PERIWINKLE FASHIONS P.LTD, MUMBAI V. DCIT 8(2), MUMBAI

ITA 4788/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3302 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 16-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJIV
• Keywords: Deemed dividend
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JASON P. BOAZ (AM) AND SHRI SANDEEP GOS AIN (JM) ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 M/S. PERIWINKLE FASHIONS P. LTD. 402, AKRUTI STAR, 4 TH FLOOR, OPP. AKRUTI CENTRE POINT BUILDING, CENTRAL ROAD, MIDC ANDHERI (E), MUMBAI- 400093. PAN- AADCP3365M VS. THE DY. COMMISSIONER OF INCOME TAX- 8 (2), ROOM NO 209, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI- 400020. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI. NISHIT GANDHI RESPONDENT BY : SHRI. RAJIV PANT. DATE OF HEARING: 27/01/2016 DATE OF PRONOUNCEMENT: 29/01/2016 O R D E R PER JASON P. BOAZ, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF THE CIT -17, MUMBAI DT. 19/05/2014 FOR ASST. YEAR 2011- 12. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE COMPANY ENGAGED IN DEALING ALL KIN DS OF FASHION PRODUCTS ETC. FILED ITS RETURN OF INCOME FOR ASST. YEAR 2011-12 ON 21/09/2011 DECLARING INCOME OF RS. 6,53,43,040/-. T HE RETURN WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961 (I N SHORT THE ACT) AND THE CASE WAS SUBSEQUENTLY TAKEN UP FOR SCRUTINY . THE ASSESSMENT WAS CONCLUDED U/S 143(3) OF THE ACT, VIDE ORDER DT. 20/01/2014, 2 ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 WHEREIN THE INCOME OF THE ASSESSEE UNDER NORMAL PRO VISIONS WAS DETERMINED AT RS. 6,91,64,110/- IN VIEW OF AN ADDIT ION OF RS. 38,21,073/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE BOOK PROFITS U/S 115JB OF THE ACT WERE ACCEPTED AS RETU RNED BY THE ASSESSEE AT RS. 7,02,79,567/-. 2.2 AGGRIEVED BY THE ORDER OF ASSESSMENT DT. 20/01/ 2014 FOR ASST. YEAR 2011-12, THE ASSESSEE PREFERRED AN APPEAL BEFO RE THE CIT(APPEALSO-17, MUMBAI. THE LD. CIT(A) DISMISSED THE ASSESSEES APPEAL VIDE ORDER DT. 19/05/2014. 3. BEING AGGRIEVED WITH ORDER OF THE CIT(APPEALS)- 17, MUMBAI, THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBU NAL RAISING THE FOLLOWING GROUNDS:- 1. AGAINST ADDITION OF RS. 2,621,073/- AS DEEMED DIVID END U/S 2(22)(E) OF THE ACT THE CIT(A) HAS ERRED IN UPHOLDING THE ADDITI ON OF RS. 2,621,073/- MADE BY THE ASSESSING OFFICER ('AO') U/ S 2(22)(E) OF THE ACT IGNORING THE FACTS OF THE CASE. THE CIT (A) SHOULD HAVE APPRECIATED THAT OUT OF THE SAID AMOUNT, RS. 2,621, 073/- REPRESENTS REPAYMENT OF EXPENSES INCURRED BY THE AP PELLANT FOR AND ON BEHALF OF TAINWALA HOLDINGS PVT. LTD. (THPL) DURING THE YEAR UNDER CONSIDERATION. THE CIT (A) FAILED TO APPRECIATE THAT SINCE NO LOAN OR ADVANCE HAS BEEN RECEIVED BY THE APPELLANT FROM THPL DURING THE YEAR, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT A TTRACTED. THE APPELLANT HUMBLY PRAYS THAT THE IMPUGNED ADDITI ON MADE BY THE CIT (A) BE DELETED, IN THE INTEREST OF NATUR AL JUSTICE. 3 ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 2. AGAINST ADDITION OF RS. 50,000/- AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT THE CIT (A) HAS ERRED IN UPHOLDING AN ADDITION OF RS. 50,000/- U/S 2(22)(E) OF THE ACT MADE BY THE AO WITHOUT CONS IDERING THE FACTS OF THE CASE. THE CIT (A) SHOULD HAVE APPRECIA TED THAT THE SAID SUM OF RS. 50,000/- REPRESENTS MERE REPAYMENT OF EXPENSES INCURRED BY THE APPELLANT FOR AND ON BEHAL F OF TAINWALA TRADING AND INVESTMENT CO. PVT. LTD (TTICP L) DURING THE YEAR UNDER CONSIDERATION. THE CIT (A) FAILED TO APPRECIATE THAT SINCE NO LOAN OR ADVANCE HAS BEEN RECEIVED BY THE APPELLANT FROM TTICPL DURING T HE YEAR, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT A TTRACTED. THE APPELLANT HUMBLY PRAYS THAT THE IMPUGNED ADDITI ON MADE BY THE CIT (A) BE DELETED, IN THE INTEREST OF NATUR AL JUSTICE. 3. THE APPELLANT CRAVES LEAVES TO ADD, ALTER, AMEND AN D/OR SUPPLEMENT ANY GROUND OR GROUNDS, IF NECESSARY, AT THE TIME OF HEARING OF THE APPEAL. 4. GROUND NO. 1 ADDITION OF RS. 26, 21,073/- AS DEEM ED DIVIDEND U/S 2 (22) (E) OF THE ACT . 4.1 IN THIS GROUND, THE ASSESSEE CONTENDS THAT TH E LD. CIT(A) ERRED IN UPHOLDING THE ADDITION OF RS. 26,21,073/- MADE BY T HE ASSESSING OFFICER (AO) U/S 2 (22)(E) OF THE ACT. IT WAS SU BMITTED THAT THIS AMOUNT OF RS. 26,21,073/- REPRESENTS REPAYMENT OF EXPENSES INCURRED BY THE ASSESSEE FOR AND ON BEHALF OF TAINWALA HOLDINGS PVT . LTD. IT IS SUBMITTED THAT THE SAID AMOUNT WAS NOT A LOAN OR AD VANCE RECEIVED BY 4 ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 THE ASSESSEE AND THEREFORE THE PROVISIONS OF SECTIO N 2 (22)(E) OF THE ACT WOULD NOT APPLY. IT WAS BROUGHT TO THE NOTICE OF T HE BENCH THAT A FACTUALLY SIMILAR ISSUE OF ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT WAS CONSIDERED BY A CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2010-11 A ND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE. THE LD. AR CONTE NDS THAT THE FACTS BEING SIMILAR IN THIS YEAR ALSO, THE ASSESSEES APP EAL ON THIS GROUND OUGHT TO BE ALLOWED. 4.2 PER CONTRA, THE LD. DR PLACED STRONG RELIANCE O N THE DECISIONS OF THE LD. CIT(A) ON THE IMPUGNED ORDER. 4.3.1 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CA REFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JUDICIAL DECI SION CITED. THE ADDITION, WHICH IS THE SUBJECT MATTER OF APPEAL, IS RS. 26,70,073/-, COMPRISING OF TWO LIMBS, NAMELY AN AMOUNT OF RS. 26 ,21,073/- PURPORTED TO HAVE BEEN RECEIVED BY M/S. TAINWALA H OLDINGS AND A SUM OF RS. 50,000/- REPRESENTING AMOUNT RECEIVED FROM TAINWALA TRADING AND INVESTMENT CO. LTD. THE FORMER ADDITION IS AGI TATED BY WAY OF GROUND OF APPEAL NO. 1 AND THE LATTER IS AGITATED B Y WAY OF GROUND OF APPEAL NO. 2 BEFORE US. 4.3.2 WITH RESPECT TO THE ADDITION OF RS. 26,21,073 /- CONSIDERED AS DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT, WE FIND THAT THE SIMILAR FACTUAL MATTER OF AN ADDITION ON ACCOUNT OF DEEMED DIVIDEND U/S 2 (22)(E) OF THE ACT WAS CONSIDERED BY THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2010-11. IN ITS ORDER IN ITA NO. 388/MUM/2014 DT. 21/08/2015, THE CO-ORDI NATE BENCH FOLLOWING THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD., ( 324 ITR 263) (BOM) HELD THAT SINCE THE ASSESSEE IS NOT A SHAREHOLDER I N THE SAID CONCERN, M/S. TAINWALA HOLDINGS PVT. LTD., SUCH AMOUNT COULD NOT BE ASSESSED 5 ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 IN THE HANDS OF THE ASSESSEE. AT PARAS 5 TO 7 OF IT S ORDER THE CO-ORDINATE BENCH HELD AS UNDER:- 5. WITH RESPECT TO THE ADDITION OF RS. 28,74,875/- , CONSIDERED AS DEEMED DIVIDEND UNDER SECTION 2 (22)(E) OF THE ACT, IT IS CONTENDED THAT THE SAID ADDITION IS NOT TENABLE IN VIEW OF THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. UNIVERSAL MEDICARE PVT. LTD., 324 ITR 263(BOM). IT IS SUBMITTED THAT THE SAID AM OUNT IS PURPORTED TO HAVE BEEN RECEIVED FROM M/S. TAINWALA HOLDING PVT. LTD. AND SINCE ASSESSEE WAS NOT A SHAREHOLDER IN THE SAID CONCERN, SUCH AMOUNT COULD NOT BE ASSESSED IN THE H ANDS OF THE ASSESSEE COMPANY FOLLOWING THE RATIO OF THE JUDGMEN T IN THE CASE CIT VS. UNIVERSAL MEDICARE PVT. LTD. (SUPRA). 6. ON THIS ASPECT, THE LD. DR APPEARING FOR THE REV ENUE HAS NOT DISPUTED THE FACTUAL MATRIX BROUGHT OUT BY LD. REPR ESENTATIVE FOR THE ASSESSEE. 7. IN VIEW OF THE AFORESAID FACTUAL MATRIX, THE P LEA OF THE ASSESSEE, BASED ON THE JUDGMENT OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT . LTD. (SUPRA) IS LIABLE TO BE UPHELD, THEREBY RESULTING IN DELETI ON OF AN ADDITION OF RS. 28,74,875/- IN THE HANDS OF THE ASS ESSEE COMPANY. ACCORDINGLY, WE SET ASIDE THE ORDER OF CIT (A) ON THIS ASPECT AND DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION OF RS. 28,74,875/- MADE IN THE HANDS OF THE ASSESSEE O N THE GROUND THAT SUCH DIVIDEND COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE AS IT IS NOT A SHAREHOLDER IN M/S. TAI NWALS HOLDING PVT. LTD. 6 ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 4.3.2 RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2010-11 IN ITA NO. 388/MUM/2014 DT. 21/08/2015, WHEREIN THE RATIO OF THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNI VERSAL MEDICARE PVT. LTD. (SUPRA) WAS FOLLOWED, WE SET ASIDE THE OR DER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 26,21,073/- MADE IN THE HANDS OF THE ASSESSEE ON THE GROUND T HAT SUCH DIVIDEND COULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE AS IT WAS NOT A SHAREHOLDER IN M/S. TAINWALA HOLDINGS PVT. LTD.. GR OUND OF APPEAL AT SR. NO. 1 IS ACCORDINGLY ALLOWED. 5. GROUND NO: 2 IN RESPECT OF THE ADDITION OF RS. 50,000/- U/S 2 ( 22)(E) OF THE ACT WAS NOT PRESSED BY THE LD. AR FOR THE AS SESSEE. IN VIEW OF THIS GROUND NOT BEING PRESSED, IT IS RENDERED INFRUCTUOU S AND IS ACCORDINGLY DISMISSED. 6. GROUND NO: 3 IS GENERAL IN NATURE AND THEREFORE NO ADJUDICATION IS CALLED FOR THEREON. 7. IN THE RESULT, THE ASSESSEES APPEAL FOR ASST. YEAR 2010-11 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JANUARY, 2016 SD/- SD/ - ( SANDEEP GOSAIN ) (JASON P.BOAZ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED: 29/01/2016 7 ITA NO. 4788/MUM/2014 ASSESSMENT YEAR: 2011-12 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. '#$ % , %' , / DR, ITAT, MUMBAI 6. $() * / GUARD FILE. + + + + / BY ORDER, + //TRUE COPY// , ,, ,/ // /+- . +- . +- . +- . (DY./ASSTT. REGISTRAR) %' %' %' %', , , , / ITAT, MUMBAI PRAMILA