DCIT, Thrissur V. M/s.Parisons Exports Inc, Calicut

ITA 485/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68984 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 24-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: A S NARAYANAMOORTHY
• Keywords: Deemed to accrue or arise in india; Deemed dividend
• Section: 143(3); 148

Judgement Text

ITA NO. 485 COCH/ 2013 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 485 /COCH/ 2013 (ASST YEAR 2005 - 06 ) THE ASST COMMR OF INCOME TAX CIRCLE1(1), KOZHIKODE VS M/S PARISONS EXPORTS INC CHEROOTY ROAD KOZHIKO DE ( APPELLANT) (RESPONDENT) PAN NO. AAFFP6372B ASSESSEE BY SRI A S NARAYANAMOORTHY REVENUE BY SMT S VIJAYAPRABHA, JR DR DATE OF HEARING 24 TH SEPT 2013 DATE OF PRONOUNCEMENT 27 TH SEPT 2013 OR D ER PER B.R. BASKARAN, AM: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE DECISION OF THE LD CIT(A) IN DELETING THE ADDITION MADE U/S 2(22)(E) OF THE I T ACT AND IT RELATES TO THE AY 2005 - 06. 2 THE ASSESSMENT IN THE HANDS OF THE ASSESSEE FIRM WAS ORIGINALLY COMPLETED ON 19.12.2007 U/S 143(3) O F THE ACT. SUBSEQUENTLY, IT WAS NOTICED THAT THE ASSESSEE FIRM HAS RECEIVED AN ADVANCE OF RS. 834.65 LACS FROM THE COMPANY NAMED M/S KOTHANDARAM ROLLERS FLOUR MILLS P LTD DURING THE PREVIOUS YEAR RELEVANT TO AY UNDER CONSIDERATION. THE AO NOTICED THAT THE PARTNERS OF THE ASSESSEE FIRM NAMELY (I) S/SHRI N K MOHAMMED ALI, (II) N K KHALID, (III) N K HARRIS, AND (IV) N K ASHRAF WITH PROFIT SHARING RATIO OF 25% EACH ARE ALSO SHARE HOLDERS OF THE ABOVE SAID COMPANY WITH 24.98% SHARE CAPITAL EACH IN THE C OMPANY . SINCE THE PARTNERS OF THE FIRM ARE HAVING SUBSTANTIAL INTEREST IN THE ABOVE SAID COMPANY, THE AO TOOK THE VIEW THAT THE ADVANCE OF RS. 834.65 LACS RECEIVED BY THE ASSESSEE FIRM FROM THE ABOVE SAID COMPAN Y IS ITA NO. 485 COCH/ 2013 2 LIABLE TO BE TREATED AS DEEMED DIVIDEND U /S 2(22)( E) OF THE A CT IN THE HANDS OF THE FIRM TO THE EXTENT THE COMPANY POSSESSES ACCUMULATED PROFIT. THE AO NOTICED THAT THE ACCUMULATED PROFIT OF THE COMPANY AS ON 1 . 4.2004 STOOD AT RS. 99,44,837/ - . ACCORDINGLY, THE AO REOPENED THE ASSESSMENT BY I SSUING NOTICE U/S 148 OF THE ACT IN ORDER TO ASSESS THE ESCAPED DEEMED INCOME U/S 2(22)(E) OF THE ACT. 2.1 THE AO EXPRESSED THE VIEW THAT , IN VIEW OF THE AMENDED PROVISIONS OF SEC. 2(22)(E) INSERTED BY FINANCE ACT, 1987 AND ALSO THE CBDT CIRCULAR DATED 22 .10.1987 GIVING EXPLANATORY NOTES , SUCH A LOAN IS TAXABLE AS DEEMED DIVIDEND IN THE HANDS OF THE BORROWING CONCERN. ACCORDINGLY, THE AO ASSESSED THE SUM OF RS. 94,44,837/ - AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FIRM. THE ASSESSEE CHALLENGED THE SAID DECISION OF THE AO BY FILING APPEAL BEFORE THE LD CIT(A). 2.2 BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESSEE CONTENDED THAT THE PROVISIONS OF SEC. 2(22)(E) CAN BE INVOKED ONLY IN THE HANDS OF THE SHARE HOLDERS IN VIEW OF THE DECISIONS IN THE C ASE OF ACIT VS BHAUMIK COLOUR LABORATORIES PVT L TD (120 TTJ (S B ) 865 ) AND CIT VS HOTEL HILLTOP (217 CTR 527 ). THE LD CIT(A) NOTICED THAT THIS BENCH OF THE TRIBUNAL , IN THE ASSESSEES SISTER CONCERN IN THE CASE OF N K MOHAMMED ALI & BROS IN ITA NO. 653/C OCH/2010 , VIDE ITS ORDER DATED 10.8.2012 , HAS HELD THAT IF THE SHARES ARE HELD IN THE INDIVIDUAL CAPACITY OF THE PARTNERS, THE ASSESSMENT OF DEEMED DIVIDEND IN THE HANDS OF THE PARTNER FIRM IS LIABLE TO BE DELETED , IN VIEW OF THE DECISION OF THE SPECIAL BE NCH IN THE CASE OF BHAUMIK COLOUR LABORATORIES P LTD (SUPRA). ACCORDINGLY, THE LD CIT(A) HELD THAT THE IMPUGNED ADDITION CANNOT BE MADE IN THE HANDS OF THE ASSESSEE FIRM. AGGRIEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. ITA NO. 485 COCH/ 2013 3 3 THE LD JR. DR SMT S VI JAYAPRABHA SUBMITTED THAT THE DEPARTMENT HAS NOT ACCEPTED THE DECISION RENDERED BY THE TRIBUNAL IN THE CASE OF N K MOHAMMED ALI & BROS (SUPRA) AND ACCORDINGLY AN APPEAL HAS BEEN PREFERRED BEFORE THE HONBLE HIGH COURT OF KERALA. SHE FURTHER SUBMITTED THAT THE TRIBUNAL MAY KINDLY RECONSIDER THE MATTER IN THE LIGHT OF THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT. THE LD DR SUBMITTED THAT UNDER THE PROVISIONS OF SEC 2(22)(E), THE DEEMED DIVIDEND CAN BE ASSESSED IN THE HANDS OF THE BORROWING CONCERNS ALSO. 3.1 ON THE CONTRARY, THE LD AR SUBMITTED THAT THE CBDT CIRCULAR REFERRED BY THE AO IN THE ASSESSMENT ORDER AND ALSO PROVISIONS OF SEC. 2(22)(E) HAS BEEN EXTENSIVELY DISCUSSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOUR LABORA TORIES P LT D (SUPRA) AND IT HAS BEEN HELD BY THE SPECIAL BENCH THAT THE DEEMED DIVIDEND CAN BE ASSESSED IN THE HANDS OF THE SHARE HOLDERS ONLY AND NOT IN THE HANDS OF THE BORROWING CONCERNS. IN THE CASE OF MOHAMMED ALI & BROS (SUPRA), THIS BENCH OF THE TRIBUNAL HAS FOLLOWED THE DECISION RENDERED BY THE SPECIAL BENCH AND THE SAME IS BINDING IN THE INSTANT CASE ALSO. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE SHARES IN THE COMPANY KO THANDARAM ROLLERS FLOUR MILLS PVT LTD., ARE HELD BY THE PARTNERS OF THE ASSESSEE FIRM IN THEIR INDIVIDUAL CAPACITY. IN THE CASE OF N K MOHAMMED ALI & BROS (SUPRA), THIS BENCH OF THE TRIBUNAL HAS ALREADY EXPRESSED THE VIEW , BY FOLLOWING THE DECISION OF T HE SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR LABORATORIES P LTD (SUPRA ) THAT DEEMED DIVIDEND IS LIABLE TO BE ASSESSED IN THE HANDS OF THE SHAREHOLDERS ONLY. WE NOTICE THAT THE LD CIT(A) HAS DECIDED THE ISSUE UNDER CONSIDERATION BY FOLLOWING THE DECISI ON RENDERED BY THIS BENCH OF THE TRIBUNAL IN THE CASE OF MOHAMMED ALI & BROS (SUPRA). ITA NO. 485 COCH/ 2013 4 UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE DECISION OF THE LD CIT(A). 5 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH , DAY OF SEPT 2013. SD/ - SD/ - (N.R.S. GANESAN ) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 27 TH , SEPT 2013 RAJ* COPY TO: 1 APPELLANT - THE ASST COMMR OF INCOME TAX - CIRCLE 1(1), KOZHIKODE 2 RESPONDENT M/S PARISONS EXPORTS INC, CHEROTTY ROAD, KOZHIKODE 3 CIT(A) 4 CIT, KOZHIKODE 5 DR 6 GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN