The DCIT, Circle-1(1)(2), Ahmedabad V. M/s. Dhanlaxmi Infrastructure Pvt. Ltd., Surat

ITA 429/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 1909 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 23-02-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVASH BIDARI
• Keywords: Reopening of assessment; Deemed to accrue or arise in india; Deemed dividend; Commercial expediency; TDS
• Section: 148; 143(3); 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER ITA NO.429/AHD/2016 (ASSESSMENT YEAR : 2007-08) DCIT, CIRCLE -1(1)(2), AHMEDABAD. VS. M/S. DHANLAXMI INFRASTRUCTURE PVT. LTD., F.P. NO.29, SURAT DUMAS ROAD, NR. DUMAS RESORT, MAGDALLA, SURAT 395 007. [PAN NO. AACCD 5578 R] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI NIVASH BIDARI, CIT(DR) RESPONDENT BY : SHRI DHANESH BAFNA, A.R. DATE OF HEARING 22/11/2018 DATE OF PRONOUNCEMENT 20/12/2018 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 16.12.2015 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 1, AHMEDABAD ARISING OUT OF THE ASSESSMENT ORDER DATED 12.03.2015 FOR THE ASSESSMEN T YEAR 2007-08 PASSED BY THE ITO, WARD 1(1)(4), AHMEDABAD UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) WITH THE FOLLOWING GROUNDS: 'THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN D ELETING THE DEEMED DIVIDEND INCOME OF RS.475,10,000/- ADDED U/S 2(22)(E) OF THE I. T. ACT.' ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER TO T HE EXTENT MENTIONED ABOVE SINCE THE ASSESSEE HAS FAILED TO DISCLOSE HIS TRUE INCOME /BOOK PROFIT. - 2 - ITA NO.429/A/16 ACIT VS. DHANLAXMI INFRASTRUCTURE PVT. LTD. ASST.YEAR 2007-08 THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED TO THE ABOVE EXTENT. THE APPELLANT CRAVES, TO LEAVE, TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 01.10.2007 DECLARING TOTAL INCOME AT RS. NIL. THE SAME WAS PROCESSED U/S 143(1 ) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOPENED AFTER RECORDING REASONS WITH THE APPRO VAL OF ADDL. CIT, RANGE-1, AHMEDABAD UPON WHICH A NOTICE U/S 148 OF THE ACT WA S ISSUED ON 26.03.2014. PURSUANT TO THE SAID NOTICE, THE ASSESSEE BY AND UNDER A LET TER DATED 24.04.2014 REQUESTED THE AUTHORITY TO TREAT THE RETURN OF INCOME ALREADY FIL ED ON 01.10.2007 IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. FURTHER THAT REASONS FOR REOPENING OF ASSESSMENT WAS ALSO PROVIDED TO THE ASSESSEE PURSUANT TO HIS REQUEST BE FORE THE LD. AO. THE ASSESSEE RAISED OBJECTION FOR REOPENING WHICH WAS DISPOSED OFF BY A ND UNDER A SPEAKING ORDER DATED 08.08.2014. 3. ON THE BASIS OF INFORMATION RECEIVED FROM DEPUTY COMMISSIONER OF INCOME TAX, TDS CIRCLE, AHMEDABAD, THE CASE OF THE ASSESSEE WAS REOPENED FOR THE REASONS THAT THE ASSESSEE WAS PROVIDED WITH A LOAN OF RS.4,75,10,000 /- FROM ONE SHRI J. P. ISCON LTD. IT IS RELEVANT TO MENTION THAT THE ASSESSEE COMPANY WAS E NGAGED IN THE BUSINESS OF DEVELOPMENT & LEASING OF COMMERCIAL RETAIL CENTERS. THE INFORMATION WAS THIS THAT THESE TWO COMPANIES ARE HAVING COMMON SHAREHOLDERS HAVING SUBSTANTIAL INTEREST THEREON. THE RATIO OF THE SHARE HOLDERS TOWARDS THE INTEREST OF THE COMPANY AS APPEARING FROM THE ORDER OF THE LEARNED AO IS AS FOLLOWS: SR.NO. NAME OF THE SHARE HOLDERS DHANLAXMI INFRASTRUCTURE PVT. LTD. J. P. ISCON LTD. 1 SHRI JATEEN M GUPTA 75% 22.63% 2 SHRI AMIT GUPTA 0 22.38% 3 J. P. ISCON LTD. 25% 0% - 3 - ITA NO.429/A/16 ACIT VS. DHANLAXMI INFRASTRUCTURE PVT. LTD. ASST.YEAR 2007-08 4. THE LEARNED AO WAS OF THE PRIMA FACIE VIEW THAT THE LOAN PROVIDED BY J. P. ISCON LTD. TO THE ASSESSEE IS DEEMED DIVIDEND WITHIN THE MEANING OF PROVISION OF SECTION 2(22)(E) OF THE ACT AND THEREFORE THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE SAID AMOUNT OF RS.4,75,10,000/- AS PROVIDED BY THE SAID J. P. ISCON LTD. SHOULD NOT BE TREATED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. IN RESP ONSE TO THE SAID SHOW-CAUSE THE ASSESSEE DULY SUBMITTED ITS REPLY DATED 28.02.2015 BY MAKING A CATEGORICAL STATEMENT THAT THE TRANSACTION BETWEEN TWO CLOSELY HELD COMPANIES WERE MADE ON ACCOUNT OF COMMERCIAL EXPEDIENCY AND NOT IN NATURE OF LOANS/ A DVANCES AS MENTIONED IN THE SAID SHOW-CAUSE NOTICE ISSUED BY THE REVENUE. THE EXPLAN ATION SO GIVEN BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE AND ULTIMATELY THE LEARNED AO ADDED THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE BY HOLDING THE SAID LOAN GIV EN TO THE ASSESSEE COMPANY ATTRACTS THE PROVISIONS OF THE SECTION 2(22)(E) OF THE ACT A ND THUS CONSIDERED THE SAME AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY. IN A PPEAL, THE LEARNED CIT(A) DELETED SUCH ADDITION. HENCE, THE INSTANT APPEAL BY REVENUE . 5. AT THE TIME OF HEARING OF THE INSTANT APPEAL, TH E LEARNED DR SUBMITTED BEFORE US THAT THOUGH THE ASSESSEE HAS DENIED BEFORE THE LEAR NED AO THAT THE PAYMENT MADE TO THE ASSESSEE COMPANY WAS LOAN OR ADVANCE BUT ACCORDING TO HIM FACTUALLY THE TWO SHARE HOLDERS NAMELY SHRI JATEEN M GUPTA AND AMIT M. GUPT A IN THE ASSESSEE COMPANY ARE ALSO THE DIRECTORS IN J. P. ISCON LTD. WHO HAS PROV IDED THE LOAN. MORESO, THEY ARE BENEFICIAL OWNERS OF SHARES HOLDING NOT LESS THAN 1 0% VOTING POWER AT ANY TIME OF PREVIOUS YEAR. THE CONDITIONS STIPULATED AS IN SECT ION 2(22)(E) IS SINCE FULFILLED AND THE LOANS OF RS.4,75,10,000/- AS PROVIDED BY THE J. P. ISCON LTD. TO THE ASSESSEE COMPANY RIGHTLY BEEN TREATED AS DEEMED DIVIDEND U/S 2(22)(E ) OF THE ACT BY THE LEARNED AO. ON THE OTHER HAND, LEARNED AR CONTENDED BEFORE US THAT THE TRANSACTION WAS NOT IN THE NATURE OF ADVANCE OR LOAN BUT SIMPLY INTER CORPORATE DEPOS ITS (ICD). IT WAS FURTHER SUBMITTED BY - 4 - ITA NO.429/A/16 ACIT VS. DHANLAXMI INFRASTRUCTURE PVT. LTD. ASST.YEAR 2007-08 HIM THAT THE ASSESSEE COMPANY HAD PROVIDED FOR THE INTEREST EXPENSES ON THE SAID ICD BORROWED AND HAVE DEDUCTED THE NECESSARY TDS THEREO N. IN THAT VIEW OF THE MATTER HE FURTHER PRAYED FOR DELETION OF SUCH ADDITION MADE B Y THE LEARNED AO. IN SUPPORT OF HIS ARGUMENT HE RELIED UPON THE JUDGMENT PASSED BY THE JURISDICTIONAL HIGH COURT PASSED IN THE MATTER OF CIT-VS-DAISY PACKERS PVT. LTD. (2014) 40 TAXMANN.COM 480 (GUJ. HIGH COURT). 6. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE PARTIES, WE HAVE PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORDS. IT APPEARS FROM THE RECORDS THAT THOUGH THE PAYMENT AS MADE BY THE J. P. ISCON LTD. COMPANY, TH E ASSESSEE COMPANY IS NOT A REGISTERED SHARE HOLDER OF THE SAME. IF THAT BE SO THEN THE APPELLANT COMPANY IS NOT A SHARE HOLDER IN THE LENDER COMPANY, BUT THE LEARNED ASSESSING OFFICER WRONGLY TREATED THE SAME AS DEEMED INCOME IN THE HANDS OF THE ASSES SEE COMPANY. FURTHER THAT IT IS THE CASE OF THE ASSESSEE THAT THE TRANSACTION WAS NOT I N THE NATURE OF ADVANCE AND/OR LOAN BUT SIMPLY INTER CORPORATE DEPOSITS FOR WHICH INTEREST EXPENSES WERE PROVIDED BY THE ASSESSEE AND DEDUCTION OF TDS WAS ALSO MADE THEREON. THE LEARNED CIT(A) WHILE CONCLUDING THE ORDER CONS IDERED THIS PARTICULAR ASPECT OF THE MATTER AS DISCUSSED BY US IN THE PARAGRAPH H EREINABOVE. APART FROM THAT, THE JUDGMENT PASSED BY THE ITAT, MUMBAI SPECIAL BENCH I N THE CASE OF ACIT-VS-BHAUMIK COLOUR PVT. LTD. AND THE JUDGMENT PASSED BY THE JUR ISDICTIONAL HIGH COURT IN THE MATTER OF CIT-VS-DAISY PACKERS PVT. LTD. HAVE ALSO BEEN TA KEN CARE OF BY THE LEARNED CIT(A) IN THE ORDER IMPUGNED. WE HAVE CONSIDERED THOSE TWO JU DGMENTS. RELYING UPON THE DECISION OF THE HONBLE DIVISION BENCH OF DELHI HIGH COURT I N THE CASE OF CIT-VS-ANKITECH PVT. LTD., (2012) 340 ITR 14 (DELHI HC) THE JURISDICTION AL HIGH COURT IN THE CASE OF CIT-VS- DAISY PACKERS PVT. LTD. WAS PLEASED TO HOLD THAT IF THE ASSESSEE COMPANY DOES NOT HOLD SHARE IN OTHER COMPANY FROM WHICH IT HAS RECEIVED D EPOSIT, THEN IT COULD NOT BE TREATED AS - 5 - ITA NO.429/A/16 ACIT VS. DHANLAXMI INFRASTRUCTURE PVT. LTD. ASST.YEAR 2007-08 A DEEMED INCOME U/S 2(22)(E) OF THE ACT. SIMILARLY, THE FINDING OF THE LEARNED TRIBUNAL THAT IT WAS NOT A LOAN GIVEN BY AMIGO BRUSHES PVT. LTD. TO THE ASSESSEE COMPANY BUT WAS INTER CORPORATE DEPOSITS, HAS BEEN UPHELD BY THE JU RISDICTIONAL HIGH COURT IN THE SAID JUDGMENT OF CIT-VS-DAISY PACKERS PVT. LTD. (SUPRA). IN THAT CASE, THE ASSESSEE WAS NOT A SHARE HOLDER OF THE SAID AMIGO BRUSHES PVT. LTD. TH E RATIO LAID DOWN BY THE DIVISION BENCH OF DELHI HIGH COURT IN THE CASE OF CIT-VS-ANK ITECH PVT LTD.(SUPRA) IN THE SAME SET OF FACTS WAS ALSO REFERRED BY THE JURISDICTIONA L HIGH COURT. IN THAT VIEW OF THE MATTER TAKING INTO CONSIDERATION THAT THE ASSESSEE IS NOT THE REGISTERED SHARE HOLDER OF J. P. ISCON LTD. CO. AND THE TRANSACTION IS NOT A LOAN BUT INTE R CORPORATE DEPOSITS (ICD) AND RESPECTFULLY RELYING UPON THE RATIO LAID DOWN BY TH E JURISDICTIONAL HIGH COURT WE FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(A) IN DELETING THE ADDITION MADE BY THE LEARNED AO AS DEEMED DIVIDEND U/S 2(22)(E) OF THE A CT FOR RS.4,75,10,000/- IN THE HANDS OF THE APPELLANT COMPANY. WE, THEREFORE, FIND NO ME RIT IN THE APPEAL PREFERRED BY THE REVENUE. THE SAME IS THUS DISMISSED. 7. IN THE RESULT, REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/12/2018 SD/- SD/- ( AMARJIT SINGH ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 20/12/2018 PRITI YADAV, SR.PS - 6 - ITA NO.429/A/16 ACIT VS. DHANLAXMI INFRASTRUCTURE PVT. LTD. ASST.YEAR 2007-08 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-I, AHMEDABAD. 5. , ! ' , #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD