Dy.Commissioner of Income Tax, Circle-16(2), Hyderabad V. M/s. My.Home Constructions Private LImited, Hyderabad

ITA 515/HYD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6228 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-12-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: D SATYANARAYANA
• Keywords: Search and seizure; Deemed dividend
• Section: 143(3); 148; 132

Judgement Text

ITA NO 515 OF 2014 MY HOME CONSTRUCTIONS P LTD HYDE RABAD PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.515/HYD/2014 (ASSESSMENT YEAR: 2007-08) DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD VS M/S. MY HOME CONSTRUCTIONS PRIVATE LTD HYDERABAD PAN: AABCM 4724 D FOR REVENUE : SMT. U. MINICHANDRAN, DR FOR ASSESSEE : SHRI D. SATYANARAYANA O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS REVENUES APPEAL FOR THE A.Y 2007-08 AGAINST THE ORDER OF THE CIT (A)-V HYDERABAD, DATED 25.11.2 013. THE ONLY GROUND OF APPEAL RAISED BY THE REVENUE IS AS UNDER: 1.THE LEARNED CIT (A) ERRED IN DIRECTING TO DELETE TH E ADDITION TOWARDS DEEMED DIVIDEND, THOUGH AT THE BEGINNING OF THE YEAR, MY HOME POWER LTD WAS NOT SHARE HOLDING COMPANY BUT RECEIVED FUNDS IN THE SHAPE OF ADVANCE PAYMENTS TOWARDS ELECTRICITY CHARGES AND REIMBURSEMENT CHARGES. THE PAYMENTS RECEIVED AS ADVANCE EXPENDITURE IS NOT FOR EXPENDITURE BUT FOR SUBSCRIPTION OF SHARES, WHICH I S WITHIN THE AMBIT OF SECTION 2(22)(E) OF THE I.T. AC T. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF CONSTRUCTION OF RESIDENTIAL/COMMERCIAL COMPLEXES AND IS ALSO INTO S HARES BUSINESS. THERE WAS A SEARCH AND SEIZURE OPERATION U/S 132 OF DATE OF HEARING : 15.12.2016 DATE OF PRONOUNCEMENT : 25.01.2017 ITA NO 515 OF 2014 MY HOME CONSTRUCTIONS P LTD HYDE RABAD PAGE 2 OF 4 THE ACT ON 7.2.2007 IN THE GROUP CASES OF MY HOME G ROUP OF INDUSTRIES LTD. THE ASSESSEE FILED ITS RETURN OF IN COME FOR THE A.Y 2007-08 ON 31.10.2007 ADMITTING A TOTAL INCOME OF RS.16,12,44,701. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE TAXABLE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.16,65,25,180. 3. SUBSEQUENTLY, THE ASSESSMENT WAS REOPENED THROUG H ISSUANCE OF NOTICE U/S 148 OF THE ACT ON 30.03.2012 AND THE ASSESSEE WAS REQUIRED TO FILE CERTAIN INFORMATION/D ETAILS. THE ASSESSEE FURNISHED THE REQUIRED DETAILS. ON PERUSAL OF THE SAME, THE AO OBSERVED THAT M/S MY HOME CONSTRUCTIONS PRIV ATE LTD (MHCPL), HYDERABAD I.E. THE ASSESSEE HEREIN, IS THE COMMON SHAREHOLDER HAVING SUBSTANTIAL INTEREST I.E. HAVING MORE THAN 20% SHAREHOLDING IN M/S MY HOME INDUSTRIES LTD (46.556% ) AND M/S MY HOME POWER LTD (44%) RESPECTIVELY AS ON 31.03.200 7. HE OBSERVED THAT M/S MHIL AS ON 30.03.2007 HAS SOLD 54 ,99,000 SHARES OF MHPL TO THE ASSESSEE HEREIN. FURTHER, ON A PERUSAL OF THE LEDGER EXTRACT OF M/S. MHPL IN THE BOOKS OF MHI L, HE NOTICED THAT DURING FINANCIAL YEAR 2006-07, MHIL HAS ADVANC ED AN AMOUNT OF RS.18,00,09,978 TO M/S MHPL. THEREFORE, H E OBSERVED THAT SINCE THE MHCPL HAS ACQUIRED 54,99,000 SHARES OF M/S. MHIL AS ON 30.03.2007, IT HAS ACQUIRED SUBSTANTIAL INTEREST I.E. MORE THAN 20% SHAREHOLDING IN M/S MHPL AND AT THE SA ME TIME, IT IS HOLDING 46.556% IN MHIL. THEREFORE, HE EXAMINE D THE APPLICATION OF THE PROVISIONS OF SECTION 2(22)(E) O F THE ACT TO THE ADVANCE GIVEN BY M/S MHIL TO M/S MHPL AS DEEMED DIV IDEND IN THE HANDS OF THE ASSESSEE. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT SHOULD NOT BE INVOKED. ITA NO 515 OF 2014 MY HOME CONSTRUCTIONS P LTD HYDE RABAD PAGE 3 OF 4 4. THE ASSESSEE SUBMITTED THAT WHEN THE ADVANCE WAS GIVEN TO THE SUBSIDIARY COMPANY I.E. MHPL, THE ASSE SSEE WAS NOT A SHAREHOLDER OF THE COMPANY AND THAT THE ASSESSEE HAS ACQUIRED THE SHARES OF THE MHPL COMPANY ONLY W.E.F. 30.03.20 07 I.E. AFTER REPAYMENT OF SUBSTANTIAL PART OF THE LOAN BY THE SU BSIDIARY COMPANY. THEREFORE, ACCORDING TO IT, THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE. HOWEVER, THE AO WAS NO T CONVINCED WITH THE ASSESSEES CONTENTIONS AND TREATED THE ADV ANCE GIVEN BY MHIL TO MHPL AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE CIT (A) WHO DELETED THE ADDITION AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED DR SUPPORTED THE ORDER OF THE AO, WH ILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON TH E ORDER OF THE CIT (A). 6. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATER IAL ON RECORD, WE FIND THAT THE ONLY ISSUE BEFORE US IS WH ETHER THE ADVANCE OF RS. 18,00,09,978/- GIVEN BY M/S. MHIL T O M/S. MHPL CAN BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. WE FIND THAT THE CIT(A) HAS CLEARLY BOUGHT OUT IN HIS ORDER THAT THE ADVANCE OF RS. 18,00,09,978/- WAS GIVEN TO MHPL IN THE RELEVANT FI NANCIAL YEAR AND FURTHER THAT DURING THE SAME PERIOD, AN AMOUNT TO THE EXTENT OF RS. 10,59,22,684 WAS REPAID BY MHPL TO MHIL LEAV ING ONLY THE BALANCE OF RS. 7,52,18,894 AS ON 29-03-2007. IT IS ALSO SEEN THAT THE ASSESSEE HAD ACQUIRED THE SHARES OF MHPL ONLY O N 29-03- 2007. THUS IT IS SEEN THAT ON THE DAY WHEN THE ADV ANCES WERE GIVEN TO MHPL BY MHIL, THE ASSESSEE WAS THE SHAREHO LDER OF MHIL BUT HAD NO INTEREST WHATSOEVER IN MHPL. WE FI ND THAT THE ITA NO 515 OF 2014 MY HOME CONSTRUCTIONS P LTD HYDE RABAD PAGE 4 OF 4 QUESTION AS TO WHETHER THE ADVANCEMENT OF THE LOAN OFS. 18,00,09,978/- TO M/S MY HOME POWER LTD, AS DEEMED DIVIDEND IN THE HANDS OF THE MHIL HAS COME UP FOR CONSIDERAT ION BEFORE THE COORDINATE BENCH OF THIS TRIBUNAL, WHEREIN IT H AS BEEN HELD THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE WHEN THE PAYMENT IS MADE TO NON SHARE HOLDER. WE F IND THAT THIS DECISION OF THE INCOME TAX APPELLATE TRIBUNAL HAS A LSO BEEN UPHELD BY THE HON'BLE ANDHRA PRADESH HIGH COURT OF VIDE ORDERS DATED 13-08-2013. THE FACTS AND CIRCUMSTANCES BEIN G SIMILAR BEFORE US, WE FIND THAT CIT(A) HAS RIGHTLY HELD TH AT THE SAID AMOUNT CANNOT BE BROUGHT TO TAX AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. THEREFORE, WE SEE NO REASON TO INTERFERE WITH THE ORDERS OF THE CIT(A). ACCORDINGLY THE REVE NUES APPEAL IS DISMISSED. 7. IN THE RESULT THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JANUARY, 2017. SD/- SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 25 TH JANUARY, 2017. VINODAN/SPS COPY TO: 1 DY.CIT, CIRCLE 16(2) ROOM NO.611, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 2 M/S. MY HOME CONSTRUCTIONS PVT LTD, 4 TH FLOOR, MY HOME JUPALLY, GREENLANDS, AMEERPET, HYDERABAD 3 CIT (A)-V HYDERABAD 4 CIT IV, HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER