TERY AIR EQUIPMENT PRIVATE LIMITED , MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX 13(3)(2), MUMBAI

ITA 5083/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8033 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 28-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S ABIRAMA KARTHIKEYAN LD
• Assessee Lawyers: RAJESH P SHAH LD
• Keywords: Question of law; Deemed dividend
• Section: 147; 143(3); 2(22)(e)

Judgement Text

ITA NO.5083/MUM/2017 TERY AIR EQUIPMENT PRIVATE LIMITED ASSESSMENT YEAR: 2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI PAWAN SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5083/MUM/2017 ( / ASSESSMENT YEAR: 2008-09) TERY AIR EQUIPMENT PVT. LTD. 416, GUNDECHA IND. COMPLEX AKURLI ROD, KANDIVALI (EAST) MUMBAI-400 101 / VS. DEPUTY COMMISSIONER OF INCOME TAX-13(3)(2) ROOM NO. 229 AAYKAR BHAVAN, M.K.ROAD 2 ND FLOOR, CHURCHGATE MUMBAI-20 ./ ./PAN/GIR NO. AABCT-9539-R ( /APPELLANT ) : ( !' / RESPONDENT ) ASSESSEE BY : RAJESH P.SHAH - LD.AR REVENUE BY : S.ABIRAMA KARTHIKEYAN, LD. DR / DATE OF HEARING : 01/01/2019 / DATE OF PRONOUNCEMENT : 02/01/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2008-09 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-21, MUMBAI [CIT(A)], APPEAL NO. CIT(A)-21/DCIT-13(3)(2)/IT-214/2016-17 DATED 29/05/2017 QUA CONFIRMATION OF CERTAIN ADDITIONS OF RS.10 LACS U/S ITA NO.5083/MUM/2017 TERY AIR EQUIPMENT PRIVATE LIMITED ASSESSMENT YEAR: 2008-09 2 2(22)(E). GROUND NUMBER-1 HAS NOT BEEN PRESSED DURI NG HEARING BEFORE US AND THEREFORE, THE SAME STAND DISMISSED IN LIMINE. 2.1 FACTS IN BRIEF ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ENTITY WAS SUBJECTED TO RE-ASSESSMENT PROCEEDINGS FOR IMPU GNED AY U/S 143(3) READ WITH SECTION 147 ON 18/03/2016 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.86.43 LACS AFTER SOLE ADDITION OF DEEMED DIVIDEND FOR RS.10 LACS U/S 2(22)(E). 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE OBTAINED LOAN OF RS.10 LACS FROM ONE OF ITS SISTER CONCERN NAMELY ALPHA PNEUMATICS PVT. LTD. IT WAS OBSERVED THAT BOTH THESE ENTITIES HAD ONE COMMON SHAREHOLDER NAMELY MR. DIERDRE DCUNHA WHO HELD MORE THAN 20% SHAREHOLDING IN BOTH THESE ENTITIES. ACCORDINGL Y, LD. AO, INVOKING THE PROVISIONS OF DEEMED DIVIDEND U/S 2(22)(E) ADDED THE SAME TO THE INCOME OF THE RECIPIENT ASSESSEE. THE LD. CIT CONFI RMED THE STAND OF LD. AO PRIMARILY BY PLACING RELIANCE ON THE DECISIO N OF HONBLE APEX COURT RENDERED IN GOPAL & SONS HUF . AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE P LACED RELIANCE ON THE DECISION OF THIS TRIBUNAL RENDERED IN ITO VS BEST CFS PRIVATE LIMITED [ITA NO. 4075/MUM/2013 DATED 05/12/2018], WHICH HAS BEEN AUTHORED BY ONE OF US, AND SUBMITTED THAT THE AFORE SAID DECISION OF HONBLE APEX COURT WAS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE LD. DR PLACED RELIANCE ON THE STAND OF LOWER AU THORITIES. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. IT IS UNDISPUTED FACT THAT THE TWO CORPO RATE ENTITIES DO NOT HOLD BENEFICIAL INTEREST IN EACH OTHER AND DO NOT HAVE A NY DIRECT SHAREHOLDING ITA NO.5083/MUM/2017 TERY AIR EQUIPMENT PRIVATE LIMITED ASSESSMENT YEAR: 2008-09 3 RATHER THESE ENTITIES HAVE ONE COMMON SHAREHOLDER H OLDING MORE THAN 20% IN EACH OF THESE ENTITIES. THE LOAN / ADVANCE I S BETWEEN THE ASSESSEE AND THE OTHER CORPORATE ENTITY. AFTER CAR EFUL CONSIDERATION, WE FIND THAT IDENTICAL ISSUE CAME FOR CONSIDERATION BE FORE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CITED ORDER, WHEREIN THE MA TTER, AFTER DUE CONSIDERATION OF APPLICABLE JUDICIAL PRONOUNCEMENTS , WAS ADJUDICATED AS UNDER: - 5. SO FAR AS THE ADDITION OF DEEMED DIVIDEND U/S 2( 22)(E) IS CONCERNED, NOTHING ON RECORD SUGGEST THAT THE ASSESSEE COMPANY WAS REG ISTERED SHAREHOLDER OR BENEFICIAL SHAREHOLDER OF THE LENDER COMPANY, IN AN Y MANNER. THE FACT THAT EMERGES ARE THAT BOTH THE ENTITIES I.E. LENDER AND THE ASSE SSEE COMPANY HAS CERTAIN INDIVIDUALS SHAREHOLDERS WHO HOLD THRESHOLD SHAREHO LDING IN THE TWO ENTITIES WITHIN THE MEANING OF SECTION 2(22)(E). HOWEVER, THE ASSES SEE ITSELF DOES NOT HOLD ANY SHAREHOLDING IN THE LENDER COMPANY EITHER AS REGIST ERED SHAREHOLDER OR AS A BENEFICIAL SHAREHOLDER. THIS BEING THE CASE, THE RA TIO OF DECISION OF SPECIAL BENCH OF MUMBAI TRIBUNAL RENDERED IN ACIT VS BHAUMIK COLOR ( P) LTD. [118 ITD 1] AS RELIED UPON BY FIRST APPELLATE AUTHORITY BECOMES SQUARELY APPLICABLE. FURTHER, WE FIND THAT AFORESAID RATIO HAS ALREADY ATTAINED FINALITY IN TH E WAKE OF DECISION OF HONBLE APEX COURT RENDERED IN CIT VS. MADHUR HOUSING & DEVELOPM ENT CO. [2017-TIOL-398-SC- IT] WHICH HAS UPHELD THE VIEW OF HONBLE DELHI HIGH COURT RENDERED IN CIT VS. ANKITECH P. LTD. [11 TAXMANN.COM 100] WHICH HAS AFF IRMED THE AFORESAID VIEW OF THE SPECIAL BENCH OF THE TRIBUNAL THAT SECTION 2(22)(E) DOES NOT EXTEND THE MEANING OF THE TERM SHAREHOLDERS AND THAT THE LOAN SO GRANTE D COULD NOT BE TAXED AS DIVIDEND INCOME IN THE HANDS OF THE RECIPIENT COMPANY WHO WA S NOT THE SHAREHOLDER OF THE LENDER COMPANY. 6. THE DECISION OF HONBLE APEX COURT RENDERED IN G OPAL SONS & HUF VS CIT [2017-TIOL-02-SC-IT] AS RELIED UPON BY REVENUE HAS DULY BEEN CONSIDERED BY HONBLE MADRAS HIGH COURT IN ITS DECISION RENDERED IN CIT VS. ENNORE CARGO CONTAINER TERMINAL PRIVATE LIMITED [2017-TIOL-695-S C-MAD-IT] WHEREIN HONBLE COURT HAS DISTINGUISHED THE SAME BY OBSERVING AS UN DER:- 4.2 THE REVENUE SEEKS TO ASSESS AS INCOME THE CAPI TAL ADVANCE RECEIVED BY THE ASSESSEE-COMPANY FROM INDEV LOGISTICS PVT. LTD. ON THE GROUND THAT IT IS DEEMED DIVIDEND RECEIVED BY THE ASSESSEE-COMPANY FO R THE BENEFIT OF THE REGISTERED SHAREHOLDER. FOR THIS PURPOSE, THE PROVI SIONS OF SECTION 2(22)(E) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IS SO UGHT TO BE RELIED UPON. THE TRIBUNAL HAS REJECTED THE SAID CONTENTION OF THE RE VENUE, PRINCIPALLY, ON THE GROUND THAT DEEMED DIVIDEND CAN ONLY BE ASSESSED IN THE HANDS OF THE REGISTERED SHAREHOLDER FOR WHOSE BENEFIT THE MONEY WAS ADVANCED. 4.3 AS INDICATED ABOVE, THERE IS NO DISPUTE THAT T HE ASSESSEE DID RECEIVE CAPITAL ADVANCE FROM INDEV LOGISTICS PVT. LTD. THERE IS ALS O NO DISPUTE THAT THERE ARE COMMON SHAREHOLDERS BOTH IN THE ASSESSEE-COMPANY AN D INDEV LOGISTICS PVT. LTD. THEREFORE, QUITE CORRECTLY, AS NOTED BY T HE TRIBUNAL, THOUGH, THE ITA NO.5083/MUM/2017 TERY AIR EQUIPMENT PRIVATE LIMITED ASSESSMENT YEAR: 2008-09 4 ADVANCE RECEIVED BY THE ASSESSEE COMPANY MAY HAVE B EEN FOR THE BENEFIT OF THE AFOREMENTIONED REGISTERED SHAREHOLDERS, IT COUL D ONLY BE ASSESSED IN THE HANDS OF THOSE REGISTERED SHAREHOLDERS AND NOT IN T HE HANDS OF THE ASSESSEE- COMPANY. 4.4 IN OUR VIEW, ON A PLAIN READING OF THE PROVISI ONS OF SECTION 2 (22)(E) OF THE ACT, NO OTHER CONCLUSION CAN BE REACHED. AS A MATTE R OF FACT, A DIVISION BENCH OF THIS COURT, IN THE CASE OF COMMISSIONER OF INCOME TAX V. PRINTWAVE SERVICES P. LTD., (2015) 373 ITR 665 (MAD.) , HAS REACHED A SOMEWHAT SIMILAR CONCLUSION. 5. MR. SENTHIL KUMAR, HOWEVER, CONTENDS TO THE CON TRARY AND RELIES UPON THE JUDGMENT OF THE SUPREME COURT IN GOPAL AND SONS (HU F) V. COMMISSIONER OF INCOME-TAX, KOLKATA-XI, (2017) 77 TAXMANN.COM 71 (S C) . 5.1 IN OUR VIEW, THE QUESTION OF LAW CONSIDERED BY THE SUPREME COURT IN THE CASE OF GOPAL AND SONS (SUPRA) WAS DIFFERENT FROM THE IS SUE WHICH ARISES IN THE PRESENT MATTER. THE QUESTION OF LAW WHICH THE SUPRE ME COURT WAS CALLED UPON TO CONSIDER WAS WHETHER LOANS AND ADVANCES REC EIVED BY A HUF COULD BE DEEMED AS A DIVIDEND WITHIN THE MEANING OF SECTI ON 2(22)(E) OF THE ACT. THE ASSESSEE IN THAT CASE WAS THE HUF AND THE PAYME NT IN QUESTION WAS MADE TO THE HUF. THE SHARES WERE HELD BY THE KARTA OF THE HUF. IT IS IN THIS CONTEXT THAT THE SUPREME COURT CAME TO THE CONCLUSI ON THAT HUF WAS THE BENEFICIAL SHAREHOLDER. 5.2 IN THE INSTANT CASE, HOWEVER, BOTH THE REGISTE RED AND BENEFICIAL SHAREHOLDERS ARE TWO INDIVIDUALS AND NOT THE ASSESSEE-COMPANY. T HEREFORE, IN OUR VIEW, THE JUDGMENT OF THE SUPREME COURT DOES NOT RULE ON THE ISSUE WHICH HAS COME UP FOR CONSIDERATION IN THE INSTANT MATTER.' UPON DUE CONSIDERATION OF FACTUAL MATRIX, WE FIND T HAT THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF GOPAL AND SONS (HUF) ( SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE SINCE THE ASSESSEE, IN TH AT CASE, WAS A HUF ENTITY AND THE ISSUE WAS AS TO WHETHER THE LOANS AND ADVANCES RECE IVED BY THE HINDU UNDIVIDED FAMILY [HUF] COULD BE TREATED AS 'DEEMED DIVIDEND' WITHIN THE MEANING OF SEC. 2(22)(E) OF THE ACT. NOTABLY, IN THE CASE BEFORE TH E HON'BLE SUPREME COURT, THE PAYMENT WAS MADE BY THE COMPANY TO THE HUF AND THE SHARES IN THE COMPANY WERE HELD BY THE KARTA OF THE HUF. IT IS IN THIS CO NTEXT THAT THE HON'BLE SUPREME COURT UPHELD THE ADDITION IN THE HANDS OF THE HUF A S FACTUALLY THE HUF WAS THE BENEFICIAL SHAREHOLDER. THE FACT-SITUATION IN THE C ASE BEFORE US STANDS ON AN ENTIRELY DIFFERENT FOOTING INASMUCH AS THE ASSESSEE-RECIPIEN T OF MONEY IS NEITHER THE REGISTERED NOR THE BENEFICIAL SHAREHOLDER OF THE LE NDER COMPANY. THEREFORE, THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F GOPAL AND SONS (HUF) (SUPRA) IS INAPPLICABLE TO THE FACTS OF THE PRESENT CASE WH ICH HAS ALSO BEEN NOTED BY HONBLE MADRAS HIGH COURT IN THEIR OBSERVATIONS AS EXTRACTE D ABOVE. 7. CONSIDERING THE ABOVE, THE VIEW TAKEN BY FIRST A PPELLATE AUTHORITY IS IN CONSONANCE WITH SETTLED JUDICIAL PROPOSITION OF LAW AND THEREFORE, REQUIRES NO INTERFERENCE ON OUR PART. ITA NO.5083/MUM/2017 TERY AIR EQUIPMENT PRIVATE LIMITED ASSESSMENT YEAR: 2008-09 5 FACTS AND CIRCUMSTANCES BEING IDENTICAL, TAKING SAM E VIEW, WE HOLD THAT THE IMPUGNED ADDITION COULD NOT BE SUSTAINED AS DEE MED DIVIDEND U/S 2(22)(E). WE ORDER SO. 5. RESULTANTLY, THE APPEAL STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND JANUARY, 2019. SD/- SD/- (PAWAN SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02/01/2019 SR.PS:- JAISY VARGHESE !'#' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. ) ( ) / THE CIT(A) 4. ) / CIT CONCERNED 5. * +!$, , , , / DR, ITAT, MUMBAI 6. + -. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI