Vardhman Buildtech Pvt. Ltd., Delhi V. ACIT, Circle- 26(1), New Delhi

ITA 4264/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 6395 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 04-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Keywords: Deemed dividend
• Section: 143(3); 2(22)(e)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F : NEW DELHI BEFORE SHRI KUL BHARAT , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER (THROUGH VIDEO CONFERENCING) ITA NO. 4264/DEL/2018 (ASSESSMENT YEAR: 2014 - 15 ) VARDHAMAN BUILDTECH PVT. LTD, 814 - 815, 8 TH FLOOR, SHAHPUR TIRATH SINGH TOWER, COMMUNITY CENTER, JANAKPURI, NEW DELHI PAN: AACCV6445M VS. ACIT, CIRCLE - 26(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY: SHRI GOVIND SINGHAL, SR. DR DATE OF HEARING 03/08 / 2021 DATE OF PRONOUNCEMENT 0 3 / 08 / 2021 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 9, NEW DELHI DATED 28 . 03 . 2018 FOR THE ASSESSMENT YEAR 2014 - 15 IN WHICH THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORD ER PASSED U/S 143(3) OF THE ACT LD DCIT, CIRCLE - 26(1), NEW DELHI (AO) WAS DISMISSED. 2. THEREFORE, THE ASSESSEE IS AGGRIEVED WITH THAT ORDER AND HAS PREFERRED THIS APPEAL RAISING FOLLOWING GROUNDS OF APPEAL: - 1. THAT THE ASSESSING OFFICER ERRED IN LAW AND ON FACTS TO MAKE THE ADDITION OF RS. 1,18,42,525/ - FOR A.Y. 2014 - 15 TREATING THE ADVANCE AMOUNT FOR BUSINESS TRANSACTIONS AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 2. THAT THE APPELLANT COMPANY GAVE1 AND RECEIVED THE AMOUNT TO M/S. VARDHMAN ESTATE & DEVELOPERS PVT. LTD. BUT APPELLANT WAS NOT THE SHAREHOLDER IN THAT COMPANY DURING THE YEAR UNDER CONSIDERATION. THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) WERE NOT APPLIC ABLE. 3. THAT THE IMPUGNED ASSESSMENT ORDER IS BAD IN LAW AS THE ASSESSING OFFICER FAILED TO RECORD THAT EVEN IF THERE ARE COMMON SHAREHOLDERS IN BOTH THE COMPANIES THE ADDITIONS CANNOT BE MADE UNDER THE PROVISIONS OF DEEMED DIVIDEND U/S 2(22)(E) OF THE AC T. SINCE APPELLANT COMPANY HERSELF IS NOT SHARE HOLDER IN VARDHMAN ESTATE DEVELOPERS (P) LTD. 4. THAT THE ASSESSING OFFICER HAS ERRED BOTH ON FACTS AND IN LAW IN CONCLUDING THAT THE AMOUNT GIVEN BY APPELLANT COMPANY TO M/S VARDHMAN ESTATE & DEVELOPERS PVT. LTD. WAS MERE A LOAN/ADVANCE. PAGE | 2 5. THAT LD. CIT (A) WAS NOT JUSTIFIED TO REJECT THE CONTENTION OF APPELLANT ABOUT TRANSACTION BETWEEN BOTH COMPANY WERE IN NATURE OF CURRENT ADJUSTMENT ACCOMMODATION ACCOUNT, THE MOVEMENT OF FUNDS WERE BOTH WAYS. 6. THAT TRAN SACTIONS WERE IN THE NATURE OF DEPOSITS AND THE SAME WERE BETWEEN TWO CORPORATE IT WAS NOTHING BUT INTER CORPORATE DEPOSITS (ICD) WHICH IN ANY CASE WAS OUTSIDE THE PREVIEW OF SECTION 2(22)(E). 7. THAT LD. CIT (A) WAS NOT CORRECT IN LAW TO SAY ANKITECH PVT. LTD. 340 ITR 14 (DELHI) IS NOW NO MORE GOOD LAW. MERELY BECAUSE THE CASE OF NATIONAL TRAVEL SERVICES VS. CIT 401 ITR 154 (SC) THE HONBLE SUPREME COURT HAD OCCASION TO REFER THE DECISION M/S. ANKITECH PVT. LTD TO LARGER BENCH. THE SLP IS STILL PENDIN G. 8. THAT CURRENTLY JUDGMENT OF DELHI HIGH COURT IN THE CASE OF ANKITECH PVT. LTD. IS PREVAILING AND IT IS BINDING UPON CIT (A) TO ACCEPT THE SAME. 3. THE BRIEF FACTS OF THE CASE SHOWS THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF REAL ESTATE . IT FILED ITS RETURN OF INCOME ON 29 . 11 . 2014 DECLARING INCOME OF RS. 84,00,970/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD AO FOUND THAT THE ASSESSEE HAS RECEIVED UNSECURED LOAN OF RS. 1,18,42,505/ - FROM M/S. VARDHMAN ESTATES AND DEVELOPERS PVT. LTD WHICH HAS COMMON SHARE HOLDER HAVING 25% SHARE HOLDING IN BOTH THE COMPANIES AS ON 31.03.2014. THE LD AO FURTHER NOTED THAT VARDHMAN ESTATE AND DEVELOPERS PVT. LTD WHO HAS GIVEN LOAN TO THE ASSESSEE IS HAVING ACCUMULATED PROFIT OF RS. 4,71,66,556/ - AS ON 31.03.2014. THEREFORE, THE LD AO WAS OF THE VIEW THAT PROVISION S OF SECTION 2(22)(E) ARE APPLICABLE IN THE CASE OF THE ASSESSEE. THE ASSESSEE WAS ASKED TO REPLY ON THIS ASPECT. THE ASSESSEE SUBMITTED THAT PROVISION OF DEEMED DIVIDEND DOES NOT APPLY TO THE ASSESSEE COMPANY AND SAME IS TAXABLE IN THE HANDS OF THE SHARE HOLDERS. THE LD AO REJECTED THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE ASSESSEE HAS TAKEN A LOAN FROM A COMPANY IN WHICH SHARE HOLDER S ARE COMMON HAVING S UBSTANTIAL INTEREST IN BOTH THE COMPANIES. THEREFORE, THE PROVISION OF SECTION 2(22)(E) ARE SATISFIED AND THE ADDITIONS IN THE HANDS OF THE COMPANY WAS MADE AT RS. 1,18,42,525/ - . ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED ON 23.12.2016 DETERMINING THE TOTAL INCOME OF THE ASSES SEE AT RS. 2,02,43,500/ - . THE ONLY ADDITION WAS OF DEEMED DIVIDEND OF RS. 1,18,42,525/ - . 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD CIT(A). THE LD CIT(A) HELD THAT THE RELIANCE PLACED BY THE ASSESSEE ON THE DECISION OF THE CIT VS. ANKITECH PVT LTD 340 IT R 14 IS NO MORE A GOOD LAW IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN NATIONAL TRAVEL SERVICES VS. CIT 401 ITR 154. HE FURTHER REJECTED THE ARGUMENT OF THE ASSESSEE THAT THE ABOVE ADDITION CAN BE MADE IN THE HANDS OF PAGE | 3 THE SHARE HOLDER ONLY . HE ALS O REJECTED THE ARGUMENT OF THE ASSESSEE THAT RECEIPT AND PAYMENT OF THE TRANSACTION FROM THE GROUP CONCERN WAS IN THE NATURE OF FINANCIAL ACCOMMODATION FOR BUSINESS PURPOSES. ACCORDINGLY, HE HELD THAT THAT WHEN THE ASSESSEE IS FOUND TO HAVE RECEIVE D THE LOAN FROM A GROUP CONCERN WHO WAS HAVING EQUAL ACCUMULATED RESERVE HAVING COMMON SHARE HOLDERS WITH SUBSTANTIAL HOLDING AND THE DECISION OF ANKITECH PVT. LTD SUBJECTED TO REVIEW BEFORE THE HONBLE SUPREME COURT ORDER , HE CONFIRMED THE ADDITION OF DEEM ED DIVIDEND IN THE HANDS OF THE ASSESSEE. THEREFORE, THE ASSESSEE IS AGGRIEVED WITH THAT ORDER AND HAS PREFERRED THIS APPEAL. 5. THE CASE OF THE ASSESSEE IS FIXED FOR HEARING, NOTICE WAS ISSUED TO THE ASSESSEE AT THE ADDRESS GIVEN IN FORM NO. 36, HOWEVER, NO NE APPEARED, AND THEREFORE, THE ISSUE IS DECIDED ON THE MERITS OF THE CASE AS PER FACTS AVAILABLE ON RECORD. 6. THE LD DR WAS HEARD . HE SUPPORTED THE ORDER OF THE LOWER AUTHORITIES. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES . THE ISSUE IS THAT THE ASSESSEE HAS RECEIVED A LOAN OF RS. 1,18,42,525/ - FROM M/S. VARDHMAN ESTATE AND DEVELOPERS PVT. LTD WHEREIN, THERE IS COMMON SUBSTANTIAL SHARE HOLDING IN BOTH THE COMPANIES BY 4 PERSONS , THE LENDER COMPANY I S HAVING THE FREE RESERVE MORE THAN THE AMOUNT OF LOAN AND THEREFORE, THE AMOUNT OF LOAN WAS TAXED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND BY INVOKING THE PROVISION OF SECTION 2(22)(E) OF THE ACT. THE HON'BLE SUPREME COURT IN THE CASE OF ANKITECH PVT. LTD IN 340 ITR 14 HAS CLEARLY HELD THAT DEEMED DIVIDEND IS CHARGEABLE TO TAX IN THE HANDS OF THE SHARE HOLDERS . THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF THE NATIONAL TRAVEL SERVICES [ SUPRA] HAS IN FACT NOT IMPACTED THE SITUATION TH AT THE DIVIDEND IS ALWAYS TAXABLE IN THE HANDS OF THE SHARE HOLDER AND NOT IN THE HANDS OF THE PERSON WHO HAS RECEIVED LOAN AND WHO IS NOT THE SHARE HOLDER OF THE COMPANY. APPARENTLY , IN THIS CASE THE ASSESSEE IS NOT THE SHAREHOLDER OF THE LENDER COMPANY . THE SHARE HOLDER S ARE FOUR DIFFERENT INDIVIDUALS WHO WERE HOLDING 25% OF THE SHARE IN THE ASSESSEE AS WELL AS IN THE LENDER COMPANY. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF NATIONAL TRA VEL SERVICES THE DIVISION BENCH HAS REFERRED MATTER T O THE LARGER BENCH ON THE ISSUE OF APPLICABILITY OF DEEMED DIVIDEND PROVISIONS U/S 2 (22) (E) OF THE INCOME TAX ACT OBSERVING THAT THE SHAREHOLDER HAS ONLY TO BE A PERSON WHO IS THE BENEFICIAL OWNER OF THE SHARES. THE MOVEMENT THERE IS A SHAREHOLDER, WHO N EED NOT NECESSARILY BE A MEMBER OF THE COMPANY ON ITS REGISTER WHO IS THE BENEFICIAL OWNER OF THE SHARES, PROVISIONS OF SECTION 2 (22) (E) OF THE ACT GETS ATTRACTED. THEREFORE THE PAGE | 4 ISSUE BEFORE US IS NOT OF A SHAREHOLDER WHO IS ALSO A BENEFICIAL SHAREHOLDER OR NOT. THEREFORE, SUCH CONTROVERSY DOES NOT EXIST IN THE APPEAL BEFORE US. IN THE APPEAL BEFORE US THE ISSUE IS WHETHER THE AMOUNT OF LOAN IS CHARGEABLE TO TAX AS DEEMED DIVIDEND IN THE HANDS OF THE PERSON WHO IS NOT AT ALL A SHARE HOLDER OR IN THE HAND OF SHARE HOLDER HAVING SUBSTANTIAL INTEREST. THUS, IT IS CLEAR THAT A DEEMED DIVIDEND IS ALWAYS CHARGEABLE TO TAX IN THE HANDS OF THE SHAREHOLDER OF THE COMPANY HAVING SUBSTANTIAL INTEREST. IN THIS CASE THE ASSESSEE IS NOT AT ALL A SHARE HOLDER. THERE FORE, WE REVERSE THE ORDER OF THE LD CIT(A) AND HOLD THAT THE DEEMED DIVIDEND IS ALWAYS CHARGEABLE IN THE HANDS OF THE SHAREHOLDER. 8. IN THE CASE OF THIS TRANSACTION, MR. VIVEK GUPTA, MR. RAJU VERMA, MR. HAR INDER BAS H ISTA AND MR. JA IDEEP AGGARWAL , A LL THES E FOUR INDIVIDUALS HELD 25% EACH IN THE LENDER COMPANY AS WELL AS ASSESSEE COMPANY. THEREFORE, THE DEEMED DIVIDEND SHOULD BE CHARGEABLE TO TAX IN THE HANDS OF THESE FOUR PERSONS AND NOT THE ASSESSEE. ACCORDINGLY, THE LD AO IS DIRECTED TO DELETE THE ADDITIO N OF DEEMED DIVIDEND IN THE HANDS OF THIS COMPANY AND INCLUDE THE INCOME OF THE DEEMED DIVIDEND IN THE HANDS OF THESE FOUR PERSONS AFTER FOLLOWING PROPER PROCEDURE OF LAW BY GIVING THEM A NOTICE AND AFFORDING OPPORTUNITY OF HEARING. AS THE OTHER GROUNDS OF APPEAL ARE RELATED TO CHARGEABILITY OF DEEMED DIVIDEND ARE NOT REQUIRED TO BE ADJUDICATED AS THE ASSESSEE IS NOT SHAREHOLDER. 9. ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION. ORDER PRONOUNCED IN THE OPEN COURT ON 0 3 / 08 / 20 21 . - SD/ - - SD/ - ( KUL BHARAT ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 3 / 08 / 2021 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI