ACIT, New Delhi V. M/s. C J International Hotels Ltd., New Delhi

ITA 5206/DEL/2011

• Counselvise Citation: 520620114 RSA 2011
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-07-2014
• Assessment Year: misc
• Appeal Filed On: 23-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI H.L. KARWA, BEFORE SHRI H.L. KARWA, BEFORE SHRI H.L. KARWA, BEFORE SHRI H.L. KARWA, HONBLE HONBLE HONBLE HONBLE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI B.C. MEENA, B.C. MEENA, B.C. MEENA, B.C. MEENA, HONBLE HONBLE HONBLE HONBLE ACCOUNTANT ACCOUNTANT ACCOUNTANT ACCOUNTANT MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .5204/DEL/2011, 5205/DEL/2011 & 5206/DEL/2011 5204/DEL/2011, 5205/DEL/2011 & 5206/DEL/2011 5204/DEL/2011, 5205/DEL/2011 & 5206/DEL/2011 5204/DEL/2011, 5205/DEL/2011 & 5206/DEL/2011 FINANCIAL FINANCIAL FINANCIAL FINANCIAL YEAR YEAR YEAR YEARS SS S : : : : 2000 2000 2000 2000- -- -01, 2001 01, 2001 01, 2001 01, 2001- -- -02 & 2002 02 & 2002 02 & 2002 02 & 2002- -- -03 0303 03 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -49(1), 49(1), 49(1), 49(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S C.J. INTERNATIONAL HOTELS M/S C.J. INTERNATIONAL HOTELS M/S C.J. INTERNATIONAL HOTELS M/S C.J. INTERNATIONAL HOTELS LIMITED, LIMITED, LIMITED, LIMITED, HOTEL LE MERIDIAN, HOTEL LE MERIDIAN, HOTEL LE MERIDIAN, HOTEL LE MERIDIAN, 8, WINDSOR PLACE, 8, WINDSOR PLACE, 8, WINDSOR PLACE, 8, WINDSOR PLACE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. TAN : DELCO1385G. TAN : DELCO1385G. TAN : DELCO1385G. TAN : DELCO1385G. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PARWINDER KAUR, SR.DR. RESPONDENT BY : SHRI TARANDEEP SINGH, CA. ORDER ORDER ORDER ORDER PER B.C. MEENA, AM PER B.C. MEENA, AM PER B.C. MEENA, AM PER B.C. MEENA, AM : : : : ALL THESE APPEALS OF THE REVENUE EMANATE FROM THE OR DER OF LEARNED CIT(A)-XXX, NEW DELHI DATED 26 TH SEPTEMBER, 2011. THIS IS A CONSOLIDATED ORDER FOR FY 1999-2000, 2000-01 & 2001- 02 UNDER SECTION 201(1)/201(1A) OF THE INCOME-TAX ACT, 1961. 2. THE APPELLANT M/S C.J. INTERNATIONAL HOTELS LTD. I S RUNNING A FIVE STAR HOTEL IN NEW DELHI AND DURING THE PERIOD 1999-2 000 TO 2001-02, THE ASSESSEE ADVANCED AMOUNTS TO M/S PURE DRINKS (NEW DELH I) LTD. THE ASSESSING OFFICER HELD THAT THE AMOUNTS SO ADVANCED W ERE HIT BY THE PROVISIONS OF SECTION 2(22)(E) READ WITH SECTION 194 OF THE ACT AND IT WAS HELD THAT MRS. HARJIT KAUR IS HOLDING MORE THA N 10% OF THE VOTING POWER IN ASSESSEE COMPANY INDIRECTLY THROUGH M/S PURE D RINKS (NEW DELHI) LTD. THE CIT(A) HAS HELD THAT THIS IS NOT A CA SE WHICH IS HIT BY ITA-5204 TO 5206/D/2011 2 THE PROVISIONS OF SECTION 2(22)(E) READ WITH SECTION 194 OF THE ACT. THE CIT(A) HAS ALSO HELD THAT THE PROCEEDINGS INITIATE D UNDER SECTION 201(1)/201(1A) OF THE ACT WERE BARRED BY LIMITATION IN ALL THE THREE YEARS BY FOLLOWING THE DECISION OF HON'BLE JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS. NHK JAPAN BROADCASTING CORPORATION [2008] 305 ITR 137 (DELHI) AND CIT VS. HUTCHISON ESSAR TELECOME LT D. [2010] 323 ITR 230 (DELHI). NOW, THE REVENUE IS IN APPEAL BEFO RE US BY TAKING THE FOLLOWING GROUNDS OF APPEAL:- 1. HOLDING THAT THE RELEVANT PAYMENTS COULD NOT BE TREATED AS DEEMED DIVIDEND IN VIEW OF THE FACT THAT NO INCOME ON ACCOUNT OF DEEMED DIVIDEND HAS BEEN ASSESSED IN THE HANDS OF THE RECIPIENT COMPANY. SUCH FINDING OF THE LD.CIT(A) IS INCORRECT IN LAW BECAUSE ASSESSMENT OF INCOM E IN THE HANDS OF RECIPIENT IS NOT A PRE CONDITION TO D ETERMINE THE LIABILITY OF TDS. THE LIABILITY TO DEDUCT TAX, WHICH IS ONLY A MODE OF COLLECTION ARISES ONCE THE NATURE OF PAYMENTS FULFILLS THE CONDITIONS MENTIONED IN THE REL EVANT SECTION. 2. HOLDING THAT PAYMENT TO M/S PURE DRINKS (NEW DELHI ) LTD. COULD NOT BE TREATED AS DEEMED DIVIDEND ON THE GROUND THAT THEY ARE NOT SHAREHOLDER OF THE ASSESSEE (DEDUCTOR) COMPANY IGNORING THE FACT THAT PAYMENT T O ABOVE ENTITY IS VERY MUCH COVERED IN THE DEFINITION OF DIVIDEND U/S 2(22)(E) OF I.T. ACT. 3. HOWEVER, LATER ON, THE REVENUE HAS ALSO TAKEN THE ADDITIONAL GROUND ON THE ISSUE OF LIMITATION WHICH READS AS UNDER: - ITA-5204 TO 5206/D/2011 3 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AS WE LL AS IN THE LAW, THE LD.CIT(A) HAS ERRED IN HOLDING THA T THE PROCEEDINGS U/S 201(1)/201(1A) ARE INVALID BEING BARR ED BY LIMITATION FOR ALL THREE FINANCIAL YEARS. 4. SINCE THE GROUND TAKEN ON THE LIMITATION OF PROC EEDINGS GOES TO THE ROOT OF THE CONTROVERSY AND IT IS PURELY A LEGAL GROUND, THEREFORE, AFTER HEARING BOTH THE SIDES, WE ARE ADMITTING THIS GR OUND FOR THE DECISION. 5. THE CONTROVERSY INVOLVED IN THESE APPEALS IS RELATED TO THE FINANCIAL YEAR 1999-2000 TO 2001-02. THE ORDER UNDE R SECTION 201(1)/201(1A) OF THE ACT WAS MADE ON 31.3.2011. TH E ORDER WAS MADE AFTER A LAPSE OF NINE YEARS FROM THE END OF FY 2 001-02 AND IT WAS AFTER ELEVEN YEARS FROM THE FY 1999-2000. WHEN THE ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-49, NEW DELHI INITI ATED PROCEEDINGS, THE ASSESSEE TOOK A PLEA THAT IN VIEW OF T HE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NHK JAPAN BROADCASTING CORPORATION (SUPRA), THE PROCEEDINGS HAVE GOT TIME B ARRED. THE LEARNED ADDITIONAL CIT TOOK A VIEW THAT SINCE DEPART MENT HAS GONE IN SLP AGAINST THE JUDGMENT OF HON'BLE DELHI HIGH COURT CITED SUPRA, THEREFORE, TO KEEP THE MATTER ALIVE, THE CONTENTION OF THE ASSESSEE WITH REGARD TO PROCEEDINGS BARRED BY LIMITATION WAS REJEC TED. THE CIT(A) HAS GRANTED THE RELIEF BY RELYING ON THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT (SUPRA), WHEREIN HONBLE HI GH COURT OBSERVED THAT THE PROCEEDINGS INITIATED UNDER SECTION 201(1)/ 201(1A) OF THE INCOME-TAX ACT, 1961 AFTER FOUR YEARS FROM THE END O F THE ASSESSMENT YEAR WAS BARRED BY TIME. ACCORDING TO THE HONBLE H IGH COURT, FOUR YEARS WAS A REASONABLE PERIOD FOR PASSING AN ORDER U/S 201(1)/201(1A), PARTICULARLY WHEN NO LIMITATION WAS PRESCRIBED FOR I NITIATION OF SUCH PROCEEDINGS UNDER THE INCOME-TAX ACT, 1961. IN THE INSTANT CASE ALSO, ITA-5204 TO 5206/D/2011 4 THE PROCEEDINGS UNDER SECTION 201(1)/201(1A) WERE I NITIATED AFTER A LAPSE OF NINE YEARS, THEREFORE, IN VIEW OF THE JUDGME NT OF HON'BLE JURISDICTIONAL HIGH COURT, THE ORDER PASSED BY THE ASSESSI NG OFFICER WAS CLEARLY TIME BARRED. WE, THEREFORE, AGREE WITH T HE VIEW TAKEN BY THE CIT(A). CONSEQUENTLY, WE DISMISS THIS GROUND OF REV ENUES APPEAL. 6. WITH REGARD TO MERITS OF THESE ADDITIONS, THE LEARN ED DR SUBMITTED THAT THE CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE RELEVANT PAYMENTS COULD NOT BE TREATED AS DEEMED DIVIDEND. T HE CIT(A) HAS ALSO ERRED IN HOLDING THAT PAYMENT TO M/S PURE DRINKS (NEW DELHI) LTD. COULD NOT BE TREATED AS DEEMED DIVIDEND ON THE GROUN D THAT M/S PURE DRINKS (NEW DELHI) LTD. IS NOT THE SHAREHOLDER OF THE ASSESSEE (COMPANY) IGNORING THE FACT THAT PAYMENT TO THIS ENT ITY IS VERY MUCH COVERED BY THE DEFINITION OF DIVIDEND UNDER SECTI ON 2(22)(E) OF THE ACT. 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. THE CIT( A) HAS GRANTED RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- FURTHER EVEN ON MERIT ALSO THE APPELLANT ASSESSEE HAS ALSO BEEN ABLE TO PROVE THAT THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT ARE NOT APPLICABLE IN THE PRESENT CASE IN AS MUCH AS BOTH THE CONDITIONS OF A SHAREHOLDER HOLDING 10% SHARES IN THE PAYER COMPANY AND MORE THAN 20% BENEFICIAL STAKES IN THE PAYEE ENTITY DO NOT EXIST IN THE PRESENT CASE AS CLARIFIED IN THE CHART GIVEN ABOVE . FURTHER SINCE THE PAYMENTS HAVE BEEN MADE TO STATUTOR Y AUTHORITIES FOR MEETING THE LIABILITIES OF THE PAYEE COMPANY PURE DRINKS (NEW DELHI) LTD., THE TRANSACTIONS HAVE N OT RESULTED IN ANY BENEFIT TO ANY OF THE SHAREHOLDERS OF THE COMPANY. ADMITTEDLY, IN THE CASE OF DEEMED DIVIDEND THE ITA-5204 TO 5206/D/2011 5 PROVISIONS OF SECTION 194 ARE APPLICABLE. HOWEVER, NO SUCH PROCEEDINGS HAD BEEN INITIATED IN THE NORMAL ASSESSMENT PROCEEDINGS FOR THE RELEVANT ASSTT. YEARS I.E. A.Y. 200 0-01, 2001-02 AND 2002-03 IN THE CASE OF THE COMPANY. CONSIDERING ALL THESE ISSUES SEVERALLY AND JOINTLY, I HOL D THAT IT IS NOT A CASE WHICH COULD BE SAID TO BE HIT BY THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT, MUCH LESS FOR OPERATION OF SECTION 194 OF THE I.T. ACT. 8. WE HAVE ALSO GONE THROUGH THE PAPER BOOK SUBMITTE D BY THE ASSESSEE. THE REVENUE HAS FAILED TO CONTROVERT THE FIND INGS OF CIT(A) ON THIS ISSUE. IN VIEW OF THE FACTUAL MATRIX NARRATED BY THE CIT(A) IN HIS ORDER, WE FIND NO INFIRMITY IN HIS ORDER. THE SAME I S SUSTAINED. 9. IN THE RESULT, ALL THE APPEALS OF THE REVENUE STAND DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 3 RD JULY, 2014. SD/- SD/- ( (( (H.L. KARWA H.L. KARWA H.L. KARWA H.L. KARWA) )) ) (B.C. MEENA (B.C. MEENA (B.C. MEENA (B.C. MEENA) )) ) PRESIDENT PRESIDENT PRESIDENT PRESIDENT ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED : 03.07.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : ASSISTANT ASSISTANT ASSISTANT ASSISTANT COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -49(1), NEW DELHI. 49(1), NEW DELHI. 49(1), NEW DELHI. 49(1), NEW DELHI. 2. RESPONDENT : M/S C.J. INTERNATIONAL HOTELS LIMITED, M/S C.J. INTERNATIONAL HOTELS LIMITED, M/S C.J. INTERNATIONAL HOTELS LIMITED, M/S C.J. INTERNATIONAL HOTELS LIMITED, HOTEL LE MERIDIAN, 8, WINDSOR PLACE, HOTEL LE MERIDIAN, 8, WINDSOR PLACE, HOTEL LE MERIDIAN, 8, WINDSOR PLACE, HOTEL LE MERIDIAN, 8, WINDSOR PLACE, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 001. 110 001. 110 001. 110 001. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR