ACIT, Madurai V. Jeyadevi Mills (P) Ltd., Aruppukottai

ITA 4/CHNY/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9345 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 06-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.4/MDS/2016 ' (' / ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE I, NO.2, V.P.RATHINASAMY NADAR RD., BIBIKULAM, MADURAI 625 002. V. M/S JEYADEVI MILLS (P) LTD., R.S.1, SAYALGUDI ROAD, SAVVASPURAM, ARUPPUKOTTAI-625 159. PAN : AAACJ 4623 P (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SH. P. RADHAKRISHNAN, JCIT ,-*+ . / / RESPONDENT BY : NONE 0 . 1$ / DATE OF HEARING : 06.04.2016 2!( . 1$ / DATE OF PRONOUNCEMENT : 19.05.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 1, MADUR AI, DATED 09.10.2015 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ADDITION OF ` 55,77,333/- AS DEEMED DIVIDEND. 2 I.T.A. NO.4/MDS/16 3. NO ONE APPEARED FOR THE ASSESSEE INSPITE OF ISSU E OF NOTICE. THEREFORE, WE HEARD LD. DEPARTMENTAL REPRESENTATIVE AND PROCEEDED TO DISPOSE OF THE APPEAL ON MERIT. 4. SH. P. RADHAKRISHNAN, THE LD. DEPARTMENTAL REPRE SENTATIVE, SUBMITTED THAT THE ASSESSEE HAS BORROWED LOAN OF ` 55,77,333/- FROM M/S SRI SATHU SPINNING MILLS PVT. LTD. ACCORDING T O THE LD. D.R., ALL THE FIVE DIRECTORS OF THE ASSESSEE-COMPANY ARE HOLD ING MORE THAN 10% SHARES AND IN FACT, ONE OF THE DIRECTORS WAS HO LDING MORE THAN 20% OF SHARES IN M/S SRI SATHU SPINNING MILLS PVT. LTD. THE LD. D.R. FURTHER SUBMITTED THAT M/S SRI SATHU SPINNING MILLS PVT. LTD. HAS ALSO ACCUMULATED PROFITS DURING THE YEAR UNDER CONSIDERATION. ADMITTEDLY, THE ASSESSEE HAS RECEIVED A SUM OF ` 55,77,333/- AS A LOAN FROM M/S SRI SATHU SPINNING MILLS PVT. LTD. T HEREFORE, THE ASSESSING OFFICER, BY PLACING RELIANCE ON THE PROVI SIONS SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') TREATED THE LOAN OF ` 55,77,333/- AS DEEMED DIVIDEND. HOWEVER, THE CIT(APPEALS) BY PLACING RELIANCE ON THE JUDGMENT OF BOMBAY HIGH COURT IN I.T.A. NO.114 OF 2012 DATED 04.07.2014 FOU ND THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF THE R EGISTERED SHAREHOLDER OF THE LENDING COMPANY. THE ASSESSEE I S NOT A 3 I.T.A. NO.4/MDS/16 REGISTERED SHAREHOLDER OF M/S SRI SATHU SPINNING MI LLS PVT. LTD., THEREFORE, THE CIT(APPEALS) DELETED THE ADDITION MA DE BY THE ASSESSING OFFICER. ACCORDING TO THE LD. D.R., THE DIRECTORS OF THIS COMPANY ARE HOLDING SHARES IN M/S SRI SATHU SPINNIN G MILLS PVT. LTD., THEREFORE, IT IS AN INDIRECT BENEFIT TO THE S HAREHOLDERS. THEREFORE, THE CIT(APPEALS) IS NOT CORRECT IN DELET ING THE ADDITION. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. D. R. AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. SECTION 2(22)(E) OF THE ACT PROVIDES FOR ASSESSMENT OF DEEMED DIVIDE ND IN THE HANDS OF THE SHAREHOLDER IF A LOAN OR ADVANCE WAS RECEIVE D EITHER BY THE SHAREHOLDER OR BY ANYBODY ELSE FOR THE BENEFIT OF S HAREHOLDER. IN THIS CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE-C OMPANY RECEIVED LOAN FROM M/S SRI SATHU SPINNING MILLS PVT. LTD. AN D THE SHAREHOLDERS WERE INDIRECTLY BENEFITED OUT OF THIS LOAN. THEREFORE, THE DEEMED DIVIDEND HAS TO BE ASSESSED ONLY IN THE HANDS OF THE REGISTERED SHAREHOLDER. 6. WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE DEEMED DIVIDEND CANNOT BE ASSESSED IN THE HANDS OF ANYBODY ELSE OTHER THAN THE REGISTERED SHAREHOLDER. THEREFORE, SINCE THE BENEFIT OF RECEIVING THE LOAN BY THE ASSESSEE- 4 I.T.A. NO.4/MDS/16 COMPANY GOES TO THE SHAREHOLDERS IN M/S SRI SATHU S PINNING MILLS PVT. LTD., THE ASSESSMENT, IF AT ALL HAS TO BE MADE , HAS TO BE MADE ONLY IN THEIR HANDS AND NOT IN THE HANDS OF THE ASS ESSEE. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY, THE SAME IS CONFIR MED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED ON 19 TH MAY, 2016 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 19 TH MAY, 2016. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-1, MADURAI 4. PRINCIPAL CIT-1, MADURAI 5. 69 ,1 /DR 6. :' ; /GF.