DEVEN CHACHRA, NEW DELHI V. DCIT, CIRCLE- 72(1), NEW DELHI

ITA 4210/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3902 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA SENIOR
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, G.D. AGRAWAL, PRESIDENT PRESIDENT PRESIDENT PRESIDENT AND AND AND AND SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA ITAITA ITA NO NONO NO S SS S . .. . 4209/DEL/2017 AND 4210/DEL/2017 4209/DEL/2017 AND 4210/DEL/2017 4209/DEL/2017 AND 4210/DEL/2017 4209/DEL/2017 AND 4210/DEL/2017 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR S SS S : : : : 2011 2011 2011 2011 - -- - 12 AND 2012 12 AND 2012 12 AND 2012 12 AND 2012 - -- - 13 1313 13 SHRI DEVEN CHACHRA, SHRI DEVEN CHACHRA, SHRI DEVEN CHACHRA, SHRI DEVEN CHACHRA, SA SASA SATYAM CINEMA BUILDING, TYAM CINEMA BUILDING, TYAM CINEMA BUILDING, TYAM CINEMA BUILDING, RANJIT NAGAR, RANJIT NAGAR, RANJIT NAGAR, RANJIT NAGAR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. PAN : AAMPC7318K. PAN : AAMPC7318K. PAN : AAMPC7318K. PAN : AAMPC7318K. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, ERSTWHILE CIRCLE ERSTWHILE CIRCLE ERSTWHILE CIRCLE ERSTWHILE CIRCLE- -- -48(1), 48(1), 48(1), 48(1), [NEW CIRCLE 72(1)], [NEW CIRCLE 72(1)], [NEW CIRCLE 72(1)], [NEW CIRCLE 72(1)], NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GAUTAM JAIN, ADVOCATE AND SHRI LALIT MOHAN, CA. RESPONDENT BY : SHRI F.R. MEENA, SENIOR DR. DATE OF HEARING : 24.10.2017 24.10.2017 24.10.2017 24.10.2017 DATE OF PRONOUNCEMENT : 02.11.2017 02.11.2017 02.11.2017 02.11.2017 ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, PER G.D. AGRAWAL, PRESIDENT PRESIDENT PRESIDENT PRESIDENT : :: :- -- - THESE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT Y EAR 2011-12 & 2012-13 ARE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-21, NEW DELHI DATED 18 TH APRIL, 2017. 2. IN BOTH THESE APPEALS, THE ASSESSEE HAS CHALLENG ED DISALLOWANCE UNDER SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961 AMOUNTING TO `2,84,87,233/- IN ASSESSMENT YEAR 2011-12 AND `6,37 ,55,557/- IN ASSESSMENT YEAR 2012-13. 3. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITTE D BY THE LEARNED COUNSEL THAT THE ASSESSEE IS A MAJOR SHAREHOLDER IN THE FOLLOWING COMPANIES :- ITA-4209 & 4210/DEL/2017 2 SR.NO. NAME OF COMPANY NATURE OF BUSINESS AS SESSEE SHAREHOLDING (IN %) I) SUPERIOR FILMS (P) LTD. INTEREST INCOME AND RENTING OF PROPERTY 26.91 II) SUPERIOR CLOTHING (P) LTD. MANUFACTURER AND EXPORTER OF READYMADE GARMENTS 40.9 III) SUPERIOR CRAFTS (P) LTD. MANUFACTURER AND EXPORTER OF READYMADE GARMENTS 30.51 IV) SATYAM AUTOSERVE (P) LTD. AUTHORIZED DEALER OF TOYOTA VEHICLE SALES & SERVICE 49 4. THAT THERE WERE BUSINESS TRANSACTIONS INTER-SE B ETWEEN THESE GROUP COMPANIES, THE DETAILS OF WHICH IS GIVEN AT P AGE 1 OF THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2012-13. FOR READY REFERENCE, THE SAME IS REPRODUCED BELOW :- SL.NO. NAME OF THE COMPANY NATURE OF TRANSACTION PERCENTAGE SHARE HOLDING OF ASSESSEE LOAN AMOUNT 1 SUPERIOR FILMS (P) LTD. LENDER COMPANY 26.9% 2 SUPERIOR CLOTHING (P) LTD. B ORROWER COMPANIES 40.9% 23,13,81,230 3 SUPERIOR CRAFTS (P) LTD. BORROWER COMPANIES 30.5% 14,89,805 4 SATYAM AUTOSERVE (P) LTD. BORROWER COMPANIES 49.0% 40,50,395 5. THAT NO MONEY IS PAID BY ANY OF THESE COMPANIES TO THE ASSESSEE. HOWEVER, THE ASSESSING OFFICER HAS MADE HUGE ADDITIONS FOR DEEMED DIVIDEND U/S 2(22)(E) WHILE THE FACT REMAINS THAT NO LOAN IS RECEIVED BY THE ASSESSEE WHICH CAN BE TREATED AS DE EMED DIVIDEND. HE FURTHER STATED THAT THE TRANSACTIONS BETWEEN M/S SUPERIOR FILMS (P) LTD. AND OTHER GROUP COMPANIES WERE BUSINESS TRANSA CTIONS BECAUSE INTEREST WAS DULY CHARGED BY M/S SUPERIOR FILMS (P) LTD. ON THE MONEY ITA-4209 & 4210/DEL/2017 3 ADVANCED TO THESE CONCERNS DURING THE NORMAL COURSE OF BUSINESS AND SUCH INTEREST INCOME WAS OFFERED TO TAX IN THE HAND S OF M/S SUPERIOR FILMS (P) LTD. HE POINTED OUT THAT M/S SUPERIOR FI LMS (P) LTD. RECEIVED INTEREST AMOUNTING TO `78,51,725/- FROM M/S SUPERIO R CLOTHING (P) LTD. AND `29,650/- FROM M/S SUPERIOR CRAFTS (P) LTD. DUR ING THE ASSESSMENT YEAR 2011-12 AND `2,62,90,476/- AND `33,11,489/- IN ASSESSMENT YEAR 2012-13. HE ALSO STATED THAT EVEN IN EARLIER AND S UBSEQUENT YEARS ALSO, THE MONEY WAS ADVANCED BY M/S SUPERIOR FILMS (P) LTD. TO THESE CONCERNS AND INTEREST WAS CHARGED ON REGULAR BASIS. THUS, THERE WAS A REGULAR TRANSACTION OF ADVANCING OF MONEY BY M/S SU PERIOR FILMS (P) LTD. TO THE GROUP CONCERNS FROM WHOM INTEREST WAS C HARGED AT THE NORMAL MARKET RATE YEAR AFTER YEAR AND THE REVENUE HAS ALSO ACCEPTED THE SAME AS A NORMAL BUSINESS TRANSACTION AND DID N OT MAKE ANY ADDITION U/S 2(22)(E) EITHER IN THE CASE OF THE BOR ROWER COMPANY OR IN THE CASE OF THE ASSESSEE IN ANY OTHER YEAR EXCEPT T HESE TWO YEARS UNDER CONSIDERATION, THAT TOO, IN THE CASE OF THE A SSESSEE WHO IS AN INDIVIDUAL AND WHO HAS NOT BORROWED ANY MONEY. HE STATED THAT SECTION 2(22)(E) IS NOT APPLICABLE IN RESPECT OF A NORMAL BUSINESS TRANSACTION. IN SUPPORT OF THIS CONTENTION, HE REL IED UPON THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF PR ADIP KUMAR MALHOTRA VS. CIT [2011] 338 ITR 538. HE ALSO RELIED UPON THE CIRCULAR NO.19/2017 OF CBDT. 6. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF AUTHORITIES BELOW AND HE STATED THAT SINCE THE ASSE SSEE HAS SUBSTANTIAL INTEREST IN THE CONCERNS WHICH ADVANCED THE MONEY A ND ALSO THE CONCERNS WHICH RECEIVED THE BORROWED MONEY, SECTION 2(22)(E) OF THE ACT WAS CLEARLY APPLICABLE. HE RELIED UPON THE DEC ISION OF LEARNED CIT(A) IN THIS REGARD AND STATED THAT LEARNED CIT(A ) HAS DISCUSSED THIS ISSUE AT LENGTH AND HAS RIGHTLY SUSTAINED THE ADDIT ION ON ACCOUNT OF DEEMED DIVIDEND. ITA-4209 & 4210/DEL/2017 4 7. WE HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT AT PAGE 4 OF THE ASSESSEES WRITTEN SUBMISSIONS, HE HAS GIVEN A CHART POINTING OUT THE INTEREST INCOME RECEIVED BY M/S SUPERIOR FILMS (P) LTD. IN THE YEARS UNDER APPEAL AS WELL AS IN THE PRECEDING AND SUBSEQ UENT YEARS. THIS CHART GIVES THE DETAILS OF INTEREST RECEIVED FROM T HE GROUP CONCERN AS WELL AS OTHERS. FOR READY REFERENCE, THE SAME IS R EPRODUCED BELOW :- SR.NO. A.Y. INTEREST RECEIVED FROM SUPERIOR CLOTHING INTEREST RECEIVED FROM SUPERIOR CRAFT INTEREST RECEIVED FROM OTHER PARTIES GROSS INTEREST OTHER INCOME REVENUE FROM OPERATIONS ASSESSMENT U/S I) 2007 - 08 5,99,135 10,71,186 4,18,192 20,88, 513 2,28,01,673 2,48,90,186 143(1) II) 2008 - 09 47,78,479 7,25,342 13,79,730 68,83,551 10,45,77,420 11,14,60,971 143(1) III) 2009 - 10 7,21,01,18 9,089 10,45,446 82,64,653 6,33,29,416 7,15,94,069 143(1) IV) 2010 - 11 -- -- 8,61,190 8,61,190 13,88,227 22,49,417 143(1) V) 2 011 - 12 78,51,725 (124,131G) 29,650 (124,131G) 72,65,167 1,51,46,542 (124) 74,05,288 2,23,03,697 (131) 143(3) PAGES 188- 190 OF PAPER BOOK FOR AY 2011-12 VI) 2012 - 13 2,62,90,476 (101) 33,11,489 (101) 85,83,797 3,81,85,762 1,18,49,712 5,00,35,474 (91 READ WITH 99) 143(3) PAGE 104 OF PAPER BOOK FOR AY 2012-13 VII) 2013 - 14 3,91,85,297 2,53,643 88,69,752 4,83,08,692 1,83,37,728 6,66,46,420 143(3) PAGES 191- 192 OF PAPER BOOK FOR AY 2011-12 VIII) 2014 - 15 3,66,45,585 -- 1,09,86,305 4,76,31,890 1,20,66,381 5,96,98 ,271 143(3) IX) 2015 - 16 4,39,68,508 -- 2,24,02,759 6,63,71,267 1,53,01,200 8,16,72,467 143(1) X) 2016 - 17 2,86,31,756 -- 2,57,26,625 5,43,58,381 1,76,47,588 7,20,05,969 143(1) ITA-4209 & 4210/DEL/2017 5 8. FROM THE ABOVE, IT IS EVIDENT THAT M/S SUPERIOR FILMS (P) LTD. IS RECEIVING SUBSTANTIAL INTEREST FROM THE GROUP CONCE RNS AS WELL AS OTHERS RIGHT FROM ASSESSMENT YEAR 2007-08 TO 2016-1 7. FROM PAGE 6 ONWARDS OF THE WRITTEN SUBMISSIONS, THE ASSESSEE HA S GIVEN THE TRANSACTIONS BETWEEN M/S SUPERIOR FILMS (P) LTD. AN D OTHER GROUP CONCERNS, FROM WHICH, IT IS EVIDENT THAT THERE WERE SEVERAL TRANSACTIONS OF THE PAYMENT AND RECEIPT OF THE MONEY DURING THE YEARS UNDER APPEAL. CONSIDERING THE TOTALITY OF ABOVE FACTS, W E HAVE NO HESITATION TO HOLD THAT M/S SUPERIOR FILMS (P) LTD. USED TO AD VANCE THE MONEY FOR EARNING INTEREST INCOME TO VARIOUS CONCERNS WHICH I NCLUDED GROUP CONCERNS ALSO. THE ADVANCING OF MONEY WAS A REGULA R COURSE OF BUSINESS FOR M/S SUPERIOR FILMS (P) LTD., NOT ONLY IN THE YEARS UNDER APPEAL BUT ALSO IN THE PRECEDING AS WELL AS SUBSEQU ENT YEARS. IN VIEW OF THE ABOVE, WE HAVE NO HESITATION TO HOLD THAT AD VANCING OF MONEY BY M/S SUPERIOR FILMS (P) LTD. TO THE GROUP CONCERN S WAS DURING THE COURSE OF NORMAL COURSE OF ADVANCING MONEY FOR THE PURPOSE OF EARNING INTEREST. 9. IN THE CASE OF PRADIP KUMAR MALHOTRA (SUPRA), HO N'BLE HIGH COURT OF CALCUTTA HAS HELD AS UNDER :- HELD, ALLOWING THE APPEAL, THAT FOR RETAINING THE BENEFIT OF LOAN AVAILED OF FROM THE BANK IF DECISION WAS TAKEN TO GIVE ADVANCE TO THE ASSESSEE SUCH DECISION WAS NOT TO GI VE GRATUITOUS ADVANCE TO ITS SHAREHOLDER BUT TO PROTEC T THE BUSINESS INTEREST OF THE COMPANY. THE SUM OF RS.20,75,000 COULD NOT BE TREATED AS DEEMED DIVIDEN D. 10. IN CIRCULAR NO.19/2017, PARAGRAPH 3, THE CBDT H AS ALSO HELD THAT TRADE ADVANCES, WHICH ARE IN THE NATURE OF COMMERCI AL TRANSACTIONS WOULD NOT FALL WITHIN THE AMBIT OF THE WORD ADVANC E IN SECTION 2(22)(E) OF THE ACT. NO CONTRARY DECISION WAS BROU GHT TO OUR KNOWLEDGE. ITA-4209 & 4210/DEL/2017 6 11. IN THE CASE UNDER CONSIDERATION, THE ADDITION U /S 2(22)(E) IS MADE IN THE CASE OF AN ASSESSEE WHO IS AN INDIVIDUA L. ADMITTEDLY, NO ADVANCE OR BORROWED MONEY IS RECEIVED BY THE ASSESS EE FROM THE CONCERNS IN WHICH THE ASSESSEE IS A SHAREHOLDER. T HERE IS A TRANSACTION OF ADVANCING OF MONEY BY M/S SUPERIOR F ILMS (P) LTD. TO THE GROUP CONCERNS IN THE NORMAL COURSE OF BUSINESS. I N VIEW OF THE ABOVE DECISION OF HONBLE HIGH COURT OF CALCUTTA AS WELL AS CBDTS CIRCULAR, SECTION 2(22)(E) IS NOT APPLICABLE IN THE FACTS OF THE CASE UNDER APPEAL BEFORE US. WE, THEREFORE, RESPECTFULLY FOLLOWING T HE ABOVE DECISION OF HONBLE HIGH COURT OF CALCUTTA AS WELL AS CBDTS CI RCULAR, DELETE THE ADDITION MADE U/S 2(22)(E) OF THE ACT. 12. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 02.11.2017 . SD/- SD/- (SUDHANSHU SRIVASTAVA (SUDHANSHU SRIVASTAVA (SUDHANSHU SRIVASTAVA (SUDHANSHU SRIVASTAVA ) )) ) ( (( ( G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER PRESIDENT PRESIDENT PRESIDENT PRESIDENT VK. COPY FORWARDED TO: - 1. APPELLANT : SHRI DEVEN CHACHRA, SHRI DEVEN CHACHRA, SHRI DEVEN CHACHRA, SHRI DEVEN CHACHRA, SATYAM CINEMA BUILDING, SATYAM CINEMA BUILDING, SATYAM CINEMA BUILDING, SATYAM CINEMA BUILDING, RANJIT NAGAR, RANJIT NAGAR, RANJIT NAGAR, RANJIT NAGAR, NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 2. RESPONDENT : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, ERSTWHILE CIRCLE ERSTWHILE CIRCLE ERSTWHILE CIRCLE ERSTWHILE CIRCLE- -- -48(1), [NEW CIRCLE 72(1)], 48(1), [NEW CIRCLE 72(1)], 48(1), [NEW CIRCLE 72(1)], 48(1), [NEW CIRCLE 72(1)], NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR