ITO 4(1)(1), MUMBAI V. SHREEPATI COMMODITIES P. LTD, MUMBAI

ITA 5022/MUM/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6746 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 21-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 02-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B JAYA KUMAR
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 5022/MUM/2009 ASSESSMENT YEAR: 2006-07 INCOME-TAX OFFICER-4(1)(1), . APPELLANT 6 TH FLOOR, R.NO. 636, AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020. VS. M/S SHREEPATI COMMODITIES, RESPONDENT 4 TH FLOOR, MEHTA MAHAL 15, MATHEWS ROAD, OPERA HOUSE, MUMBAI 400 004 APPELLANT BY : MR. B. JAYA KUMAR REVENUE BY : MR. HIRO RAI ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)-IV, MUMBAI, PASSED ON 05/06/2009 FOR THE ASS ESSMENT YEAR 2006-07. 2. GROUND NO. 1 IS DIRECTED AGAINST THE ACTION OF T HE CIT(A) IN DELETING THE ADDITION OF RS. 4,13,20,000/- U/S 2(22 (E) OF THE ACT. 3. BRIEFLY STATED THE FACTS RELATING TO RAISE THIS GROUND ARE THAT THE ASSESSEE IS A COMPANY IN WHICH SHRI P.K. KEDIA AND SMT. KUSUMLATA KEDIA INDIVIDUALLY POSSESSED MORE THAN 20% OF EQUIT Y HOLDING WITH VOTING RIGHTS AND BENEFICIAL OWNERSHIP. SHRI P.K. K EDIA AND SMT. KUSUMLATA KEDIA INDIVIDUALLY POSSESSED MORE THAN 20 % OF EQUITY HOLDING WITH VOTING RIGHTS AND BENEFICIAL OWNERSHIP IN M/S INDO UNUQIE PVT. LTD. AND M/S SHREEPATI HOLDINGS & FINAN CE PVT. LTD. SHRI P.K. KEDIA AND SMT. KUSUMLATA KEDIA INDIVIDUALLY PO SSESSED MORE THAN 20% OF EQUITY HOLDING WITH VOTING RIGHTS AND B ENEFICIAL ITA NO. 5022/M/2009 M/S SHREEPATI COMMODITIES 2 OWNERSHIP IN THE DONOR COMPANIES. THE AO OBSERVED T HAT THE DONORS WERE RELATED PARTY IN WHICH THE SHAREHOLDERS OF THE ASSESSEE HELD MORE THAN 20% BENEFICIAL OWNERSHIP AND VOTING RIGHT S THROUGH EQUITY SHARES. THUS, THE LOAN HAD BEEN ADVANCED TO ASSESSE E WHICH IS A CONCERN IN WHICH SHAREHOLDERS OF M/S INDO UNIQUE PV T. LTD. AND M/S SHREEPATHI HOLDINGS & FINANCE PVT. LTD. HOLDING MOR E THAN 10% EQUITY SHARES I.E. SHRI P.K. KEDIA OR SMT. KUSUMLAT A KEDIA INDIVIDUALLY ARE SUBSTANTIALLY INTERESTED AS THEY I NDIVIDUALLY ARE THE BENEFICIAL OWNER OF EQUITY SHARES CARRYING NOT LESS THAN 20% OF THE VOTING POWER, NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN P ROFITS. THUS, THE AO HELD THAT THE LOAN TAKEN BY THE ASSESSEE FROM M/S I NDO UNIQUE PVT. LTD. AND M/S SHREEPATHI HOLDINGS & FINANCE PVT. LTD . ATTRACTS THE PROVISIONS OF SUB-CLAUSE E OF CLAUSE 2(22) OF THE ACT. THEREFORE, THE AO CALCULATED THE DEEMED DIVIDEND U/S 2(22)(E) FROM M/S INDO UNIQUE TRADING PVT. LTD. RS. 1,78,00,000/- AND FROM M/S SH REEPATI HOLDINGS & FINANCE PVT. LTD. RS. 2,35,20,000/-, TOTALING TO RS. 4,13,20,000/-. ON APPEAL, THE CIT(A) DELETED THE ADDITION OBSERVIN G AS UNDER:- 1.4 I HAVE GONE THROUGH THE ORDER OF THE AO AND SUB MISSIONS OF THE APPELLANT. (I) LOOKING INTO THE ACCOUNTS OF M/S INDO UNIQUE TR ADING PVT. LTD. AS QUOTED AT PAGE 2 OF THE ASSESSMENT ORDER, IT CAN NOT BE SAID THAT THE TRANSACTIONS HAS TAKEN PLACE IN THE REGULA R COURSE OF BUSINESS AND THE FACTS OF THE PRESENT YEAR ARE NOT IDENTICAL TO ASSESSMENT YEAR 2005-06. THE SPECIAL BENCH JUDGMENT IN CASE OF BHUMIKA COLOUR (P) LTD. ITA NO. 5030/MUM/04 DATED 1 9/11/08, HOWEVER, APPLIES WHICH STATES THAT DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHA REHOLDER OF THE LENDING COMPANY AND NOT IN THE HANDS OF A PERSO N OTHER THAN A SHARE HOLDER, MR. P.K. KEDIA AND MRS. KUSUMLATA KEDIA ARE HOLDING 50.6% AND 49.4% OF SHARES OF THE APPELLANT COMPANY AND M/Z INDO UNIQUE PVT. LTD IS NOT A SHAREHOLDER IN TH E APPELLANT COMPANY. THE AOS OF THE SHAREHOLDERS MAY EXAMINE APPLICABILITY OF PROVISIONS OF SECTION 2(22)(E) IN THEIR RESPECTIVE HANDS BUT THE PROVISIONS OF SECTION 2(22)(E) IS NOT APPLICABLE IN CASE OF THE APPELLANT AS M/S INDO UNIQUE PVT. LTD. IS NOT A SHAREHOLDER IN THE APPELLANT COMPANY. (II) THE FACTS REGARDING M/S SHREEPATI HOLDINGS & F INANCE P. LTD. ARE IDENTICAL TO THE FACTS OF ASSESSMENT YEAR 2005- 06. THIS ISSUE ITA NO. 5022/M/2009 M/S SHREEPATI COMMODITIES 3 WAS EXAMINED IN DETAIL IN COURSE OF APPEAL PROCEEDI NGS IN APPELLANTS CASE FOR AY 05-06 IN THE ORDER DATED 15 /12/08 FROM PARA 4, PAGE 6 TO PARA 4.19, PAGE 18 OF THE APPEAL ORDER. AS THE TRANSACTIONS WERE IN THE REGULAR COURSE OF BUSINESS AND TRANSFER OF MONEY HAS TAKEN PLACE NOT BY WAY OF ADVANCE LOAN , THE PROVISIONS OF SECTION 2(22)(E) IS NOT ATTRACTED. 4. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LEARNED REPRESENTATIVES OF THE PA RTIES AGREED THAT THE ISSUE UNDER CONSIDERATION IS COVERED BY THE DEC ISION OF THE ITAT IN ASSESSEES OWN CASE FOR AY 2005-06(REVENUES APPEAL ) IN ITA NO. 1487/MUM/2009 VIDE ORDER DATED 22 ND MARCH, 2011( A COPY THE SAME IS FILED ON RECORD) WHEREIN THE ITAT HELD AS UNDER: - 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS AND PERUSED THE RECORD. APART FROM THE FACT THAT THE PA RTIES ARE NOT REGISTERED SHARE-HOLDERS AND THEREFORE, PROVISIONS OF SECTION 2(22)(E) IS NOT ATTRACTED, THE LEARNED COUNSEL, APP EARING ON BEHALF OF THE ASSESSEE, RELIED UPON THE FINDINGS OF THE LE ARNED CIT(A) WHEREIN IT WAS STATED THAT TRANSFER OF MONEY WAS IN THE REGULAR COURSE OF BUSINESS. THEREFORE, IT CANNOT BE TREATED AS A LOAN OR ADVANCE SO AS TO FALL WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE ACT. SINCE THE LEARNED DR WAS NOT ABLE TO CONTROVER T THE FINDINGS OF THE LEARNED CIT(A), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY THE LEARNED CIT(A) AND THEREFOR E AFFIRM THE ORDER OF THE FIRST APPELLATE AUTHORITY AND DISMISS THE APPEAL FILED BY THE REVENUE. 6. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALL Y IDENTICAL TO THAT OF THE AY 2005-06, WE RESPECTFULLY THE DECISIO N OF THE ITAT IN THAT YEAR AND IN THE LIGHT OF THAT WE UPHOLD THE OR DER OF THE CIT(A) IN DELETING THE ADDITION RS. 4,13,20,000/- MADE BY THE AO U/S 2(22)(E) AND DISMISS THE GROUND RAISED BY THE REVENUE. 7. GROUND NO. 2 IS DIRECTED AGAINST THE DISALLOWANC E OF RS. 13,45,308/- MADE U/S 40(A)(IA) OF THE ACT. 8. THE AO HELD THAT THE PAYMENT MADE ON ACCOUNT OF TRANSACTION CHARGES, LEASE LINE CHARGES, BOLT CHARGES, VSAT CHA RGES BY WHATEVER ITA NO. 5022/M/2009 M/S SHREEPATI COMMODITIES 4 NAME CALLED ARE TECHNICAL SERVICES FALLING WITHIN T HE PURVIEW OF SECTION 194J AND WERE, THEREFORE, LIABLE FOR DEDUCT ION OF TAX. THEREFORE, THE AO MADE ADDITION OF RS. 13,45,308/- U/S 40(A)(IA) OF THE ACT, PAID BY THE ASSESSEE TO MCX & NCDEX CHARGE S. ON APPEAL, THE CIT(A) HELD THAT THE CHARGES OF RS. 13,45,308/- WERE PAID TO MCX AND NCDEX FOR VSAT, LEASE LINE CHARGES AND TRANSACT IONS CHARGES ETC. AND THEY WERE SIMILAR TO SUCH CHARGES LEVIED BY BSE AND NSE. FOLLOWING THE DECISION IN THE CASE OF KOTAK SECURIT IES LTD., THE CIT(A) DELETED THE ADDITION OF RS. 13,45,308/- MADE BY THE AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 9. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THIS ISSUE IS COVE RED BY THE DECISION OF THE ITAT, MUMBAI BENCHES IN THE CASE OF KOTAK S ECURITIES LTD., VS. ACIT [2008] 25 SOT 440/ [2009] 124 TTJ (MUMBAI) 241 , WHEREIN IT WAS HELD THAT .. TRANSACTION FEE PAID CANNOT BE SAID TO BE A FEE PAID IN CONSIDERATION OF THE STOCK EXCHANGE RENDERI NG ANY TECHNICAL SERVICES TO THE ASSESSEE. THE PROVISION OF SECTION 194J ARE THEREFORE NOT ATTRACTED. THEREFORE, THERE WAS NO OBLIGATION O N THE PART OF THE ASESSSEE TO DEDUCT TAX AT SOURCE. CONSEQUENTLY, THE PROVISIONS OF SECTION 40(A)(IA) WERE ALSO NOT ATTRACTED AND THERE FORE THE DISALLOWANCE MADE IS DIRECTED TO BE DELETED. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS COUNT AND DISMISS THE GROUND RAISED BY THE REVENUE. 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 22 ND DAY OF JULY, 2011. SD/- SD/- (R.S. SYAL) (V. DUR GA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 22 ND JULY, 2011 KV ITA NO. 5022/M/2009 M/S SHREEPATI COMMODITIES 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, E BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.