The DCIT, 1(1), Indore V. M/s Ayush Ajay Tolls Pvt. Ltd., Indore

ITA 429/IND/2012

• Counselvise Citation: 42922714 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 06-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Keywords: Additional evidence; Deemed dividend

Judgement Text

PAGE 1 OF 13 IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AACCA7837Q I.T.A.NO. 429 /IND/201 2 A.Y. : 2007-08 DY. CIT, 1(1), INDORE. VS. M/S.AYUSH AJAY TOLLS PVT.LTD., INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI R. A. VERMA, SR. DR RESPONDENT BY : SHRI PRAKASH JAIN, C. A. DATE OF HEARING : 13 . 11 .201 3 DATE OF PRONOUNCEMENT : 19 . 1 1 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER PASSED BY THE CIT(A), DATED 18.04.2011 FOR THE ASSE SSMENT YEAR 2007-08 IN THE MATTER OF ORDER PASSED U/S 143( 3)/147 OF THE INCOME-TAX ACT, 1961. 2. THE ONLY GRIEVANCE OF THE REVENUE RELATES TO DELETI NG THE ADDITION OF RS. 76,89,300/- ON ACCOUNT OF DEEME D DIVIDEND AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 2 PAGE 2 OF 13 U/S 2(22)(E) MERELY ON THE GROUND THAT THIS AMOUNT REPRESENTED SHARE APPLICATION MONEY. 3. THE RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORDS PERUSED. DURING THE COURSE OF ASSESSMENT, THE ASSES SING OFFICER, OBSERVED THAT T HE ASSESSEE HAS SHOWN RECEIPT OF RS. 82,09,300/ - FROM M/S. AYUSHAJAY CONSTRUCTION P. LTD. IT IS SEEN THAT THE ASSESSEE IS A SHAREHOLDER IN M/S. AYU SHAJAY CONSTRUCTION P. LTD. IT HAS BEEN CLAIMED THAT THE R ECEIP T IS ON ACCOUNT OF SHARE APPLICATION MONEY. WHEN CONFRONTED ON THE QUESTION OF APPLICATION OF SECTION 2(22)( E), THE A SSESSEE MADE WRITTEN SUBMISSION, WHICH IS REPRODUCED BELOW: 1] THAT YOU HAVE ASKED FROM US TO EXPLAIN THAT WHY PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE IN THE CASE OF AMOUNT RECEIVED FROM M/S. AYUSH AJAY TOOLS (P) LTD., WHICH IS APPEA RED IN THE AUDITED BALANCE SHEET AS SHARE APPLICATION MONEY OF RS. 82,06,000/-. IN THIS RESPECT, WE HAVE TO SUBMIT AS UNDER :- 2.2] THE ASSESSEE IS SHORE HOLDER OF AYUSHAJAV CONTRACTION (P) LIMITED, AND HOLDING 5,03,000 EQUIT Y SHARES OUT OF TOTAL ISSUED SHARE CAPITAL OF 54,82,9 18 AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 3 PAGE 3 OF 13 EQUITY SHARES WHICH ARE 9.17 % OF THE TOTAL ISSUED CAPITAL WHICH IS BELOW 10%, THUS SECTION 2(22)(E) I S NOT APPLICABLE IN THIS CASE. WITHOUT PREJUDICE TO THE ABOVE, IT IS FURTHER SUBMI TTED THAT :- 2.3] THAT DURING THE YEAR, ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY OF RS. 82,06,000/-. COPY OF ACCOUNT OF SHARE APPLICATION MONEY RECEIVED ACCOUNT IS ENCLOSED HEREWITH. 2.4] STATEMENT GIVING SHARE HOLDING PATTERN OF AYUSHAJAY CONSTRUCTION (P) LTD IS ENCLOSED HEREWITH. 3.1] IN THE PRESENT CASE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE SINCE THE AMOUNT WAS RECEIVED ON ACCOUNT OF SHARE APPLICATION AND NOT AS A LOAN OR ADVANCE. 3.2] THAT APPLICATION OF SECTION 2(22/(E) INVOLV ES CONSIDERATION OF TWO FACTORS, WHETHER -(I) THE PAYMENT IS A LOAN, AND AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 4 PAGE 4 OF 13 -(II) AT THE DATE WHEN THE PAYMENT IS MADE THERE ARE ACCUMULATED PROFITS TO THE EXTENT OF THE LOAN. THAT FOR INTERPRETING A DEEMING PROVISION,. IT IS NECESSARY TO FIND OUT THE PURPOSE FOR WHICH THE FIC TION WAS CREATED . A WIDER MEANING CANNOT BE GIVEN THAT WHAT IS STATED IN THE FICTION. IN THE PRESENT CASE UNDISPUTEDLY THE AMOUNT RECEIVED WAS IN THE NATURE OF SHARE APPLICATION MONEY, WHICH COULD NOT BE CONSTRU ED AS LOAN, AND THUS, THE DEEMING PROVISION CONTAIN ED IN SECTION 2(22)(E) COULD NOT BE APPLIED. 4. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT ASSESSEES CONTENTION AND HELD THAT AMOUNT SO RECEI VED WAS IN THE NATURE OF LOANS AND ADVANCES. THEREFORE, THE AD DITION WAS MADE U/S 2(22)(E) OF THE INCOME-TAX ACT, 1961. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS :- THROUGH THIS GROUND THE ASSESSEE HAS CHALLENGED THE ADDITION OF RS. 76,89,300/- AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 5 PAGE 5 OF 13 U/S 2(22)(E). THE FACTS AS DISCUSSED IN THE ASSESSMENT ORDER ON THIS ISSUE ARE THAT THE ASSESSEE COMPANY IS SUBSTANTIAL HOLDER (HAVING EQUITY SHARE OVER 10 %) OF THE COMPANY AYUSH AJAY CONSTRUCTION PVT LTD; THAT THE ASSESSEE COMPANY HAD SHOWN RECEIPT OF RS. 82,09,300/- FROM THAT COMPANY ( I.E. AYUSH AJAY CONSTRUCTION PVT LTD): THE ASSESSEE HAD CLAIMED THAT RECEIPT AS SHARE APPLICATION MONEY. THE AO HOWEVER DID NOT AGREE WITH THE ASSESSEE'S CLAIM AS REGARDS TO THE NATURE OF SUCH RECEIPTS, THE AO WAS OF THE VIEW THAT THE AMOUNT WAS IN THE NATURE OF LOANS AND ADVANCES AND ACCORDINGLY HE ADDED THE SAME TREATING THAT AS DEEMED DIVIDEND U/S 2(22)(E) OF THE I T ACT. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD CLAIMED FOR HAVING LESS THAN 10 % EQUITY SHARES OF AYUSH AJAY CONSTRUCTION PVT LTD AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 6 PAGE 6 OF 13 AND ON THAT GROUND ALSO PLEADED THAT SECTION 2(22)(E) WAS NOT APPLICABLE. AS REGARDS TO THE NATURE OF RECEIPTS. THE AO HAS BASED HIS REASONING ONTO THE ACCOUNTS OF THE ASSESSEE APPEARING THE BOOKS OF AYUSH AJAY CONSTRUCTION PVT LTD IN WHICH THE ENTRIES STARTS FROM OPENING BALANCE AND SUBSEQUENT ENTRIES WERE MADE ON DATES RANGING FROM 24.04.06 TO THE YEAR END. THE AO NOTED THAT IN ALL 12 ENTRIES WERE MADE IN THAT ACCOUNT; AND OUT OF WHICH 7 ENTRIES WERE JOURNAL ENTRIES WHICH COULD NOT CARRY THE INTENTION OF INVESTMENT. FOR THAT REASON THE AO WAS OF THE VIEW THAT THE NAME GIVEN TO THE ACCOUNT AS 'SHARE: APPLICATION MONEY WAS JUST AN AFTER THOUGHT. 4.2.1 DURING THE APPEAL PROCEEDINGS, THE DETAILED SUBMISSIONS HAVE BEEN MADE WHICH FIND PLACE IN PARA 3 ABOVE. MY ATTENTION WAS AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 7 PAGE 7 OF 13 ALSO DRAWN TO THE RELEVANT ENTRIES IN THE BALANCE SHEETS OF ASSESSEE COMPANY (AYUSH AJAY TOLLS PVT. LTD) AND THAT OF AYUSH AJAY CONSTRUCTION PVT. LTD FOR THE RELEVANT YEAR (I.E. 31ST MARCH 2007). THE AMOUNT OF RS. 82,06,0001- IS SHOWN IN THE ASSESSEE'S BALANCE SHEET AS RECEIVED ON ACCOUNT OF 'SHARE APPLICATION MONEY'. THE DETAILS / BREAKUP IN THIS REGARD IS GIVEN IN PARA 2.3, 2.4 AND 2.5 OF ASSESSEE'S SUBMISSION (WHICH IS ALREADY REPRODUCED IN PARA 3 ABOVE). FOR READY REFERENCE, THE SAME IS REPRODUCED HEREUNDER : - '2.3] THAT DURING THE YEAR ASSESSEE COMPANY HAS RECEIVED SHARE APPLICATION MONEY OF RS. 76,86,000/- FROM M/S. AYUSH AJAY CONSTRUCTION (P) LTD. DETAILS OF SHARE APPLICATION ACCOUNT IS SUMMARIZED AS UNDER :- AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 8 PAGE 8 OF 13 OPENING BALANCE 520,000 ADD: SHARE APPLICATION MONEY RECEIVED DURING THE YEAR 7,686,000 CLOSING BALANCE OF SHARE APPLICATION ACCOUNT (AS PER AUDITED BALANCE SHEET) 8,206,000 2.4] IN ADDITION TO THAT COMPANY IS ALSO RECEIVED RS.3,300/- ON ACCOUNT OF SHARE APPLICATION MONEY HOWEVER SINCE APPLICATION FOR ALLOTMENT WAS NOT RECEIVED IN THE PRESCRIBED FORMAT IN THE STIPULATED TIME SO THAT COMPANY HAS ACCOUNTED THE SAID AMOUNT AS CURRENT LIABILITY UNDER THE SCHEDULE-7 OF THE AUDITED BALANCE SHEET. 2.5] COPY OF AUDITED BALANCE SHEET OF OUR COMPANY AS ON 31.03.07 DULY HIGHLIGHTING THE SHARE APPLICATION MONEY RECEIVED OF RS. 82,06,000/- AND RS.3,300/- UNDER THE HEAD CURRENT LIABILITIES IS ENCLOSED HEREWITH.' AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 9 PAGE 9 OF 13 1. MOREOVER SHEDULE - VII OF THE BALANCE SHEET OF AYUSH AJAY CONSTRUCTION PVT LTD ALSO REFLECTS THE INVESTMENT OF RS. 82,09,300/- OF THAT COMPANY AS APPLICATION MONEY OF PRIVATE COMPANIES. BOTH THE BALANCE SHEET ARE AUDITED AS ON 31.08.2007 AND 03.09.2007 RESPECTIVELY BY THE CHARTERED ACCOUNTANT SHRI SANJAY MEHTA OF M/S SANJAY MEHTA & ASSOCIATES. THE ASSESSEE HAD ALSO FURNISHED COPIES OF RELEVANT SHARE APPLICATIONS. IT IS ALSO PLEADED THAT LATERON THE ASSESSEE COMPANY HAD ALSO ALLOTTED SHARE OF RS. 82,09,300/- TO M/S AYUSH AJAY CONSTRUCTION PVT. LTD A COPY OF RETURN OF ALLOTTMENT FILED BEFORE THE ROC IN THIS RESPECT HAS ALSO BEEN SUBMITTED. THE DATE OF ALLOTTMENT AS MENTIONED THERE IS 01.10.2009. HAVING CONSIDERED THE FACTS OF THE CASE AND THE NATURE OF RECEIPTS AS SHOWN IN THE AUDITED BALANCE SHEET OF BOTH THE COMPANIES AND THE FACT THAT SHARES WERE ALSO ULTIMATELY ALLOTTED, I DO NOT APPROVE THE ASSESSING AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 10 PAGE 10 OF 13 OFFICERS VIEW THAT THE AMOUNTS WERE RECEIVED AS LOANS AND ADVANCES AND LATERON SHOWN AS SHARE APPLICATION MONEY AS A RESULT OF AFTER THOUGHT. IN THE FACTS OF THE CASE NATURE OF THE RECEIPTS IS TO BE REGARDED AS OF 'SHARE APPLICATION MONEY' ONLY AND THEREFORE THE PROVISIONS OF SECTION 2(22)(E) WOULD NOT BE APPLICABLE ONTO THOSE RECEIPTS. IN THE CIRCUMSTANCES ADDITION WAS NOT WARRANTED. WHETHER THE ASSESSEE COMPANY HAPPENED TO BE SUBSTANTIAL SHAREHOLDER OF THE COMPANY M/S. AYUSH AJAY CONSTRUCTION PVT. LTD OR NOT IS NOT' RELEVANT IN THE FACTS OF THE CASE AS THE RECEIPTS A RE CONSIDERED IN THE NATURE OF SHARE APPLICATION MONEY AND NOT LOAN AND ADVANCES FOR WHICH SECTION 2(22)(E) WOULD BE APPLICABLE. IN THE RESULT, THE ENTIRE ADDITION OF RS. 76,89,300/- IS DELETED. ACCORDINGLY ASSESSEE'S GROUND STANDS ALLOWED. AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 11 PAGE 11 OF 13 6. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEAL BEFORE US. 7. IT WAS ARGUED BY THE LD. SR. DR THAT AMOUNT SO RECEIVED BY ASSESSEE WAS ON ACCOUNT OF LOANS AN D A DVANCES AND ONLY AS AN AFTER THOUGHT, THE ASSESSEE HAS PLEA DED THE SAME AS SHARE APPLICATION MONEY. THE LD. SR. DR DRE W OUR ATTENTION TO THE DOCUMENTS FILED BEFORE THE CIT(A) IN THE FORM OF BALANCE SHEET OF SUBSEQUENT YEARS AS WELL AS RET URN OF ALLOTMENT OF SHARES FILED WITH ROC. CONTENTION OF L D. SENIOR DR WAS THAT THESE ARE ADDITIONAL EVIDENCE BY RELYIN G ON WHICH THE CIT(A) HAS DELETED THE ADDITION, SO THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF ASSESSING OFFICER FOR EXAMINING THESE ADDITIONAL EVIDENCES AND DECIDED THE MATTER A FRESH. 8. ON THE OTHER HAND, LD. AUTHORIZED REPRESENTATIVE DREW OUR ATTENTION TO THE STATEMENT OF ACCOUNT OF M /S. AYUSH AJAY CONSTRUCTION PRIVATE LIMITED, WHICH CLEARLY I NDICATE RECEIPT OF MONEY ON ACCOUNT OF SHARE APPLICATION. O UR ATTENTION WAS ALSO INVITED TO THE PAPER BOOK FILED BEFORE US WHEREIN CERTIFICATE WAS ENCLOSED TO THE EFFECT THAT COPY OF SHARE AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 12 PAGE 12 OF 13 APPLICATION MONEY, ACCOUNT OF SHARE APPLICATION MON EY, COPY OF FORM NO.2 FILED WITH ROC FOR ALLOTMENT OF SHARES , COPY OF BOARDS RESOLUTION FOR ALLOTMENT OF SHARES HAVING B EEN FILED BEFORE THE ASSESSING OFFICER. THE LD. AUTHORIZED RE PRESENTATIVE FURTHER CONTENDED THAT SHAREHOLDING OF ASSESSEE IN M/S. M/S. AYUSH AJAY CONSTRUCTION PRIVATE LIMITED WAS LESS TH AN 10% THEREFORE PROVISION OF SECTION 2(22)(E) OF THE ACT WAS NOT ATTRACTED AT ALL. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D FOUND FROM RECORD THAT THE ASSESSEES STAND FROM THE VERY BEGINNING BEFORE THE ASSESSING OFFICER WAS THAT THE AMOUNT WA S RECEIVED ON ACCOUNT OF SHARE APPLICATION MONEY. IT IS NOT TH E CASE OF REVENUE THAT THIS EXPLANATION WAS NOT FURNISHED BEF ORE THE ASSESSING OFFICER. FROM THE RECORD, WE FOUND THAT T HE ASSESSEE HAS FILED COPY OF RELEVANT SHARE APPLICATION MONEY, COPY OF BOARDS RESOLUTION AND ALSO COPY OF RETURN OF ALLOT MENT OF SHARES FILED WITH ROC. ALL THESE DOCUMENTARY EVIDEN CES CLEARLY ESTABLISH THAT MONEY SO RECEIVED WAS ON ACCOUNT OF SHARE AYUSH AJAY TOLLS PVT.LTD. I.T.A.NO. 429/IND/2012 A.Y.2007-08 13 PAGE 13 OF 13 APPLICATION MONEY, WHICH WAS STAND OF THE ASSESSEE FROM THE VERY BEGINNING. THE DETAILED FINDING RECORDED BY TH E LD.CIT(A) AT PARA 4.2 HAS NOT BEEN CONTROVERTED, ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT(A) . 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER, 2013. SD/- SD/- (JOGINDER SINGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19 TH NOVEMBER, 2013. CPU* 131811