DCIT 2(2)(2), MUMBAI V. PERFECT ENGINEERING ASSOCIATES P.LTD, MUMBAI

ITA 5019/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4858 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 21-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HARI S RAHEJA
• Keywords: Share purchase agreement; Deemed dividend
• Section: 2; 142(1); 2(22)(e)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C , MUMBAI . , , , BEFORE SHRI G. MANJUNATHA, ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER, ITA NO.5019/MUM/2017 ASSESSMENT YEAR: 2014-15 DCIT-2(2)(2), ROOM NO.545, 5 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400020 / VS. M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD. MEHAR HOUSE, 15, CAWASJI PATEL STREET, FORT, MUMBAI-400001 ( / REVENUE) ( /ASSESSEE) P.A. NO.AAACP2016Q !' # / DATE OF HEARING : 04/02/2019 ' # / DATE OF ORDER: 13/02/2019 / O R D E R PER G. MANJUNATHA (ACCOUNTANT MEMBER) THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD. CIT(APPEAL)-5, MUMBAI, DATED 10/04 /2017 AND IT !' / REVENUE BY SHRI R. SINDHU !' / ASSESSEE BY SHRI HARI S. RAHEJA 2 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . PERTAINS TO AY 2014-15. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT(A) IS RIGHT IN DELETING THE ADDITION MA DE HOLDING THAT SINCE THE ASSESSEE COMPANY IS NOT THE SHARE HO LDER IN OTHER COMPANY, PROVISION OF SEC.2(22)(E) OF THE ACT CANNOT BE INVOKED RELYING ON THE DECISION OF THE HONBLE BOMB AY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE, 324 ITR 26 3 (BOM.) AND BHAUMIK COLOURS 313 ITR 146 (BOM.) IGNORING THE FACT THAT THE SHAREHOLDERS OF THE ASSESSEE COMPANY HOLDI NG MORE THAN 20% SHARE HOLDING ARE THE MAJOR SHARE HOLDER O F M/S SHIVSMRUTI INVESTMENT & SERVICES PVT. LTD. 2. THE BRIEF, FACTS OF THE CASE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF TAKING CONTRACT FOR WATE R PIPELINES WITH PUMPING MACHINERIES INCLUDING LAYING, JOINTING , INSTALLATION, ERECTION AND COMMISSIONING OF THE PROJECTS. THE ASS ESSEE HAD FILED RETURN OF INCOME FOR THE AY 2014-15 ON 30/09/ 2014, DECLARING TOTAL INCOME OF RS.98,55,870/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 1 43(2) AND 142(1) OF THE ACT, WERE ISSUED. IN RESPONSE TO THE NOTICES, THE LD. AUTHORISED REPRESENTATIVE (IN SHORT AR) OF THE AS SESSEE APPEARED FROM TIME TO TIME AND FILED VARIOUS DETAIL S AS CALLED FOR. DURING THE ASSESSMENT PROCEEDINGS, THE LD. ASSESSIN G OFFICER NOTICED THAT THE ASSESSEE HAD TAKEN LOAN OF RS.66,0 8,535/- FROM M/S SHIVSMRUTI INVESTMENT & SERVICES PVT. LTD. THE LD. AO FURTHER OBSERVED THAT M/S SHIVSMRUTI INVESTMENT & S ERVICES PVT. 3 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . LTD. WAS HAVING RESERVES AND SURPLUS IN EXCESS OF LOANS TAKEN BY THE ASSESSEE. IT WAS FURTHER NOTICED THAT THE TWO C OMMON DIRECTORS HOLDING 46% OF SHARES IN M/S SHIVSMRUTI INVESTMENT & SERVICES PVT. LTD. AND IN M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD., THEREFORE, CALLED UPON THE ASSESSEE AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961 SHA LL NOT INVOKED TO TAX LOAN TAKEN FROM THE ABOVE COMPANY AS THE DEE MED DIVIDEND. IN RESPONSE, THE ASSESSEE HAS STATED THA T IN ORDER TO APPLY THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT , THERE SHOULD BE REGISTERED AND BENEFICIAL INTEREST IN THE COMPANY. THE ASSESSEE HAS TAKEN LOAN FROM ANOTHER COMPANY WHERE COMMON DI RECTORS ARE INVOLVED, THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, CANNOT BE APPLIED. THE ASSESSEE HAS RELIED UPO N THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNI VERSAL MEDICARE 324 ITR 263 (BOM.). THE LD. AO, AFTER CONS IDERING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AND SUBMI SSIONS OF THE ASSESSEE, HELD THAT THE STATUTORY FICTION OF DEEMED DIVIDEND ARISING AT THE TIME OF GIVING LOAN BY THE COMPANY W ILL BE ACTIVE AT THE MOMENT THE LOAN IS GIVEN TO ANY CONCERN IN WHIC H SHAREHOLDERS ARE MEMBERS OR PARTNERS AND IN WHICH T HERE HAS BEEN SUBSTANTIAL INTEREST. ACCORDINGLY, THE LOAN T AKEN BY THE 4 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . ASSESSEE COMPANY, FROM M/S SHIVSMRUTI INVESTMENT & SERVICES PVT. LTD. HAS BEEN CONSIDERED AS DEEMED DIVIDEND U NDER THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE LD. AO, THE ASSES SEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A), IT WAS ARGUED THAT PROVISIONS OF SECTION 2(22)(E) O F THE ACT, CANNOT BE INVOKED AS THE ASSESSEE IS NEITHER THE SHAREHOLD ER NOR DOES IT HAVE ANY BENEFICIAL INTEREST IN THE SHARES OF M/S S HIVSMRUTI INVESTMENT & SERVICES PVT. LTD. THE ASSESSEE HAS R ELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS IMPACT CONTAINERS PVT. LTD. (BOM.). THE LD. CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND ALS O FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF UNIVERSAL MEDICARE 324 ITR 263 (BOM.) AND BHAUMIK C OLOURS 313 ITR 146(BOM.) HELD THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN ANOTHER COMPANY AND HENCE PROVISIONS OF SECTION 2(22)(E) OF THE ACT, CANNOT BE INVOKED. ACCORDINGLY , THE ADDITION MADE BY THE LD. AO TOWARDS LOAN TAKEN FROM M/S SHIV SMRUTI INVESTMENT & SERVICES PVT. LTD. U/S 2(22)(E) OF THE HAS BEEN 5 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . DELETED. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 4. THE LD. DR SUBMITTED THAT THE LD. CIT(A) WAS ER RED IN DELETING THE ADDITION MADE BY THE AO TOWARDS LOAN U NDER SECTION 2(22)(E) OF THE ACT, WITHOUT APPRECIATING SAME THAT THE SHAREHOLDERS OF THE ASSESSEE COMPANY HOLDING MORE T HAN 20% SHAREHOLDING ARE THE MAJOR SHAREHOLDER OF M/S SHIVS MRUTI INVESTMENT & SERVICES PVT. LTD.. 5. THE LD. AR, ON THE OTHER HAND, SUBMITTED THAT I N ORDER TO INVOKE PROVISIONS OF SECTION 2(22)(E) OF THE ACT , THERE SHOULD BE BENEFICIAL OWNERSHIP OF THE SHARES BY ANY PERSON BU T IN THIS CASE, SHARES ARE HELD BY THE COMPANY, THEREFORE, PROVISIO NS OF SECTION 2(22)(E) OF THE ACT CANNOT BE INVOKED TO TAX LOANS AND ADVANCES AS DEEMED DIVIDEND. THE LD. AR FOR THE ASSESSEE FUR THER SUBMITTED THAT THE B BENCH OF THE ITAT MUMBAI, I N THE CASE OF M/S NEHA HOME BUILDERS PVT. LTD. VS DCIT HAS CONSID ERED THE IDENTICAL ISSUE IN THE LIGHT OF THE PROVISIONS OF S ECTION 2(22)(E) OF THE ACT, AND ALSO BY CONSIDERING THE LATEST JUDGEME NT OF HONBLE SUPREME COURT IN THE CASE OF GOPAL & SONS (HUF) (20 17) 77 TAXMANN.COM 71(SC) HELD THAT IN RESPECT OF LOAN, TH E ASSESSEE 6 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . WAS NEITHER THE BENEFICIAL SHAREHOLDER NOR THE REGI STERED SHAREHOLDER OF THE ASSESSEE COMPANY, THE AMOUNT SO RECEIVED IS NOT LIABLE TO TAX AS DEEMED DIVIDEND. THE LD. CIT(A ), AFTER CONSIDERING THE SUBMISSIONS OF BOTH SIDES, HAS RIGH TLY DELETED AND HIS ORDER SHOULD BE UPHELD. 6. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MAT ERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDER OF T HE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT, IN THE LIGHT OF VARIOUS JUDICIAL PRECED ENCE CITED BY BOTH PARTIES. IT IS AN ADMITTED FACT THAT THE ASSESSEE H AS TAKEN LOAN FROM ANOTHER COMPANY WHERE TWO COMMON DIRECTORS HEL D MORE THAN 46% EQUITY SHARES. THE AO HAS CONSIDERED LOAN TAKEN FROM M/S SHIVSMRUTI INVESTMENT & SERVICES PVT. LTD. WITH IN THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ON THE GR OUND THAT AS PER PROVISIONS OF SECTION 2(22)(E) OF THE ACT, ANY LOAN S AND ADVANCES FROM A COMPANY WHERE A PERSON HELD MORE THAN 20% BE NEFICIAL OWNERSHIP IN THE SAID COMPANY, THEN THE LOANS AND A DVANCED RECEIVED FROM THAT COMPANY SHALL BE TREATED AS DEEM ED DIVIDEND TO THE EXTENT OF RESERVES AND SURPLUS OF THE LENDIN G COMPANY. IN THIS CASE, THERE IS NO DISPUTE WITH REGARD TO THE F ACT THAT AS ON 7 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . DATE OF LOAN, THE COMPANY I.E. M/S SHIVSMRUTI INVES TMENT & SERVICES PVT. LTD. IS HAVING RESERVES AND SURPLUS I N EXCESS OF LOANS AND ADVANCES GIVEN TO THE ASSESSEE COMPANY. T HE ONLY DISPUTE IS WHETHER THE SAID LOANS AND ADVANCES SHAL L BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2( 22)(E) OF THE ACT, WHEN RECIPIENT COMPANY WAS NEITHER BENEFICIAL NOR REGISTERED OWNER OF SHARES IN OTHER COMPANY. ADMITTEDLY, THE A SSESSEE IS NOT THE BENEFICIAL OWNERSHIP IN THE LENDING COMPANY , BUT TWO COMMON SHAREHOLDERS ARE OWNED MORE THAN 40% EQUITY SHARES IN THE ABOVE COMPANY. WHEN THE ASSESSEE IS NEITHER BE NEFICIAL NOR REGISTERED IN LENDING COMPANY, THEN LOANS AND ADVAN CES RECEIVED FROM THE SAID COMPANY CANNOT BE BROUGHT TO TAX WITH IN THE AMBIT OF PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THIS LEGAL PROPOSITION HAS BEEN LAID DOWN BY THE HONBLE BOMBAY COURT IN T HE CASE OF CIT VS IMPACT CONTAINERS PVT. LTD. (BOM.), WHERE TH E HONBLE HIGH COURT BY FOLLOWING ITS EARLIER DECISION IN THE CASE OF UNIVERSAL MEDICARE 324 ITR 263 (BOM.) (324 ITR 263) (BOM) AND BHAUMIK COLOURS (313 ITR 146)(BOM.) HELD THAT WHEN THE RECIPIENT OF THE LOAN WAS NOT A SHAREHOLDER IN ANY OF THE ENTITIES WHICH HAVE ADVANCED LOANS AND ADVANCE, THEN THE ADD ITION IS REQUIRED TO BE DELETED. THIS LEGAL PROPOSITION IS F URTHER SUPPORTED 8 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . BY THE DECISION OF THE JURISDICTIONAL ITAT, MUMBAI, B BENCH IN THE CASE OF M/S NEHA HOME BUILDERS PVT. LTD. VS DCI T (ITA NO.3157/MUM/2018), WHERE THE CO-ORDINATE BENCH, AFT ER CONSIDERING THE VARIOUS CASE LAWS, INCLUDING THE DE CISION OF THE HONBLE SUPREME COURT IN THE CASE OF GOPAL & SONS ( HUF) (2017) 77 TAXMANN.COM 71(SC) HELD THAT SINCE ASSESSEE WAS NEITHER THE BENEFICIAL NOR THE REGISTERED SHAREHOLDER OF THE CO MPANY, THE AMOUNT SO RECEIVED IS NOT LIABLE TO BE TAXED AS DEE MED DIVIDEND. THE RELEVANT OBSERVATION OF THE TRIBUNAL IS AS UNDE R:- 18. NOW WE DEAL WITH THE DECISIONS RELIED BY THE C IT(A) FOR HOLDING THAT AMOUNT RECEIVED BY THE ASSESSEE IS LIABLE TO BE TAX ED AS DEEMED DIVIDEND. 19. IN THE CASE OF GOPAL AND SONS (HUF) V/S CIT [20 17] 77 TAXMANN.COM 71 SC, THE ASSESSEE IS A HINDU UNDIVIDED FAMILY (HU F). DURING THE PREVIOUS YEAR, THE ASSESSEE HAD RECEIVED CERTAIN AD VANCES FROM ONE M/S. G.S. FERTILIZERS (P) LTD. (HEREINAFTER REFERRE D TO AS THE 'COMPANY'). THE COMPANY IS THE MANUFACTURER AND DISTRIBUTOR OF VARIOUS GRADES OF NPK FERTILIZERS AND OTHER AGRICULTURAL INPUTS. IN T HE AUDIT REPORT AND ANNUAL RETURN FOR THE RELEVANT PERIOD, WHICH WAS FI LED BY IT BEFORE THE REGISTRAR OF COMPANIES (ROC), IT WAS FOUND THAT THE SUBSCRIBED SHARE CAPITAL OF THE SAID COMPANY WAS RS. 1,05,75,000/- ( LE., 10,57,500 SHARES OF RS. 10/- EACH). OUT OF THIS, 3,92,500 NUMBER OF SHARES WERE SUBSCRIBED BY THE ASSESSEE WHICH REPRESENTED 37.12% OF THE TOTAL SHAREHOLDING OF THE COMPANY. FROM THIS FACT, THE AO CONCLUDED THAT THE ASSESSEE WAS BOTH THE REGISTERED SHAREHOLDER OF THE COMPANY AND ALSO THE BENEFICIAL OWNER OF SHARES, AS IT WAS HOLDING M ORE THAN 10% OF VOTING POWER. ON THIS BASIS, AFTER NOTICING THAT THE AUDIT ED ACCOUNTS OF THE COMPANY WAS SHOWING A BALANCE OF RS. 1,20,10,988/- AS 'RESERVE & SURPLUS' AS ON 31ST MARCH, 2006, THIS AMOUNT WAS IN CLUDED IN THE INCOME OF THE ASSESSEE AS DEEMED DIVIDEND. 20. IT IS ALSO FOUND AS A FACT, FROM THE AUDITED AN NUAL RETURN OF THE COMPANY FILED WITH ROC THAT THE MONEY TOWARDS SHARE HOLDING IN THE COMPANY WAS GIVEN BY THE ASSESSEE / HUF. THOUGH, TH E SHARE CERTIFICATES WERE ISSUED IN THE NAME OF THE KARTA, SHRI GOPAL KUMAR 9 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . SANEI, BUT IN THE ANNUAL RETURNS, IT IS THE HUF WHI CH WAS SHOWN AS REGISTERED AND BENEFICIAL SHAREHOLDER. IN ANY CASE, IT CANNOT BE DOUBTED THAT IT IS THE BENEFICIAL SHAREHOLDER. EVEN IF WE P RESUME THAT IT IS NOT A REGISTERED SHAREHOLDER, AS PER THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT, ONCE THE PAYMENT IS RECEIVED BY THE HUF AND SH AREHOLDER (MR. SANEI, KARTA, IN THIS CASE) IS A MEMBER OF THE SAID HUF AND HE HAS SUBSTANTIAL INTEREST IN THE HUF, THE PAYMENT MADE T O THE HUF SHALL CONSTITUTE DEEMED DIVIDEND WITHIN THE MEANING OF CL AUSE (E) OF SECTION 2(22) OF THE ACT. 21. IT IS CLEAR FROM THE ABOVE ORDER THAT ALL THE P ARTIES HAVE CLEARLY HELD THAT HUF WAS REAL BENEFICIAL OWNER OF THE COMPANY, ACCORDINGLY AMOUNT SO RECEIVED WAS CORRECTLY HELD TO BE DEEMED DIVIDEN D. HOWEVER, IN THE PRESENT CASE ASSESSEE NEITHER A REGISTERED NOR BENE FICIAL SHARE HOLDER OF EIPL WHICH IS NOT DISPUTED BY THE REVENUE AUTHORITY . HENCE, DECISION OF GOPAL AND SONS HUF WILL NOT APPLY IN PRESENT CASE. BUT IT SUPPORTS THE CONTENTION OF ASSESSEE THAT .ADDITION CANNOT BE MAD E IN ASSESSEES HAND BECAUSE NHBPL IS NOT A BENEFICIAL SHAREHOLDER OF EI PL. 22. IN THE CASE OF NATIONAL TRAVEL SERVICES [2018] 89 TAXMANN.COM 332 (SC), THE ASSESSES IS A PARTNERSHIP FIRM CONSISTING OF THREE PARTNERS, NAMELY, MR. NARESH GOYAL, MR. SURINDER GOYAL AND M/ S JET ENTERPRISES PRIVATE LIMITED HAVING A PROFIT SHARING RATIO OF 35 %, 15% AND 50% RESPECTIVELY. THE ASSESSEE FIRM HAD TAKEN A LOAN OF RS.28,52,41,516/- FROM M/S JETAIR PRIVATE LIMITED, NEW DELHI. IN THIS COMPANY, THE ASSESSEE SUBSCRIBED TO THE EQUITY CAPITAL OF THE AF ORESAID COMPANY IN THE NAME OF TWO OF ITS PARTNERS, NAMELY, MR. NARESH GOYAL AND MR. SURINDER GOYAL TOTALING 48.19 PER CENT OF THE TOTAL SHAREHOLDING. THUS MR. NARESH GOYAL AND MR. SURINDER GOYAL ARE SHAREHOLDER S ON THE COMPANY'S REGISTER AS MEMBERS OF THE COMPANY. THEY HOLD THE AFORESAID SHARES FOR AND ON BEHALF OF THE FIRM, WHI CH HAPPENS TO BE THE BENEFICIAL SHAREHOLDER. 23. HOWEVER, IN THE PRESENT CASE ASSESSEE IS NEITHE R REGISTERED SHAREHOLDER NOR BENEFICIAL SHAREHOLDER OF EIPL. 24. NATIONAL TRAVEL CASE NEITHER ANY DECISION WAS R ENDERED NOR WAS ANY STAY ON APPLICABILITY OF DECISION OF HON'BLE SUPREM E COURT IN CASE OF CIT VS. ANKITECH P. LTD. IN CIVIL APPEAL NO.3961 OF 201 3 GIVEN. IN THAT CASE MATTER WAS ONLY REFERRED TO LARGER BENCH FOR RECONS IDERATION AND NOTHING HAS BEEN DECIDED YET. HENCE, TILL DATE LARGER BENCH NOT DECIDED THE CASE, THE EARLIER LAW WILL HOLD GOOD AND BE IN OPER ATION AND BINDING ON ALL COURTS AND TRIBUNAL THROUGHOUT; THE TERRITORY OF IN DIA. AS PER ARTICLE 141 OF THE CONSTITUTION OF INDIA WHICH LAYS DOWN THAT THE \ LAW DECLARED BY THE SUPREME COURT SHALL BE BINDING ON ALL COURTS THROUG HOUT THE TERRITORY OF INDIA. EARLIER IN CASE OF CIT VS. ANKITECH P. LTD. IN CIVIL APPEAL NO.3961 OF 2013 HON'BLE SUPREME COURT LAY DOWN THE LAW THAT FOR ATTRACTING SECTION 2(22)(E) SHAREHOLDER NEEDS TO BE REGISTERED AND BENEFICIAL SHARE HOLDER. IN THE PRESENT CASE IT IS A SETTLED FACT TH AT THE ASSESSEE IS NEITHER A REGISTERED NOR A BENEFICIAL SHAREHOLDER. THUS WIT H NO STRETCH OF 10 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . IMAGINATION THE ASSESSEE CAN BE COVERED UNDER THE D EFINITION OF SECTION 2(22)(2) I.E., DEEMED DIVIDEND. 25. THE SIMILAR ISSUE WAS COME BEFORE THE HONBLE KERALA HIGH COURT IN CASE OF CIT V/S SETTLEMENT COMMISSION (IT & WT) (20 09) 176 TAXMAN 421 (KERALA) WHERE THE HONBLE HIGH COURT HELD AS U NDER:- IN THIS CASE, THE SETTLEMENT COMMISSION HAS REJECT ED EXT. P2 ON THE GROUND THAT THE ISSUE RAISED IS A DEBATABLE ISS UE. BUT, I FEEL THAT WHEN THERE IS A DECISION OF THE APEX COURT, NO INFERIOR COURT OR TRIBUNAL CAN SAY THAT THE ISSUE IS A DEBATABLE I SSUE FOR THE REASON THAT A BENCH OF TWO JUDGES OF THE APEX COURT HAS DOUBTED THE CORRECTNESS OF THE DECISION OF THE CONSTITUTION BENCH. EVEN ASSUMING THERE IS A FINAL JUDGMENT OF A TWO JUDGES BENCH OF THE APEX COURT, THE SAME HAS TO BE IGNORED AND INFERIOR COURTS AND TRIBUNALS ARE BOUND TO FOLLOW THE DECISION OF THE C ONSTITUTION BENCH IN VIEW OF THE LAW RELATING TO PRECEDENTS AND ALSO ARTICLE 741 OF THE CONSTITUTION OF INDIA. SO, THE REJECTION OF EXT. P2 APPLICATION IS UNJUSTIFIED. 26. IN VIEW OF THE ABOVE, THE DECISION OF THE HONB LE SUPREME COURT AS ON TODAY ESTABLISHED BINDING. UNDER ARTICLE 141 OF THE CONSTITUTION, RATIO OF DECISION OF THE HONBLE SUPREME COURT AND PRINCI PLE UNDERLYING DECISION IS BINDING. IT IS MOST CRUCIAL TO NOTE THA T IN THAT CASE MATTER WAS REFERRED TO RECONSIDER THE EARLIER DECISION WITH TH EIR OBSERVATION THAT FOR APPLYING DEEMED DIVIDEND PROVISION IT IS SUFFICIENT IF THE SHAREHOLDER IS BENEFICIAL SHAREHOLDER. IT NEED NOT BE NECESSARY TH AT SHAREHOLDER MUST BE REGISTERED SHAREHOLDER. BECAUSE AS PER EARLIER D ECISION FOR APPLYING DEEMED DIVIDEND SHAREHOLDER MUST SATISFY BOTH CHARA CTER OF SHAREHOLDER I.E. REGISTERED AS WELL AS BENEFICIAL SHAREHOLDER. THUS, AS PER OBSERVATION OF THIS DECISION ALSO SHAREHOLDER NEEDS TO BE BENEFICIAL SHAREHOLDER. IF THE SHAREHOLDER IS NOT A BENEFICIAL SHAREHOLDER THEN AS PER THIS OBSERVATION ALSO PROVISIONS OF DEEMED DIVI DEND WILL NOT APPLY. HENCE, ALL THE DECISION SUPPORTS THE CONTENTION OF ASSESSEE THAT DEEMED DIVIDED CANNOT BE APPLY IN ASSESSEES HAND AS IT IS NEITHER REGISTERED NOR BENEFICIAL SHAREHOLDER OF EIPL. 27. IN VIEW OF THE ABOVE DISCUSSION, WE CAN SAFELY CONCLUDE THAT SINCE ASSESSEE WAS NEITHER THE BENEFICIAL NOR THE REGISTE RED SHAREHOLDER OF THE COMPANY, THE AMOUNT SO RECEIVED IS NOT LIABLE TO BE TAXED AS DEEMED DIVIDEND. MOREOVER, THE TRANSACTION BETWEEN TWO GRO UP CONCERNS WERE IN THE NATURE OF CURRENT ACCOUNT AND INTER BANKING ACC OUNT CONTAINING BOTH TYPES OF ENTRIES I.E., RECEIPTS AND PAYMENTS, THE S AME CANNOT BE BROUGHT IN THE PURVIEW OF LOANS AND ADVANCES SO AS TO ATTRA CT SECTION 2(22)(E). 7. IN THIS VIEW OF THE MATTER AND RESPECTFULLY FOLL OWING THE RATIOS OF THE CASE LAWS DISCUSSED HEREINABOVE, WE A RE OF THE CONSIDERED VIEW THAT THERE IS NO ERROR IN THE REASO NS RECORDED BY 11 ITA NO.5019/MUM/2017 M/S PERFECT ENGINEERING ASSOCIATES PVT. LTD . THE LD. CIT(A), WHILE DELETING THE ADDITION TOWARDS THE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. HENCE, WE ARE INC LINED TO UPHOLD THE ORDER OF THE LD. CIT(A) AND DISMISSED THE APPEA L FILED BY THE REVENUE. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2019. SD/- SD/- ( RAVISH SOOD ) ( G. MANJUNATHA ) #'$ /JUDICIAL MEMBER %'$ / ACCOUNTANT MEMBER ! MUMBAI; & DATED : 13/02/2019 F{X~{T? P.S / /. .. &#'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. '( )* / THE APPELLANT (RESPECTIVE ASSESSEE) 2. +,)* / THE RESPONDENT. 3. -- . ( '( ) / THE CIT, MUMBAI. 4. -- . / CIT(A)- , MUMBAI, 5. 0 1+2 , -'(#'23 , / DR, ITAT, MUMBAI 6. 1 45 / GUARD FILE. / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI