE RETURN OF INCOME, THE A.O. N OTICED THAT THE ASSESSEE HAS SHOWN SHORT TERM CAPITAL GAIN AT RS. 7 0,29,388/- AND LONG TERM CAPITAL GAIN AT RS. 32,42,293/-. THE ASSE SSEE WAS ASKED TO FURNISH THE RELEVANT DETAILS PERTAINING TO THE CAPI TAL GAINS. ASSESSEE FILED DETAILS SCRIP-WISE AND THE SAME IS EXTRACTED BY THE A.O FROM PAGES 2 TO 4 OF THE ASSESSMENT ORDER. 6. AFTER PERUSING THE DETAILS FILED BY THE ASSESSEE AN D OBSERVING THAT THE ASSESSEE HAS ENTERED INTO NUMEROUS TRANSACTIONS IN SHARES/MUTUAL ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 3 FUNDS DURING THE YEAR, THE ASSESSEE WAS ASKED TO EX PLAIN WHY THE GAIN ON SALE OF SHARES BE NOT TREATED AS BUSINESS INCOME . 7. ASSESSEE FILED A DETAILED REPLY VIDE REPLY DATED 26 .11.2008 AND STRONGLY CONTENDED THAT IT IS AN INVESTMENT COMPANY AND ACCORDINGLY THE SHARES HAVE BEEN SHOWN AS INVESTMENT IN THE BAL ANCE SHEET. IT WAS EXPLAINED THAT THE INTENTION OF THE ASSESSEE CO MPANY WHILE ACQUIRING THE SHARES WAS TO HOLD IT AS INVESTMENT A ND IT WAS NEVER THE INTENTION OF THE ASSESSEE TO TRADE IN SHARES. IT WA S FURTHER POINTED OUT THAT THE OPENING BALANCE OF INVESTMENT IN SHARES WA S AT RS. 2,43,54,972/- WHILE THE CLOSING BALANCE WAS RS. 3,4 2,02,153/-. IT WAS BROUGHT TO THE NOTICE OF THE A.O. THAT THE MAIN SUR PLUS IS ON ACCOUNT OF PORTFOLIO MANAGEMENT SCHEME WHEREIN FUNDS HAVE BEEN GIVEN AND GAIN HAS REALIZED. 8. THE DETAILED SUBMISSION DID NOT FIND ANY FAVOUR WIT H THE A.O. THE A.O. WAS OF THE FIRM BELIEF THAT CONSIDERING THE MAGNITU DE OF TRANSACTIONS ENTERED INTO BY THE ASSESSEE DURING THE YEAR CLEARL Y SHOW THAT THE ASSESSEE WAS REGULARLY AND SYSTEMATICALLY PURCHASIN G AND SELLING SHARES/MUTUAL FUNDS AND THE PURCHASE AND SALE OF SH ARES WAS DONE WITH A MOTIVE OR EARNING PROFIT. THE ENTIRE PROFIT EARNED ON SALE OF SHARES WAS TREATED AS BUSINESS INCOME OF THE ASSESS EE. 9. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CLAIM OF BEING AN INVESTOR. 10. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) PERUSED PAST THREE YEARS AUDITED ACC OUNTS OF THE ASSESSEE AND FOUND THAT IN ALL THESE YEARS, THE SHA RES WERE TREATED AS ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 4 INVESTMENT. THE LD. CIT(A) FURTHER OBSERVED THAT IN THE IMMEDIATE PRECEDING YEAR, ASSESSING OFFICER VIDE ORDER DATED 17.10.2007 ACCEPTED THE SURPLUS ON SALE OF SHARES UNDER THE HE AD CAPITAL GAINS. THE LD. CIT(A) WAS CONVINCED WITH THE FACTS OF THE CASE THAT THE ASSESSEE WAS ONLY AN INVESTOR AND DIRECTED THE A.O. TO TREAT THE GAIN UNDER THE HEAD CAPITAL GAINS. 11. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. 12. THE D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O . PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HA S BEEN STATED BEFORE THE LOWER AUTHORITIES. 13. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW AND HAVE CONSIDERED THE RELEVANT DOCUMENTARY EVIDEN CES BROUGHT ON RECORD. 14. THE DISPUTE IS REGARDING THE NATURE OF INCOME ON SA LE AND PURCHASE OF SHARES BY THE ASSESSEE. THE ISSUE, WHET HER THE INCOME FROM SALE AND PURCHASE OF SHARES IN A PARTICULAR CA SE SHOULD BE TREATED AS CAPITAL GAIN OR AS BUSINESS INCOME HAS BEEN A DE BATABLE ISSUE AND THERE ARE CONFLICTING DECISIONS OF THE TRIBUNAL ON THIS ISSUE. EACH CASE IS THEREFORE, TO BE BASED ON ITS OWN FACTUAL SITUAT ION. IN THE BALANCE SHEET, THE ASSESSEE HAS SHOWN SHARES UNDER THE HEAD 'INVESTMENT'. THESE INVESTMENT SHARES HAVE BEEN VALUED AT COST. T HE HON'BLE SUPREME COURT IN THE CASE OF CIT ASSOCIATED INDUSTR IAL DEVELOPMENT CO PVT. LTD. 82 ITR 586, WHICH DECISION HAS ALSO BE EN CONSIDERED BY THE CBDT IN ITS CIRCULAR NO. 4/2007 DT. 15.6.2007, HAS OBSERVED THAT: ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 5 'WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY O F INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS -WITHIN THE KNOWLEDGE OF THE ASSESSEE WHO HOLDS THE SHARES AND IT SHOULD, IN NORMAL CIRCUMSTA NCES, BE IN A POSITION TO PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINCTION BETWEEN THOSE SHARES WHICH ARE ITS STOCK-IN-TRADE A ND THOSE WHICH ARE HELD BY WAY OF INVESTMENT' 15. THE CBDT HAS FURTHER THROWN LIGHT ON THIS CONTROVER SIAL ISSUE IN ITS CIRCULAR NO. 6/2016 DATED 29.02.2016 AND THE S AME READS AS UNDER:- SUB: ISSUE OF TAXABILITY OF SURPLUS ON SALE OF SHAR ES AND SECURITIES - CAPITAL GAINS OR BUSINESS INCOME INSTRUCTIONS IN ORDER TO REDUC E LITIGATION - REG.- SUB-SECTION (14) OF SECTION 2 OF THE INCOME-TAX ACT , 1961 ('ACT') DEFINES THE TERM 'CAPITAL ASSET' TO INCLUDE PROPERTY OF ANY KIND HEL D BY AN ASSESSEE, WHETHER OR NOT CONNECTED WITH HIS BUSINESS OR PROFESSION, BUT DOES NOT INCLUDE ANY STOCK-IN-TRADE OR PERSONAL ASSETS SUBJECT TO CERTAIN EXCEPTIONS. A S REGARDS SHARES AND OTHER SECURITIES, THE SAME CAN BE HELD EITHER AS CAPITA! ASSETS OR STOCK-IN-TRADE/ TRADING ASSETS OR BOTH. DETERMINATION OF THE CHARACTER OF A PARTICULAR INVESTMENT IN SHARES OR OTHER SECURITIES, WHETHER THE SAME IS IN THE NATURE OF A CAPITAL ASSET OR STOCK-IN-TRADE, IS ESSENTIALLY A FACT-SPECIFIC DETE RMINATION AND HAS LED TO A LOT OL UNCERTAINTY AND LITIGATION IN THE PAST. 2. OVER THE YEARS, THE COURTS HAVE LAID DOWN DIFFER ENT PARAMETERS TO DISTINGUISH THE SHARES HELD AS INVESTMENTS FROM THE SHARES HELD AS STOCK-IN-TRADE. THE CENTRAL BOARD OF DIRECT TAXES ('CBDT') HAS ALSO, THROUGH IN STRUCTION NO. 1827, DATED AUGUST 31, 1989 AND CIRCULAR NO. 4 OF 2007 DATED JU NE 15, 2007, SUMMARIZED THE SAID PRINCIPLES FOR GUIDANCE OF THE FIELD FORMATION S. 3. DISPUTES, HOWEVER, CONTINUE TO EXIST ON THE APPL ICATION OF THESE PRINCIPLES TO THE FACTS OF AN INDIVIDUAL CASE SINCE THE TAXPAYERS FIND IT DIFFICULT TO PROVE THE INTENTION IN ACQUIRING SUCH SHARES/SECURITIES. IN T HIS BACKGROUND, WHILE RECOGNIZING THAT NO UNIVERSAL PRINCIPAL IN ABSOLUTE TERMS CAN BE LAID DOWN TO ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 6 DECIDE THE CHARACTER OF INCOME FROM SALE OF SHARES AND SECURITIES (I.E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS I NCOME), CBDT REALIZING THAT MAJOR PART OF SHARES/SECURITIES TRANSACTIONS TAKES PLACE IN RESPECT OF THE LISTED ONES AND WITH A VIEW TO REDUCE LITIGATION AND UNCER TAINTY IN THE MATTER, IN PARTIAL MODIFICATION TO THE AFORESAID CIRCULARS, FURTHER IN STRUCTS THAT THE ASSESSING OFFICERS IN HOLDING WHETHER THE SURPLUS GENERATED F ROM SALE OF LISTED SHARES OR OTHER SECURITIES WOULD BE TREATED AS CAPITAL GAIN O R BUSINESS INCOME, SHALL TAKE INTO ACCOUNT THE FOLLOWING- A) WHERE THE ASSESSEE ITSELF, IRRESPECTIVE OF THE PERIOD OF HOLDING THE LISTED SHARES AND SECURITIES, OPTS TO TREAT THEM AS STOCK- IN-TRADE, THE INCOME ARISING FROM TRANSFER OF SUCH SHARES/SECURITIES WOULD BE TR EATED AS ITS BUSINESS INCOME, B) IN RESPECT OF LISTED SHARES AND SECURITIES HELD FOR A PERIOD OF MORE THAN 12 MONTHS IMMEDIATELY PRECEDING THE DATE OF ITS TRANSF ER, IF THE ASSESSEE DESIRES TO TREAT THE INCOME ARISING FROM THE TRANSFER THEREOF AS CAPITAL GAIN, THE SAME SHALL NOT BE PUT TO DISPUTE BY THE ASSESSING OFFICER. HOW EVER, THIS STAND, ONCE TAKEN BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SHALL REMAIN APPLICABLE IN SUBSEQUENT ASSESSMENT YEARS ALSO AND THE TAXPAYERS SHALL NOT BE ALLOWED TO ADOPT A DIFFERENT/CONTRARY STAND IN THIS REGARD IN SUBSEQ UENT YEARS; C) IN ALL OTHER CASES, THE NATURE OF TRANSACTION (I .E. WHETHER THE SAME IS IN THE NATURE OF CAPITAL GAIN OR BUSINESS INCOME) SHALL CO NTINUE TO BE DECIDED KEEPING IN VIEW THE AFORESAID CIRCULARS ISSUED BY THE CBDT. 4. IT IS, HOWEVER, CLARIFIED THAT THE ABOVE SHALL N OT APPLY IN RESPECT OF SUCH TRANSACTIONS IN SHARES/SECURITIES WHERE THE GENUINE NESS OF THE TRANSACTION ITSELF IS QUESTIONABLE, SUCH AS BOGUS CLAIMS OF LONG TERM CAP ITAL GAIN/SHORT TERM CAPITAL LOSS OR ANY OTHER SHAM TRANSACTIONS. 5. IT IS REITERATED THAT THE ABOVE PRINCIPLES HAVE BEEN FORMULATED WITH THE SOLE OBJECTIVE OF REDUCING LITIGATION AND MAINTAINING CO NSISTENCY IN APPROACH ON THE ISSUE OF TREATMENT OF INCOME DERIVED FROM TRANSFER OF SHARES AND SECURITIES. ALL THE RELEVANT PROVISIONS OF THE ACT SHALL CONTINUE TO AP PLY ON THE TRANSACTIONS INVOLVING TRANSFER OF SHARES AND SECURITIES. ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 7 16. CONSIDERING THE FACTS IN HAND, IN THE LIGHT OF THE AFOREMENTIONED CIRCULAR OF THE BOARD, IN OUR CONSIDERED OPINION, T HE INTENTION OF THE ASSESSEE AT THE TIME OF THE PURCHASE OF SHARES IS P ARAMOUNT. IF THE ASSESSEE HAS CLEAR INTENTION OF BEING AN INVESTOR A ND SHOWING THE SHARES AS INVESTMENT, WE DO NOT FIND ANY REASON TO DISTURB THE INTENTION OF THE ASSESSEE. THE ASSESSEE UNDER CONSI DERATION IS INVESTOR AND, THEREFORE, ANY GAIN ARISING OUT THE TRANSFER O F SHARES SHOULD BE TREATED AS CAPITAL GAINS BE IT SHORT TERM OR LONG T ERM. 17. WE ALSO FIND THAT THE ASSESSEE HAS NOT UTILIZED ANY BORROWED FUNDS FOR MAKING PURCHASES OF SHARES. THE AVERAGE H OLDING PERIOD IS AROUND 172 DAYS. FURTHER, IT IS NOT THE CASE OF THE ASSESSING OFFICE R THAT THE ASSESSEE WAS CHURNING THE SHARES, BUYING A ND SELLING THE SAME SHARES AGAIN AND AGAIN. IN CIT V/S MADAN GOPAL RADHEY LAL, [1969] 73 ITR 652 (SC), THE HON'BLE SUPREME COURT H AS DEALT WITH THE ISSUE AND DISCUSSED THE QUESTION:- 'A TRADER MAY ACQUIRE A COMMODITY IN WHICH HE IS DE ALING, FOR, HIS OWN PURPOSES, AND HOLD IT APART FROM THE STOCK-IN-TRADE OF HIS BU SINESS. THERE IS NO PRESUMPTION THAT SUCH AN .ACQUISITION, EVEN IF IT IS AN ACCRETI ON TO THE STOCK-IN-TRADE OF THE BUSINESS, IS AN ACQUISITION FOR THE PURPOSE OF HIS BUSINESS: IN EACH CASE THE QUESTION IS ONE OF INTENTION TO BE GATHERED FROM TH E EVIDENCE OF CONDUCT AND DEALINGS BY THE ACQUIRER WITH THE COMMODITY.' IN ASSOCIATED INDUSTRIAL DEVELOPMENT (SUPRA), THE S UPREME COURT OBSERVED AS FOLLOWS: - '....IT WAS OPEN TO THE ASSESSEE TO CONTEND THAT EV EN ON THE ASSUMPTION THAT IT HAD BECOME A DEALER AND WAS NO LONGER AN INVESTOR IN SH ARES THE PARTICULAR HOLDINGS WHICH HAD BEEN CLEARED AND THE SALES OF WHICH HAD R ESULTED IN THE PROFIT IN QUESTION HAD ALWAYS BEEN TREATED BY IT AS AN INVEST MENT. IT CAN HARDLY BE DISPUTED THAT THERE WAS NO BAR TO A DEALER INVESTING IN SHAR ES. BUT THEN THE MATTER DOES NOT REST PURELY ON THE TECHNICAL QUESTION OF ONUS WHICH UNDOUBTEDLY IS INITIALLY ON THE ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 8 REVENUE TO PROVE THAT A PARTICULAR ITEM OF RECEIPT IS TAXABLE. WHETHER A PARTICULAR HOLDING OF SHARES IS BY WAY OF INVESTMENT OR FORMS PART OF THE STOCK-IN-TRADE IS A MATTER WHICH IS WITHIN THE KNOWLEDGE OF THE ASSESSE E WHO HOLDS THE SHARES AND IT SHOULD, IN NORMAL CIRCUMSTANCES, BE IN A POSITION T O PRODUCE EVIDENCE FROM ITS RECORDS AS TO WHETHER IT HAS MAINTAINED ANY DISTINC TION BETWEEN THOSE SHARES WHICH ARE ITS STOCK-IN-TRADE AND THOSE WHICH ARE HE LD BY WAY OF INVESTMENT.' 18. THE HON'BLE SUPREME COURT IN ANOTHER CASE IN P.M. M OHAMMED MEERAKHAN (P.M.) V/S CIT, [1969] 073 ITR 735 (SC), REITERATED THAT IT WAS NOT POSSIBLE TO EVOLVE ANY SINGLE TEST OR FORMU LA WHICH COULD BE APPLIED IN DETERMINING THE TRANSACTION AS ADVENTURE IN NATURE OF TRADE OR NOT. THE DISTINCTION BETWEEN THE TWO TYPES OF TR ANSACTION IS NOT ALWAYS EASY TO MAKE. WHETHER THE TRANSACTION IS OF ONE KIND OR THE OTHER DEPENDS ON THE QUESTION WHETHER THE EXCESS IS AN ENHANCEMENT OF THE VALUE BY REALIZING THE SECURITY OR A GAIN IN AN OPERATION OF PROFIT MAKING. THE ASSESSEE MIGHT HAVE INVESTED CAPITAL IN SHARES WITH AN INTENTION TO RESALE THESE IF IN FUTURE THEIR SALE B RINGS IN A HIGHER PRICE. SUCH AN INVESTMENT THOUGH MOTIVATED BY A POSSIBILIT Y OF ENHANCEMENT VALUE, DID NOT NECESSARILY RENDER THE INVESTMENT A TRANSACTION IN THE NATURE OF TRADE. 19. IT IS ALSO AN ADMITTED FACT THAT IN THE PRECEDING Y EARS, THE SHARE TRANSACTIONS HAVE BEEN CONSIDERED UNDER THE HEAD CA PITAL GAINS. 20. CONSIDERING THE FACTS IN TOTALITY, WE DO NOT FIND A NY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). APPE AL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. ITA NO. 383/AHD/2013 FOR A.Y. 2008-09. ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 9 21. THE SUBSTANTIAL GRIEVANCE OF THE REVENUE READS AS U NDER:- 1. THE CIT(A) HAS ERRED IN LAW AND ON FACT IN DIRECTIN G TO CONSIDER PROFIT FROM TRADING IN SHARES HELD FOR MORE THAN 30 DAYS AS CAP ITAL GAINS AND NOT BUSINESS INCOME DESPITE THE FACT THAT DURING THE YEAR THE AS SESSEE HAD PURCHASED AND SOLD SHARES WORTH RS.3.41 CRORES AND 5.79 CRORES RESPECT IVELY AND ALSO AVAILED LOANS OF RS.1.64 CRORES FOR THE SAME. THE FACTS OF THE CA SE CLEARLY INDICATE THAT THE INTENTION OF THE ASSESSEE WAS TO EARN PROFIT FROM T RADING IN SHARES. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACT IN NOT TREA TING THE AMOUNT RECEIVED FROM MAS CHEMICALS INDS. P LTD. AS DEEMED DIVIDEND U/S 2 (22)(E) DESPITE THE FACT THAT SAMURAI HOLDINGS HELD 95.45% AND 80% OF BENEFICIAL OWNERSHIP RESPECTIVELY IN BOTH THE PAYER AND PAYEE COMPANIES. 22. THE FACTS AND ISSUES INVOLVED IN THE FIRST GROUND O F APPEAL ARE IDENTICAL TO THE FACTS AND ISSUES CONSIDERED AND DE CIDED BY US IN ITA NO. 3370/AHD/2010 QUA GROUND NO. 1 OF THAT APPEAL. FOR OUR DETAILED DISCUSSION THEREIN, WE DECLINE TO INTERFERE WITH TH E FINDINGS OF THE LD. CIT(A). GROUND NO. 1 IS ACCORDINGLY DISMISSED. 23. INSOFAR AS GROUND NO. 2 IS CONCERNED, THE DISPUTE R ELATES TO THE TREATMENT OF THE LOAN RECEIVED BY THE ASSESSEE COMP ANY FROM M/S. MAS CHEMICALS INDUSTRIES PVT. LTD. AS DEEMED DIVIDE ND U/S. 2(22)(E) OF THE ACT. 24. THE MOST IMPORTANT FACT IS TO BE CONSIDERED IN RELA TION TO THIS ISSUE IS THAT THE ASSESSEE IS NOT A SHAREHOLDER OF M/S. MAS CHEMICALS INDUSTRIES PVT. LTD. ONE SAMURAI HOLDINGS HOLDS 95. 45% OF THE VOTING POWER IN THE COMPANY M/S. MAS CHEMICALS INDUSTRIES PVT. LTD. AND THE SAID SAMURAI HOLDINGS IS ALSO BENEFICIALLY ENTITLED TO 80% OF THE INCOME OF THE ASSESSEE COMPANY ON THE BASIS OF THES E FACTS, THE A.O. ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 10 FORMED A BELIEF THAT PROVISIONS OF SECTION 2(22)(E) OF THE ACT SQUARELY APPLY ON THE FACTS OF THE CASE. 25. THIS ISSUE IS NO MORE RES INTEGRA IN THE LIGHT OF T HE DECISION OF THE HONBLE HIGH COURT OF BOMBAY GIVEN IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD. 324 ITR 263 AND IMPACT CONTAINER S 367 ITR 346 AND ALSO BY THE DECISION OF THE HONBLE JURISDICTIO NAL HIGH COURT OF GUJARAT IN THE CASE OF DAISY PACKERS PVT. LTD. IN T AX APPEAL NO. 212 OF 2010. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOUR PVT. LTD. 313 ITR (AT) 146 (MUM) HAS HELD THAT FOR THE APPLICATION OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, IT I S MANDATORY THAT THE RECIPIENT OF THE LOAN/ADVANCE MUST BE BOTH REGISTER ED AND BENEFICIAL SHAREHOLDER. THE SPECIAL BENCH FURTHER OBSERVED TH AT THE DEEMED DIVIDEND CANNOT BE TAXED IN HANDS OF PERSONS OTHER THAN SHAREHOLDER OF LENDER COMPANY. THIS VIEW OF THE SPECIAL BENCH H AS BEEN CONFIRMED BY THE HONBLE HIGH COURT (SUPRA). 26. THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF UNI VERSAL MEDICARE PVT. LTD. (SUPRA) HAS HELD THAT THE TRIBUNAL HAD FOUND THAT AS A MATTER OF FACT NO LOAN OR ADVANCE WAS GRANTED TO THE ASSESSEE. EVEN, ASSUMING THAT IT WAS A DIVIDEND, IT WO ULD HAVE TO BE TAXED NOT IN THE HANDS OF THE ASSESSEE BUT IN THE H ANDS OF THE SHAREHOLDERS. 27. RESPECTFULLY FOLLOWING THE FINDINGS OF THE SPECIAL BENCH OF THE TRIBUNAL AND THE HONBLE HIGH COURT (SUPRA), WE DEC LINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). GROUND NO. 2 I S DISMISSED. ITA NO. 3370 /AHD/10 & 383/AHD/13 . A.YS. 2006- 07 & 2008-09 11 28. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22- 07 - 2016. SD/- SD/- (S. K. YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD