ACIT, Cochin V. M/s.Manikandan Motors P. Ltd, Ernakulam

ITA 447/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68932 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 12-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: A S NARAYANAMURTHY
• Keywords: Depreciation; Deemed to accrue or arise in india; Deemed dividend

Judgement Text

1 ITA NO. 447/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 447/COCH/2013 (ASSESSMENT YEAR 2007-08) A.C.I.T., CIR.1(2) VS M/S MANIKANDAN MOTORS P L TD KOCHI 39/3842, ALAPPAT ROAD ERNAKULAM 682 016 PAN : AAECM3998G (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. S VIJAYAPRABHA RESPONDENT BY : SHRI A.S. NARAYANAMURTHY DATE OF HEARING : 02-09-2013 DATE OF PRONOUNCEMENT : 05-09-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, KOCHI DATED 20-03-2013 AND PERTAINS TO ASSESSMENT Y EAR 2007-08. 2. THE FIRST ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO ASSESSMENT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. 3. SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT TH E ASSESSEE COMPANY RECEIVED UNSECURED LOAN OF RS.32,67,365.83 FROM M/S RAJASREE 2 ITA NO. 447/COCH/2013 MOTORS (P) LTD. ACCORDING TO THE LD.DR, BOTH ASSES SEE COMPANY AS WELL AS M/S RAJASREE MOTORS (P) LTD ARE HAVING COMMON SHARE HOLDERS. THEREFORE, THE ADVANCE MADE BY M/S RAJASREE MOTORS (P) LTD TO ASSESSEE COMPANY FROM THE ACCUMULATED PROFIT HAS TO BE TREATED AS DI VIDEND U/S 2(22)(E) OF THE ACT. ON A QUERY FROM THE BENCH, THE LD.DR CLAR IFIED THAT EVEN THOUGH THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN M/S RA JASREE MOTORS (P) LTD, STILL, IT HAS TO BE ASSESSED U/S 2(22)(E) OF T HE ACT SINCE BOTH THE COMPANIES ARE HAVING COMMON SHAREHOLDERS. 4. ON THE CONTRARY, SHRI A.S. NARAYANA MURTHY, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT SECTION 2(22)(E) OF THE ACT PROVIDES FOR ASSESSMENT OF LOAN OR ADVANCE MADE BY A COMPANY TO ITS SHAREHOLDER OR TO ANY PERSON TO BENEFIT THE SHAREHOLDER DIRECTLY O R INDIRECTLY. IN THIS CASE, THE COMPANY ADVANCED MONEY TO THE ASSESSEE. THE AS SESSEE COMPANY IS NOT A SHAREHOLDER IN M/S RAJASREE MOTORS (P) LTD . THEREFORE, MERELY BECAUSE BOTH THE COMPANIES ARE HAVING COMMON SHAREH OLDERS IT DOES NOT MEAN THAT THE MONEY WAS ADVANCED TO THE BENEFICIARI ES OF THE SHAREHOLDER OF THE ASSESSEE COMPANY. EVEN IF IT IS CONSTRUED T HAT THE ADVANCE WAS MADE FOR THE BENEFIT OF THE SHAREHOLDER OF THE ASSE SSEE COMPANY, STILL, THE ASSESSMENT HAS TO BE MADE ONLY IN THE HANDS OF THE INDIVIDUAL SHAREHOLDERS AND NOT IN THE HANDS OF THE COMPANY. ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSEE IS NOT HOLDING ANY SHARES OF M/S RAJASREE 3 ITA NO. 447/COCH/2013 MOTORS (P) LTD AS A BENEFICIAL OWNER ON BEHALF OF T HE SHAREHOLDERS. THEREFORE, THE ASSESSMENT, IF ANY, COULD BE MADE ON LY IN THE HANDS OF THE INDIVIDUAL SHAREHOLDERS AND NOT IN THE HANDS OF THE ASSESSEE COMPANY. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS ON EITHER S IDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE COMPANY AS WELL AS M/S RAJASREE MOTORS (P) LTD ARE HAVING COMMON SH AREHOLDERS. ADMITTEDLY, M/S RAJASREE MOTORS (P) LTD ADVANCED UN SECURED LOAN TO THE ASSESSEE COMPANY. IT IS ALSO AN ADMITTED FACT THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN M/S RAJASREE MOTORS (P) LTD . THE CONTENTION OF THE REVENUE IS THAT THE ADVANCE WAS MADE BY M/S RAJASRE E MOTORS (P) LTD TO THE ASSESSEE COMPANY FOR THE BENEFIT OF THE COMMON SHAREHOLDERS, THEREFORE, IT HAS TO BE TREATED AS DEEMED DIVIDEND. NO DOUBT, ANY ADVANCE MADE BY A COMPANY FOR THE BENEFIT OF THE SHAREHOLDE RS, WHO ARE BENEFICIAL OWNERS OF SHARES HAS TO BE TREATED AS DEEMED DIVIDE ND AND THE ASSESSMENT HAS TO BE MADE AS DEEMED INCOME ON SUCH SHAREHOLDERS TO THE EXTENT TO WHICH THE COMPANY POSSESSED ACCUMULAT ED PROFIT. IN THIS CASE, ADMITTEDLY, THE ASSESSEE COMPANY IS NOT A SHA REHOLDER. THE COMPANY ALSO DOES NOT OWN ANY SHARES FOR THE BENEFI T OF ITS SHAREHOLDERS AS A BENEFICIAL OWNER. ADMITTEDLY, THE SHAREHOLDER S ARE HOLDING THEIR SHARES IN THEIR INDIVIDUAL CAPACITY AND THEREFORE A DVANCE MADE BY M/S RAJASREE MOTORS (P) LTD WOULD INDIRECTLY BENEFIT TH E SHAREHOLDER OF THE 4 ITA NO. 447/COCH/2013 ASSESSEE COMPANY. UNFORTUNATELY, THE DEPARTMENT HA S NOT TAKEN ANY STEP TO ASSESS THE DEEMED DIVIDEND IN THE HANDS OF THE I NDIVIDUAL SHAREHOLDERS. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT SIN CE THE ASSESSEE COMPANY IS NOT HOLDING ANY SHARES IN M/S RAJASREE M OTORS (P) LTD, THERE CANNOT BE ANY ASSESSMENT IN THE HANDS OF THE PRESEN T ASSESSEE. AT THE BEST, AS CONTENDED BY THE LD.REPRESENTATIVE FOR THE ASSESSEE, THE ASSESSMENT CAN BE MADE ONLY IN THE HANDS OF THE IND IVIDUAL SHAREHOLDERS OF THE ASSESSEE COMPANY. IN VIEW OF THE ABOVE DISC USSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 6. THE NEXT ISSUE PERTAINS TO DEPRECIATION ON PRINT ERS & UPS. THE ASSESSING OFFICER RESTRICTED THE DEPRECIATION ON TH ESE COMPUTER PERIPHERALS AT 15% AS AGAINST 60% CLAIMED BY THE ASSESSEE. HOW EVER, THE CIT(A) ALLOWED THE DEPRECIATION AT 60% HOLDING THAT INTERN AL HARDWARE PARTS OF A COMPUTER ARE OFTEN REFERRED TO AS COMPONENTS WHIL E EXTERNAL HARDWARE DEVICES ARE USUALLY CALLED PERIPHERALS; THEREFORE , THEY ALL FALL UNDER THE CATEGORY OF COMPUTER HARDWARE. WE FIND THAT THE DE CISION OF THE CIT(A) IS IN CONFORMITY WITH THE DECISION OF THE MUMBAI SPECI AL BENCH OF THIS TRIBUNAL IN DCIT VS DATACRAFT INDIA LTD (2010) 133 TTJ (MUMBAI) (SB) 377. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE DE CISION ARRIVED AT BY THE CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 5 ITA NO. 447/COCH/2013 7. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 05 TH SEPTEMBER, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 05 TH SEPTEMBER, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH