DCIT 3(2)(1), MUMBAI V. LAVANYA HOLDINGS & TRADING P.LTD, MUMBAI

ITA 5130/MUM/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8015 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 28-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH KUMAR LD
• Assessee Lawyers: ANUJ KISHNADWALA LD ARS
• Keywords: Gift; Capital receipt
• Section: 56; 143(3); 115JB

Judgement Text

ITA NO. 5130/MUM/2015 ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5130/MUM/2015 ( / ASSESSMENT YEAR: 2010-11) DEPUTY COMMISSIONER OF INCOME TAX - 3(2)(1) R.NO. 674, 6 TH FLOOR AAYKAR BHAWAN, M.K.ROAD MUMBAI-400 020 / VS. LAVANYA HOLDINGS & TRADING PVT. LTD. [NOW KNOWN AS RITI HOLDINGS & TRADING PVT. LTD.] 84A, MITTAL COURT,224, NARIMAN POINT MUMBAI -400 021 ./PAN : AAACL-1945-J ( /APPELLANT ) : ( ! / RESPONDENT ) ASSESSEE BY : VIJAY MEHTA & ANUJ KISHNADWALA, LD. ARS REVENUE BY : ASHISH KUMAR, LD. DR / DATE OF HEARING : 28/11/2018 / 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] 2010-11 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-8, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-8/IT-166/14-15 DATED 26/08/2015 ON FOLLOWING GROUNDS OF APPEAL: - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 5 CRO RES BEING RECEIPT WITHOUT CONSIDERATION, WITHOUT APPRECIATING THE FACT THAT T HE SAME WAS COVERED UNDER ITA NO. 5130/MUM/2015 ASSESSMENT YEAR-2010-11 2 THE AMBIT OF AND SCOPE OF 'INCOME' U/S. 2(24) OF TH E IT ACT, 1961 ESPECIALLY WHEN RECEIPT WAS FROM A GROUP COMPANY AND THE OVERA LL OBJECTIVE OF THE GROUP WAS TO DO BUSINESS AND EARN PROFITS? 2. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS . 5 CRORES WITHOUT APPRECIATING THE FACT THAT A SO-CALLED GIFT BY ONE CORPORATION TO ANOTHER CORPORATION THOUGH A GROUP COMPANY WHICH IS ALWAYS CLAIMED TO BE INDEPENDENT FOR TAX PURPOSE, IS NOTHING BUT AN INCO ME IN THE HANDS OF RECEIVING COMPANY, IN ABSENCE OF LOVE AND AFFECTION BEING THERE IN THE CASE OF COMPANIES WHOSE OBJECTIVE IS TO CARRY OUT THE BU SINESS ACTIVITIES? 3. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT THE RECEIPT OF RS. 5 CRORES IS NOT TAXABLE WHEN THE SAME WAS RECEIVED WITHOUT CORRESPONDING LI ABILITY, BEING RECURRING AND PERIODICAL IN NATURE, WHICH IS NOT SPECIFICALLY EXEMPT UNDER THE STATUTE? 4. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING ADDITION OF RS. 5 CRORES WITHOUT APPRECIATING THE FACT THAT IF SUCH INTERPRETATION WAS TO BE ACCE PTED, IT WILL LEGALIZE THE TRANSFER OF FUNDS FROM ONE COMPANY TO ANOTHER WITHO UT ANY CONSIDERATION AND WITHOUT PAYMENT OF TAXES BY THE RECIPIENT, WHICH WI LL BE AGAINST THE SCHEME LAID DOWN BY THE LEGISLATURE U/S. 2(24) OF THE IT A CT, 1961? 5. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN HOLDING THAT RECEIPTS OF RS . 5 CRORES WAS NOT TAXABLE U/S. 28(IV) OF THE IT ACT, WITHOUT APPRECIATING THE FACT THAT SAME WAS COVERED UNDER THE AMBIT AND SCOPE OF 'BENEFIT' ARISING FROM BUSINESS AS CONTAINED IN THAT SECTION?' 6. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE ID. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 5 CRO RES TO THE BOOK PROFIT U/S. 115JB OF THE IT ACT, 1961 WITHOUT APPRECIATING THE FACT THAT SUCH RECEIPT WILL HAVE TO BE TAKEN AS INCOME AND CREDITED TO THE P&L A/C AS PER CLAUSE 2(B) & 3(XII)(B) OF PART II OF SCHEDULE VI OF THE COMPANIE S ACT? THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. DE PUTY COMMISSIONER OF INCOME TAX-CIRCLE 3(2), MUMBAI [AO] IN SCRUTINY ASSESSMENT U/S 143(3) ON 26/03/2013 WHEREIN THE INC OME OF THE ASSESSEE WAS DETERMINED AT RS.551.05 LACS UNDER NOR MAL PROVISIONS AFTER SOLE ADDITION OF RS.500 LACS AS AGAINST REVIS ED RETURNED INCOME OF RS.51.05 LACS FILED BY THE ASSESSEE ON 20/03/2012. THE CORRESPONDING ADJUSTMENT OF RS.500 LACS WAS ALSO MADE WHILE ARRIV ING AT BOOK PROFITS U/S 115JB. THIS ADDITION / ADJUSTMENT OF RS.500 LAC S IS THE SUBJECT ITA NO. 5130/MUM/2015 ASSESSMENT YEAR-2010-11 3 MATTER OF THIS APPEAL. DURING IMPUGNED AY, THE ASSE SSEE BEING RESIDENT CORPORATE ENTITY WAS STATED TO BE DEALING IN FINANCIAL INSTRUMENTS. 2. DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED THA T THE ASSESSEE RECEIVED A GIFT OF RS.500 LACS FROM AN ENTITY NAMEL Y KDA ENTERPRISES PRIVATE LIMITED WHICH WAS DIRECTLY CREDITED TO CAPITAL RESERVE ACCOUNT IN THE BALANCE SHEET. DOUBTING THE GENUINENESS OF THE SAME, THE ASSESSEE WAS DIRECTED TO EXPLAIN THE SAME. THE ASSESSEE DEFE NDED THE SAME BY SUBMITTING THAT GIFT COULD BE GIVEN BY THE CORPORAT E ENTITY UNDER THE PROVISIONS OF REPEALED GIFT TAX ACT, 1958. IT WAS A LSO SUBMITTED THAT THE GIFT BEING CAPITAL RECEIPTS WERE NON-TAXABLE IN THE HANDS OF THE ASSESSEE SINCE THE PROVISIONS OF SECTION 56(2)(V) AS INSERTE D WITH EFFECT FROM 01/04/2005 WERE APPLICABLE ONLY TO GIFTS RECEIVED B Y INDIVIDUAL OR HINDU UNDIVIDED FAMILY AND NOT TO A CORPORATE ENTITY. THE ATTENTION WAS FURTHER DRAWN TO THE FACT THAT AMENDED PROVISIONS OF SECTIO N 56(2)(VIIA) AS APPLICABLE WITH EFFECT FROM 01/06/2010 RESTRICTED T HE TAXABILITY TO RECEIPT IN THE FORM OF SHARES OF A UNLISTED COMPANY WITHOUT CONSIDERATION OR WITHOUT SUFFICIENT CONSIDERATION. IT WAS ALSO SUBMI TTED THAT THE MEMORANDUM AND ARTICLES OF ASSOCIATION OF BOTH THE DONOR AS WELL AS DONE ENTITY CONTAINED PROVISIONS TO MAKE / RECEIVE GIFTS RESPECTIVELY AND THEREFORE, THERE WAS NO IMPEDIMENT TO MAKE / RECEIV E GIFTS. RELIANCE WAS PLACED ON THE DECISION OF THIS TRIBUNAL RENDERED IN THE CASE OF DONOR COMPANY FOR AY 2009-10 AS WELL AS IN THE CASE OF D.P.WORLD PRIVATE LIMITED. HOWEVER, NOT CONVINCED, LD. AO OPINED THAT THE AFOR ESAID RECEIPT WAS TAXABLE AS INCOME UNDER RESIDUARY SECTI ON 56 AND THE AFORESAID GIFTS WERE NOT IN ACCORDANCE WITH THE PRO VISIONS AND INTENT OF SECTION 56(2)(V) / (VIIA). REJECTING THE OTHER CONT ENTIONS / SUBMISSIONS, ITA NO. 5130/MUM/2015 ASSESSMENT YEAR-2010-11 4 THE AFORESAID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE WHILE ARRIVING AT INCOME UNDER NORMAL PROVISIONS AS WELL AS WHILE COMPUTING BOOK PROFITS U/S 115JB. 3. AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH S UCCESS BEFORE FIRST APPELLATE AUTHORITY WITH SUCCESS VIDE IMPUGNE D ORDER DATED 26/08/2015 WHEREIN LD. CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY RELYING UPON THE CITED DECISION OF THIS TRIBUNAL RE NDERED IN THE CASE OF DCIT VS. KDA ENTERPRISES PRIVATE LIMITED FOR AY 2009-10, ITA NO. 2662/MUM/2013 DATED 11/03/2015 RENDERED ON SIMILAR FACTS AND CIRCUMSTANCES. THE DECISION OF THE TRIBUNAL HAS ALR EADY BEEN SUMMARIZED BY LD. CIT(A) IN PARA 5.8 OF THE IMPUGNED ORDER. CONSEQUENTLY, THE ADJUSTMENT THEREOF MADE U/S 115JB WAS ALSO DELETED. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SHRI VIJAY MEHTA SUBMITTED THAT THE CITED DECISION OF THE TRIBUNAL R ENDERED IN THE CASE OF DONOR FOR AY 2009-10 HAS SUBSEQUENTLY BEEN FOLLOWED BY THIS BENCH IN THE CASE OF SAME ASSESSEE FOR AY 2010-11 A S WELL AS FOR AY 2011-12 VIDE COMMON ORDER ITA NOS. 5118-19/MUM/2015 DATED 28/02/2018. THE COPY OF THE SAME HAS BEEN PLACED ON RECORD. ALTHOUGH LD. DR SUPPORTED THE STAND OF LD. AO, HOWEVER, THE ABOVE SUBMISSIONS COULD NOT BE REBUTTED. NOTHING COULD BE BROUGHT ON RECORD TO SUGGEST THAT THE CITED DECISIONS OF THE TRIBUNAL ARE NOT AP PLICABLE TO THE FACTS OF THE CASE OR THE SAME HAS EVEN BEEN OVER-RULED BY AN Y HIGHER JUDICIAL AUTHORITY, IN ANY MANNER. THE REVENUE HAS RAISED ID ENTICAL WORDED GROUNDS OF APPEAL. THEREFORE, RESPECTFULLY MAINTAIN ING JUDICIAL DISCIPLINE AND FOLLOWING THE BINDING JUDICIAL PRECEDENTS IN TH E SHAPE OF MULTIPLE ITA NO. 5130/MUM/2015 ASSESSMENT YEAR-2010-11 5 DECISIONS OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL , TAKING THE SAME VIEW, WE DISMISS THE APPEAL. IN OTHER WORDS, THE STAND OF FIRST APPELLATE AUTHORITY GETS CONFIRMED. 5. IN NUTSHELL, THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/01/2019. SD/- SD/- (MAHAVIR SINGH) (M ANOJ 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