DCIT (OSD) 8(2), MUMBAI V. ILLUSION DENTAL LABORATORY P.LTD, MUMBAI

ITA 4617/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3537 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 15-02-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI . . , , ! ' #$, % , & BEFORE SHRI G.S.PANNU, AM AND SHRI AMARJIT SINGH, J M / I.T.A. NO.4617/M/14 ( % ' !(' / ASSESSMENT YEAR: 2010-11) DY. COMMISSIONER OF INCOME TAX (OSD) 8(2), R.NO.218, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI 400 020 / VS. M/S. ILLUSION DENTAL LABORATORY PVT. LTD. 402/403, AKRUTI ARCADE, J.P.ROAD, OPP. A.H.WADIA SCHOOL, NEAR ANDHERI SPORTS COMPLEX, ANDHERI (E), MUMBAI - 400053 ./ ./ PAN/GIR NO. : AABCI3029F ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 15.02.2016 !' /DATE OF PRONOUNCEMENT: 29.02.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL AGAINST THE ORDER DATED 17.04.20 14 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 17, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESS MENT YEAR 2010-11. ASSESSEE BY: SHRI NONE DEPARTMENT BY: SHRI NEIL PHILIP ITA NO.4617/M/14 A.Y. 2010-11 2 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E E-FILED ITS RETURN OF INCOME FOR A.Y. 2010-11 ON 30.09.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS.33,41,380/-. THE SAID RETURN OF INC OME PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961( IN SHOR T THE ACT) ON 21.05.2011 ACCEPTING ITS RETURNED INCOME. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICES U/S. 143(2) DATED 24.08.2011 W AS ISSUED AND WAS DULY SERVED UPON THE ASSESSEE ON 14.09.2011. THERE AFTER, NOTICE UNDER SECTION U/S.142(1) OF THE ACT DATED 14.06.201 2 WAS ISSUED AND WAS SERVED UPON THE ASSESSEE CALLING FOR DETAILS. IN RESPONSE TO THE SAID NOTICES, MR. ABHAY MORI, CHARTERED ACCOUNTANT APPEARED ON BEHALF OF THE ASSESSEE. DURING THE ASSESSMENT YEAR , THE ASSESSEE RECEIVED LOAN OF RS.1,36,01,530/- FROM LAXMI DENTAL EXPORT PVT. LTD. ON EXAMINATION OF THE ACCOUNTS BOOKS AND AFTER COMP ARING THE SHARE HOLDING PATTERNS OF BOTH THE COMPANIES. IT WAS OBS ERVED THAT SHRI SAMEER MERCHANT AND SHRI RAJESH KHAKAR WERE COMMON SHAREHOLDERS IN BOTH COMPANIES. THE DETAILS OF THE SAME ARE AS UNDER:- NAME OF THE SHAREHOLDER ILLUSION DENTAL LABORATORY PVT. LTD. (% OF SHAREHOLDING) LAXMI DENTAL EXPORTS PVT. LTD. (%OF SHAREHOLDING) SAMEER MERCHANT 29% 20% RAJESH KHAKAR 45% 30% ITA NO.4617/M/14 A.Y. 2010-11 3 THEREAFTER ON SEEING THE RECORD OF M/S. LAXMI DENTA L EXPORTS PVT. LTD., THE RESERVE AND SURPLUS OF THE COMPANY WAS FO UND TO BE RS.9,88,14,120/-. SINCE ADVANCES OUTSTANDING TO A HOLDING COMPANY HAVING SUBSTANTIAL INTEREST IN THE ASSESSEE-COMPANY AND HAVING MORE THAN 10% OF VOTING POWER, THE RECIPIENT HOLDING COM PANY M/S. ILLUSION DENTAL LABORATORY PVT. LTD. WAS LIABLE TO PAY THE INCOME TAX ON OUTSTANDING LOAN AMOUNT OF RS.1,36,01,530/- AS DEEMED DIVIDEND IN VIEW OF THE PROVISIONS CONTAINED IN SE CTION 2(22)(E) OF THE ACT. SUBSEQUENTLY, THE ASSESSEE PREFERRED AN A PPEAL BEFORE THE LEARNED CIT(A) AND LEARNED CIT(A) DELETED THE SAID ADDITION. 3. THE SOLE POINT WHICH HAS BEEN RAISED BEFORE US I S THAT THE LEARNED CIT(A) WAS EARNED IN DELETING THE ADDITION OF RS.1,36,01,530/- U/S. 2(22)(E) OF THE ACT. THE LEA RNED REPRESENTATIVE OF THE DEPARTMENT HAS ARGUED THAT THE CASE OF THE A SSESSEE HAS DULY BEEN COVERED BY THE CBDT CIRCULAR NO.495 OF 2 ND SEPTEMBER 1987, THEREFORE IN THE SAID CIRCUMSTANCES THE LEARNED CIT (A) HAS WRONGLY DELETED THE ADDITION OF RS.1,36,01,530/- U/S. 2(22) (E) OF THE ACT, AND REQUESTED TO SET ASIDE THE ORDER IN QUESTION. ON T HE OTHER HAND LEARNED REPRESENTATIVE OF THE ASSESSEE HAS REFUTED THE SAID CONTENTIONS. IN VIEW OF THE CONTENTION RAISED BY THE PARTIES AND GO ING THROUGH THE RECORD, IT IS OBSERVED THAT THE ASSESSEE COMPANY RE CEIVED THE LOAN TO THE TUNE OF RS.13,60,530/- FROM LAXMI DENTAL EXPORT PVT. LTD.. THE ASSESSING OFFICER ASSESSED THE SAID LOAN AS DEEMED DIVIDEND AND THE ITA NO.4617/M/14 A.Y. 2010-11 4 SAID AMOUNT WAS ADDED TO THE TAX. SUBSEQUENTLY, IN THE APPEAL THE LEARNED CIT(A) HAS HELD THAT THE ASSESSEE COMPANY I S NOT THE SHARE HOLDER OF LENDING COMPANY THEREFORE, MONEY RECEIVED FROM LENDING COMPANY CANNOT BE TREATED AS DIVIDEND INCOME. IN D ECIDING THE SAID ISSUE LEARNED CIT(A) HAS ALSO PLACED RELIANCE UPON THE LAW SETTLED IN CIT VS. UNIVERSAL MEDICARE LTD. (2010) 190 TAXMAN 1 40(MUM), CIT VS. ANKITECH PVT. LTD. (2012) 340 ITR 14 (DEL), CIT VS. HOTEL HILLTOP (2008) 217 CTR (RAJ) 527, CIT VS. UNIVERSAL MEDICARE (P) LTD. (2011) 237 CTR (BOM) 147 AND ACIT VS. BHAUMIK COLOUR (P) LTD. (2009) 120 TTJ (MUMBAI) (SB) 865. IN THE APP EAL THE LEARNED DEPARTMENTAL REPRESENTATIVE FURTHER RELIED UPON THE CBDT CIRCULAR NO.495 OF 2 ND SEPTEMBER 1987. THIS CIRCULAR HAS ALREADY BEEN DISCUSSED BY THE LEARNED CIT(A) IN HIS APPEAL. MOR EOVER, IN THE SAID CIRCUMSTANCES IT IS NOT BINDING UPON THE COURTS. T HE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICAR E LTD. (2010) 190 TAXMAN 140 (MUM) HAS DISCUSSED ABOUT THE MATTER OF CONTROVERSY TO THE FACT THAT THE LOAN OR ADVANCE CANNOT BE TREATED AS DEEMED DIVIDEND AT THE END SUCH CONCERN WHO IS NOT A SHAREHOLDER AN D IT IS A CORRECT LEGAL PROPOSITION. EVEN AT THE TIME OF ARGUMENTS B EFORE US THE LEARNED DEPARTMENTAL REPRESENTATIVE NOWHERE PRODUCE ANY AUT HORITY CONTRARY TO THE LAW RELIED BY THE ASSESSEE MENTIONED ABOVE. THEREFORE IN VIEW OF THE SAID CIRCUMSTANCES WE ARE OF THE VIEW THAT T HE LEARNED CIT(A) HAS PASSED THE ORDER DATED 17.04.2014 JUDICIOUSLY A ND CORRECTLY WHICH DOES NOT REQUIRED TO BE INTERFERE WITH AT THIS APPE LLATE STAGE. IN VIEW ITA NO.4617/M/14 A.Y. 2010-11 5 OF THE SAID CIRCUMSTANCES, THE APPEAL OF THE REVENU E IS HEREBY ORDERED TO BE DISMISSED. 4. ACCORDINGLY, APPEAL OF THE REVENUE IS HEREBY DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY, 2016 SD/- SD/- (G.S.PANNU) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 29 TH FEBRUARY, 2016 MP MP MP MP * + ,%'#- .-(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. * / BY ORDER, - & //TRUE COPY// //$ (DY./ASSTT. REGISTRAR)