DCIT 10(3), MUMBAI V. PLUSHTECH FABRICATOR P. LTD, NAVI MUMBAI

ITA 5099/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84050 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 08-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: DR P DANIEL
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH C, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 5099/MUM/2013 ASSESSMENT YEAR: 2008-09 DCIT 10(3) R. NO. 451 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD. MUMBAI 400 020 VS. M/S. PLUSTECH FABRICATORS PVT. LTD. 214, J. K. CHAMBERS. PLOT NO. 76 SECTOR- 17, VASHI, NAVI MUMBAI PAN: AAACP 6612 Q (APPELLANT) (RESPON DENT) ASSESSEE BY : DR. P. DANIEL REVENUE BY : SHRI NEIL PHILIP DATE OF HEARING : 03 . 11 . 2014 DATE OF PRONOUNCEMENT : 03 . 1 1 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGA INST THE ORDER DATED 05.04.2003 PASSED BY THE LD.CIT(A) -22, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) (II) FOR THE A.Y. 2008 -09, ON THE FOLLOWING GROUNDS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.50,8 6,949/- U/S 2(22)(E) OF THE ACT IGNORING THE PROVISIONS OF SECT ION 2(22)(E) OF THE ACT. 2. THE ASSESSEE IS A COMPANY WHO HAS TAKEN ADVANCES AND UNSECURED LOANS OF RS.50,86,949/- FROM M/S. PLUS TE CH ENGINEERING PVT. ITA NO. 5099/MUM/2013 M/S. PLUSTECH FABRICATORS PVT. LTD ASSESSMENT YEAR: 2008-09 2 LTD., A COMPANY WHICH WAS ALSO ENGAGED IN SIMILAR K IND OF BUSINESS. THE AO NOTED THAT, SINCE THE ASSESSEE COMPANY HAD COMMO N SHAREHOLDERS HAVING BENEFICIAL INTEREST, OF MORE THAN 20%, THER EFORE, THE PROVISION OF 2(22)(E) ARE SQUARELY APPLICABLE. BEFORE THE ASSESS ING OFFICER, ASSESSEE SUBMITTED THAT THE LOAN TRANSACTION BETWEEN THE TWO SISTER CONCERNS WERE UNDER TAKEN DURING NORMAL COURSE OF BUSINESS A ND THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN OTHER COMPANY OR VI CE VERSA AND THEREFORE PROVISIONS OF 2(22)(E) ARE NOT APPLICABLE . HOWEVER, THE ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTIO N ON THE GROUND THAT, ISSUE HAS NOT ATTAINED FINALITY THAT NO DEEMED DIVI DEND PROVISIONS UNDER SECTION 2(22)(E) ARE APPLICABLE EVEN WHEN ASSESSEE IS NOT A SHAREHOLDER IN OTHER COMPANY. ACCORDINGLY HE TREATED THE AMOUNT OF RS.50,86,949/- AS DEEMED DIVIDEND U/S 2(22)(E) AS IT WAS SUFFICIEN T THAT THERE WERE COMMON SHAREHOLDERS HAVING INTEREST OF MORE THAN 20 %. 3. THE LD.CIT(A) DELETED THE SAID ADDITION AFTER RE LYING UPON A DECISION OF SPECIAL BENCH OF ITAT IN THE CASE OF AC IT VS. M/S. BHAUMIK COLOUR PVT. LTD. REPORTED IN 313 ITR (AT) 146 (AB) AND BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE P. LTD REPORTED IN 324 ITR 263 (BOM) AFTER OBSERVING AND HOLDING AS UNDER: - WITH REGARD TO THE DEEMED DIVIDEND, THE APPELLANT SUBMITTED THAT THE ASSESSEE HAD A RUNNING ACCOUNT WITH ITS SI STER CONCERN. THE AO. ASKED FOR EXPLANATION REGARDING DEEMED DIVI DEND. THE ASSESSEE SUBMITTED FIRST OF ALL IT IS A MUTUAL OPEN AND CLOSE CURRENT ACCOUNT WHICH WOULD NOT COME WITHIN THE PUR VIEW OF LOAN ACCOUNT. IN VIEW OF THE SPECIAL BENCH DECISION OF THE HON'BLE ITAT IN THE CASE OF ACIT V. BHAUMIK COLOUR P. LTD. REPORTED IN 313 ITR(A T) 146 (S8) WHICH HELD THAT ' LOAN ACCOUNT BETWEEN TWO SISTER CONCERNS CANNOT BE TAXED IN THE HANDS OF THE RECIPIENTS AS THE ASSESSEE COMPANY IS NOT A SHAREHO LDER IN THE OTHER COMPANY.' THE SAID DECISION OF THE TRIBUNAL I S APPROVED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVER SAL MEDICARE P. LTD. REPORTED IN 324 ITR 263 (80M). RELIANCE IS ALSO PLACED ON ITA NO. 5099/MUM/2013 M/S. PLUSTECH FABRICATORS PVT. LTD ASSESSMENT YEAR: 2008-09 3 THE DECISION OF THE BOMBAY TRIBUNAL IN THE CASE OF M/S. SHRUTI PROPERTIES PVT. LTD. VS. ITO, REPORTED IN (2010) R (TRIB.) 186 (MUMBAI). HENCE, THE ISSUE HAVE BEEN SETTLED BY THE BOMBAY COURT, IT IS A LAW OF THE LAND TILL IT IS REVERSED BY THE SUPREME COURT THEIR ARGUMENTS WERE ALSO ADVANCED. THE SAME WERE NOT CONSIDERED BUT MERELY STATED THAT THIS ISSUE HAS NO T ATTAINED FINALITY. IN VIEW OF THIS POSITION IT IS PRAYED THA T THE ADDITION MADE MAY PLEASE BE DELETED. 9.2 AS THE APPELLANT'S CASE IS COVERED IN VIEW OF T HE SPECIAL BENCH DECISION OF THE HON'BLE ITAT IN THE CASE OF A CIT V. BHAUMIK COLOUR P. LTD. REPORTED IN (AT) 146 (SB) AN D APPROVED BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE P. LTD. REPORTED IN 324 ITR 263 (BOM), ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND AMOUNTI NG TO S.50,86,949/- IS HEREBY DELETED. THIS GROUND OF APP EAL IS ALLOWED. 4. IT HAS BEEN ADMITTED BY BOTH THE PARTIES BEFORE US, THAT THIS ISSUE STANDS COVERED BY VARIOUS DECISIONS OF THE JURISDIC TIONAL HIGH COURT. LEARNED COUNSEL POINTED OUT THAT IN THE LATEST DECI SION BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. IMPACT CON TAINERS PVT. LTD. AND OTHERS REPORTED IN (2014) 107 DTR (BOM) 145, TH IS PROPOSITION HAS BEEN REITERATED THAT PROVISIONS OF SECTION 2(22)(E) CANNOT BE INVOKED WHERE THE ASSESSEE COMPANY WAS NOT A SHAREHOLDER IN THE LENDING COMPANY, EVEN THOUGH DIRECTORS OF THE ASSESSEE COMP ANY WERE HOLDING MORE THAN 20% SHARES OF THE ASSESSEE COMPANY. 5. AFTER CONSIDERING THE RELEVANT FACTS OF THE CAS E AND THE ISSUE INVOLVED, WE FIND THAT THE ISSUE OF APPLICABILITY O F DEEMED DIVIDEND U/S 2(22)(E) IN THE CASES, WHERE THE ASSESSEE COMPANY I S NOT A SHAREHOLDER IN THE LENDING COMPANY HAS BEEN SETTLED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. L TD (SUPRA) AND CIT VS. IMPACT CONTAINERS PVT. LTD. (SUPRA). IN THE LAT EST DECISION, THE ITA NO. 5099/MUM/2013 M/S. PLUSTECH FABRICATORS PVT. LTD ASSESSMENT YEAR: 2008-09 4 HONBLE JURISDICTIONAL HIGH COURT HAS ANALYZED THIS ENTIRE ISSUE AFRESH AND HAS REITERATED THE PROPOSITION ON LAID DOWN IN UNIVERSAL MEDICARE PVT. LTD. (SUPRA) AND ALSO THE SPECIAL BENCH DECISI ON IN THE CASE OF BHAUMIK COLOUR PVT. LTD. (SUPRA). THUS IN VIEW OF T HE LAW AS OF NOW SETTLED BY THE HONBLE JURISDICTIONAL HIGH COURT ON THIS SCORE, WE DO NOT FIND ANY MERITS IN THE GROUND RAISED BY THE DEPARTM ENT AND ACCORDINGLY SAME IS DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . 0 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 03 RD DAY OF NOVEMBER, 2014. SD/- SD/- (SANJAY ARORA) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 03.11.2014 *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.