ITO, New Delhi V. M/s. Dimple Impex (India) Pvt. Ltd., New Delhi

ITA 3859/DEL/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65604 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 25-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R B MEENA
• Keywords: Deemed dividend

Judgement Text

ITA NO. 3859/DEL/2012 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 3859/DEL/2012 A.Y. : 2008-09 I.T.O., WARD 10(3), ROOM NO. 199-C, C.R. BUILDING, NEW DELHI VS. M /S DIMPLE IMPEX (INDIA) PVT. LTD., B-54, OKHLA INDL. AREA, NEW DEELHI (PAN/GIR NO. : AAACD3526F) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : NONE DEPARTMENT BY : SH. R.B. MEENA, SR. D.R. ORDER ORDER ORDER ORDER PER PER PER PER SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-XIII, NEW D ELHI DATED 22.5.2012 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. COMMISSIONER OF INCOME TAX (A) HA S ERRED BOTH ON FACTS AND LAW IN HOLDING THAT THE AMOUNTS OF ` 46,37,542/- RECEIVED FROM THE SISTER CONCERN IS NOT COVERED U/S. 2(22)(E) OF THE ACT WH EN THE FACTS OF THE CASE CLEARLY ESTABLISHES THAT THE ITA NO. 3859/DEL/2012 2 AMOUNT WAS NOT RECEIVED AS BUSINESS ADVANCES BUT TO DISCHARGE ITS LIABILITY ON ACCOUNT OF UNSECURED LOA NS. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 3. IN THIS CASE, THE ASSESSEE IS ENGAGED IN THE BUS INESS OF FABRICATION OF HOME FURNISHING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS OBSERVED BY THE ASSESSING OFFIC ER THAT M/S ESTOCORP. IND. PVT. LTD. HAD AN OPENING DEBIT BALANC E OF ` 29,39,671/- IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. DURING THE YEAR THE ASSESSEE HAD CARRIED OUT JOB WORK, WORTH ` 48,92,583 /- FOR M/S ESTOCORP IND. PVT. LTD. AS AGAINST THIS THE ASSESSEE RECEIV ED ` 1,29,07,129/-. THUS, THERE WAS A CLOSING CREDIT BALANCE OF ` 50,74 ,875/-. SINCE APPELLANT HAD RECEIVED AMOUNTS IN EXCESS OF THE JOB WORK CARRIED OUT, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE FOR APPLYING PROVISIONS OF SECTION 2(22)(E) IN THE CASE OF ASSESSEE. THE AMOUNT OF ` 46,37,542/- WAS TREATED AS DEEMED DIVIDEND IN THE H ANDS OF THE ASSESSEE AS THE SHARE HOLDERS OF THE ASSESSEE COMPAN Y ARE ALSO SHARE HOLDERS OF M/S ESTROCORP. IND. PVT. LTD. 3.1 ASSESSEE SUBMITTED THAT ASSESSEE HAD PURELY COMM ERCIAL TRANSACTION WITH M/S ESTOCORP. INDIA PVT. LTD. IT HAD CARRIED OUT THE FABRICATION WORK FOR ESTOCORP AGAINST WHICH IT WAS PAID THE CHARGES. M/S ESTOCORP. ALSO PAID CERTAIN MONEY AS ADVANCES IN THE ORDINARY COURSE OF BUSINESS BETWEEN THE CUSTOMER AND SUPPLIER S. ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES SUBMISSIONS. HE HELD THAT THAT THE ASSESSEE HAS RECEIVED ` 46,37,542/- WHICH IS CO VERED UNDER THE ITA NO. 3859/DEL/2012 3 PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE SAM E WAS ASSESSED IN ITS HANDS. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (A), ASS ESSEE MADE ELABORATE SUBMISSIONS AND INTER-ALIA RELIED UPON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOUR S PVT. LTD. 118 ITD 1 (SB) (MUM). LD. COMMISSIONER OF INCOME TAX (A) NOTED THAT M/S ESTOCORP. INDIA PVT. LTD. AS WELL AS THE ASSESSEE H AS COMMON SHAREHOLDERS AND THE SHAREHOLDING PATTERN IS AS UND ER:- NAME OF SHAREHOLDER %SHAREHOLDING IN DIMPLE IMPEX PVT. LTD. % SHAREHOLDING IN ESTOCORP. IND. PVT. LTD. MR. SAJID DEHLVI 55 51.6 MR. CHANDAN AGGARWAL 45 48.4 4.1 FROM THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) OBSERVED THAT NEITHER THE ASSESSEE COMPANY IS HOLDING ANY SHA RES IN M/S ESTOCORP. IND. PVT. LTD. NOR M/S ESTOCORP. INDIA PVT. LTD. WAS HOLDING ANY SHARES IN THE ASSESSEE COMPANY DURING THE YEAR U NDER CONSIDERATION. LD. COMMISSIONER OF INCOME TAX (A) FURTHER OBSERVED THAT FOR ATTRACTING THE PROVISION OF SECTION 2(22)( E) OF THE I.T. ACT, THE ASSESSEE AS WELL AS M/S ESTOCORP IND. PVT. LTD. HAS TO BE REGISTERED SHARE HOLDER IN EACH OTHER COMPANIES. HOWEVER, TH IS IS NOT THE CASE HERE. LD. COMMISSIONER OF INCOME TAX (A) OBSERVED T HAT BOTH THE COMPANIES WERE HAVING TRADING TRANSACTIONS WITH EAC H OTHER AND ASSESSING OFFICER HAS ALSO ACCEPTED THAT ASSESSEE COMPANY HAS CARRIED OUT JOB WORK FOR M/S ESTOCORP INDIA PVT. LTD . OF ` 48,92,583/- DURING THE YEAR. HE, FURTHER OBSERVED THAT ASSESSEE COMPANY WAS ITA NO. 3859/DEL/2012 4 REGULARLY CARRYING OUT THE JOB WORK OF M/S ESTOCOR. INDIA PVT. LTD. IN THE ORDINARY COURSE OF BUSINESS. 4.2 FROM THE ABOVE, LD. COMMISSIONER OF INCOME TAX (A) I NFERRED THAT ADVANCES RECEIVED BY THE ASSESSEE WAS IN REGUL AR COURSE OF BUSINESS. LD. COMMISSIONER OF INCOME TAX (A) CON CLUDED THAT IN VIEW OF THE FACTUAL AND LEGAL POSITION DISCUSSED AB OVE, IT WAS OBVIOUS THAT EXCESS ADVANCE AMOUNT OF ` 46,37,542/- RECEIVED FROM M/S ESTOCORP. IND. PVT. LTD. BY THE ASSESSEE WAS ON ACCOUNT OF BUSINESS TRANSACTION EFFECTED BY BOTH THE COMPANIES DURING THE YEAR. HE OBSERVED THAT THE SURROUNDING CIRCUMSTANCES OF TH E AMOUNT RECEIVED AND PAID SUGGESTS THAT THE AMOUNT RECEIVED WAS TO GIVE EFFECT TO THE BUSINESS OR COMMERCIAL TRANSACTION B ETWEEN THE ASSESSEE COMPANY AND M/S ESTROCOP. INDI. PVT. LTD. LD. COMMISSIONER OF INCOME TAX (A) HELD THAT THE RECEIPT AND PAYMENT OF MONEY TO GIVE EFFECT COMMERCIAL TRANSACTIONS DOES NOT FALL WITHIN THE DEFINITION OF THE DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT. HENCE, LD. COMMISSIONER OF INCOME TAX (A) DELETED THE ADDIT ION OF ` 46,37,542/- IN THIS REGARD. 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. ON PERUSAL O F THE RECORDS, WE ARE OF THE OPINION THAT THE MATTER CAN BE DISPOSED O FF BY HEARING THE LD. DEPARTMENTAL REPRESENTATIVE AND PERUSING THE RE CORDS. ACCORDINGLY, WE HAVE PERUSED THE RECORDS AND HEARD THE LD. DEPARTMENTAL REPRESENTATIVE. WE FIND THAT THE ISSU E INVOLVED IS ITA NO. 3859/DEL/2012 5 SQUARELY COVERED BY THE DECISION OF THE SPECIAL BEN CH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BHAUMIK COLOURS PVT. LTD. 27 SOT 270. IN THIS CASE THE SPECIAL BENCH HAS HELD AS UNDER:- DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY AN D NOT IN THE HANDS OF A PERSON THAN A SHAREHOLDER; AND THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTIO N 2(22)(E) REFERS TO BOTH A REGISTERED SHAREHOLDER AND BENEFIC IAL SHAREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLD ER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISIONS OF S ECTION 2(22)(E) WILL NOT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THE AL SO THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. 7. IN THE PRESENT CASE, BEFORE US, WE FIND THAT THE ASSESSEE COMPANY IS NOT A REGISTERED SHARE HOLDER OF M/S EST OCORP. INDIA PVT. LTD. IN THAT VIEW OF THE MATTER, ASSESSEE DOES NO T COME UNDER THE AMBIT OF THE PROVISIONS OF THE SECTION 2(22)(E). THUS, WE FIND THAT ON THE ANVIL OF DECISION OF THE SPECIAL BENCH OF THE T RIBUNAL IN THE CASE OF ACIT VS. BHAUMIK COLOURS PVT. LTD. 118 ITD 1 (SB) (MUM) , THE AMOUNT INVOLVED CANNOT BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ITA NO. 3859/DEL/2012 6 ASSESSEE, AS THE ASSESSEE COMPANY WAS NOT A REGISTER ED SHARE HOLDER OF M/S ESTOCORP. INDIA PVT. LTD. ACCORDINGLY, WE CON FIRM THE DELETION OF ADDITION IN THIS REGARD. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27/9/2012. SD/- SD/- [ [[ [JOGINDER SINGH JOGINDER SINGH JOGINDER SINGH JOGINDER SINGH] ]] ] [SHAMIM [SHAMIM [SHAMIM [SHAMIM YAHYA] YAHYA] YAHYA] YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE:- 27/9/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES