ITO 8(2)(4), MUMBAI V. OM DIDDI VINAYAK CREATIONS P. LTD, MUMBAI

ITA 3852/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49017 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 10-05-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 12-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SINHA
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, C, MUMBAI BEFORE S/SHRI D.K.AGARWAL (JM) AND RAJENDRA SINGH ( A.M ) ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) INCOME TAX OFFICER 8(2)-4, ROOM NO.213, 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 M/S OM SIDDI VINAYAK CREATIONS PVT.LTD. GAZEBO HOUSE, 6 TH FLOOR, 52, GULMOHAR ROAD, VILE PARLE (W), MUMBAI-400049 PAN:AAACO7488F APPELLANT V/S RESPONDENT C.O.NO.33/MUM/2011 IN ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) M/S OM SIDDI VINAYAK CREATIONS PVT.LTD. GAZEBO HOUSE, 6 TH FLOOR, 52, GULMOHAR ROAD, VILE PARLE (W), MUMBAI-400049 PAN:AAACO7488F INCOME TAX OFFICER 8(2)-4, ROOM NO.213, 2 ND FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 CROSS-OBJECTOR V/S RESPONDENT REVENUE BY : SHRI AJIT KUMAR SIN HA ASSESSEE BY : ADJOURNMENT LETTER DATED 3.5.2011 (NOT PRESSED ) O R D E R PER D.K.AGARWAL (JM) THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.2.2010 PASSED BY THE LEA RNED COMMISSIONER OF INCOME TAX (A) FOR THE ASSESSMENT YEAR C.O.NO.33/MUM/2011 IN ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) 2 2006-07 AGAINST WHICH THE ASSESSEE HAS ALSO FILED CROSS- OBJECTION SUPPORTING THE ORDER OF THE LEARNED COMMI SSIONER OF INCOME TAX (A). THE APPEAL AND CROSS-OBJECTION ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROV IDING FINANCIAL SERVICES. IT FILED RETURN DECLARING THE I NCOME AT RS.1,23,311/-. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO ON EXAMINATION OF BALANCESHEET OBSERVED THA T THE ASSESSEE HAS OBTAINED UNSECURED LOAN OF RS.37,50,00 0/- FROM GAZEBO DEVELOPERS PVT.LTD. A GROUP COMPANY. IT WAS FURTHER OBSERVED THAT THE ASSESSEE AND THE GROUP CO MPANY HAD A COMMON SHAREHOLDING PATTERN AS UNDER : GAZEBO DEVELOPERS PVT.LTD. OM SIDDHI VINAYAK CREATIONS PVT.LTD. SR. NO. NAME OF THE SHAREHOLDER NO.OF SHARES %AGE NO.OF SHARES %AGE 1 MADAN SINGH BHARARA 204920 98% 9000 90% 2 KEWAL S.KISHAN 5020 2% 1000 10% TOTAL 209940 100% 10000 100% THE AO FURTHER OBSERVED THAT FROM THE AFORESAID SHAREHOLDINGS PATTERN SHRI MADAN SINGH BHARARA HAD SUBSTANTIAL INTEREST (MORE THAN 20% SHAREHOLDINGS) IN THE ASSESSEE-COMPANY AND ALSO HOLDS MORE THAN 10% SHAR ES IN C.O.NO.33/MUM/2011 IN ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) 3 GAZEBO DEVELOPERS PVT. LTD.. THE AO AFTER RELYING O N CERTAIN DECISIONS ON THE APPLICATION OF THE PROVISIONS OF S ECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 (THE ACT) HELD THAT THE ASSESSEE-COMPANY HAS RECEIVED PAYMENTS OF RS.37,50 ,000/- COVERED BY THE DEEMING PROVISIONS OF SECTION 2(22) (E) OF THE ACT AND HENCE HE ADDED THE SAME TO THE INCOME OF TH E ASSESSEE AND ACCORDINGLY COMPLETED THE ASSESSMENT A T AN INCOME OF RS.38,73,310/- VIDE ORDER DATED 30.12.20 08 PASSED UNDER SECTION 143(3) OF THE ACT. 3. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (A) WHILE OBSERVING THAT THE APPELLANT WAS NOT A SH AREHOLDER OF THE COMPANY M/S GAZEBO DEVELOPERS PVT.LTD. AND FOLLOWING VARIOUS DECISIONS INCLUDING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN ACIT V/S M/S BHA UMIK COLOUR (P) LTD DATED 18.11.2008 HELD THAT THE PRO VISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE IN THE CASE OF THE APPELLANT AND ACCORDINGLY DELETED THE ADDITION MADE BY THE AO. 4. BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A), THE REVENUE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS THAT THE D ELETION OF ADDITION OF RS.37,50,000/- MADE BY THE AO U/S 2(2 2)(E) OF THE ACT. C.O.NO.33/MUM/2011 IN ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) 4 5. AT THE TIME OF HEARING, THE LEARNED D.R. SUPPORT S THE ORDER OF THE AO. 6. ON THE OTHER HAND, THE REPRESENTATIVE OF SHRI M.P.SHARMA, CHARTERED ACCOUNTANT OF THE ASSESSEE-CO MPANY SUBMITS AN APPLICATION SEEKING ADJOURNMENT ON THE G ROUND THAT SHRI SHARMA IS LEAVING OUT OF MUMBAI ON A URG ENT SOCIAL CALL. HOWEVER, LATER ON HE DID NOT PRESS THE SAME AND SUBMITS THAT HE HAS NO OBJECTION IF THE BENCH DECID ES THE ISSUE.. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT THE ASSESSEE-COMPANY IS NE ITHER SHARE HOLDER NOR THE BENEFICIAL SHARE HOLDER IN THE COMPANY NAMELY M/S GAZEBO DEVELOPERS PVT.LTD. IN ACIT VS. B HAUMIK COLOUR P. LTD. [2009] 118 ITD 1 (MUM.)(SB), IT HAS BEEN HELD BY THE SPECIAL BENCH VIDE PARA -41, APPEARING AT PA GE 27, OF THE REPORT AS UNDER: ON THE FIRST QUESTION : DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HA NDS OF A PERSON OTHER THAN A SHAREHOLDER. ON THE SECOND QUESTION: THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2(22)(E) REFERS TO BOTH A RE GISTERED C.O.NO.33/MUM/2011 IN ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) 5 SHAREHOLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHARE HOLDER THEN THE PROVISIONS OF SECTION 2(22)(E) WILL NOT AP PLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER B UT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. 8. THE HONBLE JURISDICTIONAL HIGH COIRT IN CIT , VS UNIVERSAL MEDICARE PVT LTD (2010) 324 ITR 263 (BOM) HAS HELD THAT EVEN ASSUMING THAT IT WAS A DIVIDEND, IT WOULD HAVE TO BE TAXED NOT IN THE HANDS OF THE ASSESSEE B UT IN THE HANDS OF THE SHAREHOLDER. 9. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BRO UGHT ON RECORD BY THE LEARNED D.R., WE RESPECTFULLY FOLLOW ING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL (SUPR A) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT (SUPRA) H OLD THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICAB LE IN THE CASE OF THE ASSESSEE AND ACCORDINGLY WE ARE INCLIN ED TO UPHOLD THE FINDING OF THE LEARNED COMMISSIONER OF INCOME TAX (A) IN DELETING THE ADDITION MADE BY THE AO. TH E GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. C.O.NO.33/MUM/2011 (BY ASSESSEE) 10. IN THE CROSS-OBJECTION, THE ASSESSEE HAS SUPPOR TED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A) . THIS BEING SO AND IN VIEW OF OUR FINDINGS RECORDED IN R EVENUES C.O.NO.33/MUM/2011 IN ITA NO.3852/MUM/2010 (ASSESSMENT YEAR: 2006-07) 6 APPEAL IN PARAGRAPHS 7 TO 9 OF THIS ORDER, THE GROU NDS RAISED BY THE ASSESSEE DOES NOT REQUIRE ANY FRESH ADJUDIC ATION AND ACCORDINGLY THE SAME ARE REJECTED. 11. IN THE RESULT, THE REVENUES APPEAL AND ASSESS EES CROSS-OBJECTION STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH MAY,201 1. SD S D (RAJENDRA SINGH ) (D.K.A GARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 20 TH MAY, 2011 SRL:11511 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH 6. GUARD FILED. TRUE COPY BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI