M/s Birendra Chandra Saha, Kolkata V. ACIT, CIR-39, KOLKATA, Kolkata

ITA 541/KOL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4568 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 22-06-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 27-03-2014
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Keywords: Revision of order; Deemed dividend; Condonation of delay
• Section: 263

Judgement Text

I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 1 OF 9 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 541 /KOL/ 2014 ASSESSMENT YEAR: 2008-2009 M/S. BIRENDRA CHANDRA SAHA,........................ ............................APPELLANT 65/1, M.D. ROAD, NIMTALLA, KOLKATA-700 006 [PAN: AACFB 7386 C] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ..................RESPONDENT CIRCLE-39, KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 APPEARANCES BY: SHRI SOUMITRA CHOUDHURY, ADVOCATE, FOR THE ASSESSEE SHRI NIRAJ KUMAR, CIT, D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : AUGUST 22, 2016 DATE OF PRONOUNCING THE ORDER : AUGUST 26, 2016 O R D E R PER SHRI K. NARASIMHA CHARY, J.M .: THIS APPEAL BY THE ASSESSEE IS CHALLENGING THE ORDE R DATED 25.03.2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX, KOLKA TA-XIII, KOLKATA (HEREINAFTER CALLED AS THE CIT IN SHORT) IN RESPECT OF THE ASS ESSMENT YEAR 2008-09. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN CONDUCTING MANUFACTURING INDUSTRIES AND DERIVING INCOME FROM T RADING IN STEEL TUBES. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UN DER CONSIDERATION ON 27.09.2008 DECLARING A TOTAL INCOME OF RS.10,16,470 /-. THE ASSESSING OFFICER BY WAY OF AN ORDER DATED 04.01.2010 PROCESSED THE SAME ON THE RETURNED INCOME. HOWEVER, THE CASE WAS SELECTED FOR SCRUTINY AND AFT ER FOLLOWING THE PROCEDURE AND HEARING THE ASSESSEE, THE ASSESSING OFFICER ASS ESSED THE INCOME. SUBSEQUENTLY THE LD. CIT BY WAY OF AN ORDER DATED 2 5.03.2013 ENHANCED THE I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 2 OF 9 INCOME AND ASSESSED THE SAME AT RS.1,05,87,423/-. I N THE PROCESS, THE LD. CIT ADDED DEEMED DIVIDEND TO A TUNE OF RS.95,70,953/-, WHICH WAS THE UNSECURED LOAN GIVEN BY M/S. MASCOT WOODCRAFT PVT. LTD. CHALL ENGING THE SAME, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING GROUNDS:- (1) FOR THAT ON THE FACTS OF THE CASE, THE ORDER PA SSED U/S 263 BY THE LD. CIT-XIII, KOLKATA IS COMPLETELY ARBITRARY, UNJUSTIF IED AND ILLEGAL. (2) FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT- XIII, KOLKATA WAS WRONG IN PASSING THE ORDER U/S 263 WITHOUT CONSIDER ING THE FACTS THAT THE AO HAS CONSIDERED ALL THE POINTS RAISED BY THE LD. CIT-XIII, KOLKATA IN THE NOTICE U/S 263, THEREFORE, THE ORDER PASSED BY THE LD. CIT-XIII, KOLKATA U/S 263 IS COMPLETELY ARBITRARY, UNJUSTIFIE D AND ILLEGAL. (3) FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT- XIII, KOLKATA WAS WRONG IN ADDING RS.95,70,953/- U/S 2(22)(E) AS DEEM ED DIVIDNED WHICH WAS DULY CONSIDERED BY THE AO AT THE TIME OF ASSESSMENT, THEREFORE, THE DIRECTION GIVEN BY THE LD. CIT-XIII, KOLKATA IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. (4) FOR THAT ON THE FACTS OF THE CASE, THE LD. CIT- XIII, KOLKATA WAS WRONG IN NOT CONSIDERING THE FACT THAT THE ACCOMMOD ATION OF RS.95,70,953/- AS RECEIVED FROM THE GROUP COMPANIES PURELY ON BANKING COMPULSIONS AND BUSINESS ISSUES WHICH WAS D ULY CONSIDERED BY THE AO AT THE TIME OF ASSESSMENT, THEREFORE, THE DIRECTION GIVEN BY THE LD. CIT-XIII, KOLKATA IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. (5) FOR THAT ON THE FACTS OF THE CASE, THE APPELLAN T RESERVE THE RIGHT TO ADDUCE ANY FURTHER GROUND OR GROUNDS IF NECESSARY, ON OR BEFORE THE HEARING OF THE APPEAL. 3. THERE WAS A DELAY OF 303 DAYS ON THE PART OF THE ASSESSEE IN FILING THIS APPEAL BEFORE THE TRIBUNAL AND ACCORDING TO THE ASS ESSEE, AS SOON AS THE ORDER UNDER SECTION 263 OF THE ACT WAS PASSED, THE ASSESS EE APPROACHED ONE SHRI P.K. SARKAR, FCA ON THE LEGAL ASPECTS, BUT SINCE THE SAI D CHARTERED ACCOUNTANT WAS NOT VERY CONVERSANT WITH THE INCOME TAX APPELLATE TRIBU NAL, HE COULD NOT ADVISE THE ASSESSEE PROPERLY. FURTHER, THE CONTENTION OF THE A SSESSEE IS THAT SMT. KAMALA SAHA, PARTNER OF THE ASSESSEE-FIRM, WAS SUFFERING F ROM TUMOR IN UTERUS AND ARTHRITIS AND WAS ADMITTED IN HOSPITAL FOR OPERATIO N, AS SUCH SHE WAS UNABLE TO I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 3 OF 9 WORK FOR A CONSIDERABLE LONG TIME. HOWEVER, SUBSEQU ENTLY SHE ENGAGED ONE MR. BALARAM SARDAR, ADVOCATE, WHO ADVISED HER TO FILE T HIS APPEAL BUT BY THAT TIME, A DELAY OF 303 DAYS OCCURRED. 4. WE HAVE HEARD THE LD. A.R. AND LD. D.R. ON THIS ASPECT. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF THI S TRIBUNAL IN THE CASE OF SHRI ANUPAM BISWAS, KOLKATA VS.- ITO, KOLKATA IN ITA NO . 2198/KOL/2014 DELIVERED ON 09.12.2015 AND ALSO ANOTHER DECISION IN THE CASE OF M/S. FIBRE BOX COMPANY (SINCE DISSOLVED) VS.- ITO IN ITA NO. 1301 & 983/K OL/2008 DELIVERED ON 24.12.2008. THE LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT THESE TWO DECISIONS WERE RENDERED CONDONING THE DELAY ON IDENTICALLY SI TUATED FACTS. ON THE OTHER HAND, THE LD. D.R. SUBMITTED THAT THE ASSESSEE IS A PARTNERSHIP FIRM AND THE PARTNERS OTHER THAN THE ONE, WHO SWORN THE AFFIDAVI T COULD HAVE PURSUED THE MATTER DILIGENTLY AS SUCH THE MEDICAL EXIGENCY OF O NE PARTNER WILL NOT GIVE ANY BENEFIT TO OTHER PARTNER. ON THIS PREMISE, THE LD. D.R. PRAYED NOT TO CONDONE THE DELAY. 5. WE HAVE PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN SO FAR AS THE SWORN STATEMENT OF THE DEPONENT TO THE EFFECT THAT THEIR FORMER COUNSEL, I.E. MR. P.K. SARKAR, FCA, COULD NOT GIVE PROPER GUIDANCE DU E TO HIS LACK OF KNOWLEDGE WITH THE MATTER RELATING TO THE INCOME TAX APPELLAT E TRIBUNAL, AND AFTER ENGAGING MR. BALARAM SARDAR, DEPONENT, SMT. KAMALA SAHA, PAR TNER OF THE ASSESSEE-FIRM, HAD FALLEN SICK DUE TO TUMOR IN UTERUS AND ARTHRITI S AND WAS ADMITTED IN HOSPITAL AND AS SUCH, THE DELAY OCCURRED, IS CONCERNED ABSOL UTELY THERE IS NO DISPUTE AS TO THE CORRECTNESS OF THIS STATEMENT. IN ABOVE CITED D ECISION, INCOMPETENCY OF THE CHARTERED ACCOUNTANT IN GIVING PROPER ADVICE WAS CO NSIDERED AS SUFFICIENT CAUSE. HONBLE SUPREME COURT IN THE CASE OF COLLECTOR LAND ACQUISITION VS.- MST. KATIJI & OTHERS REPORTED IN 1987 AIR 1353 LAID DOWN THE FOLLOWING GUIDELINES FOR EVALUATING THE APPLICATION S FOR CONDONATION OF SUCH DELAY:- I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 4 OF 9 GUIDELINES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF COLLECTOR LAND ACQUISITION VS.- KAT IJI & OTHERS : THE LEGISLATURE HAS CONFERRED THE POWER TO CONDONE DELAY BY ENACTING SECTION 5 OF THE INDIAN LIMITATION ACT OF 1963 IN O RDER TO ENABLE THE COURTS TO DO SUBSTANTIAL JUSTICE TO PARTIES BY DISP OSING OF MATTERS ON 'MERITS'. THE EXPRESSION 'SUFFICIENT CAUSE' EMPLOYE D BY THE LEGISLATURE IS ADEQUATELY ELASTIC TO ENABLE THE COURTS TO APPLY TH E LAW IN A MEANINGFUL MANNER WHICH SUBSERVES THE ENDS OF JUSTICE -THAT BE ING THE LIFE-PURPOSE FOR THE EXISTENCE OF THE INSTITUTION OF COURTS. IT IS C OMMON KNOWLEDGE THAT THIS COURT HAS BEEN MAKING A JUSTIFIABLY LIBERAL APPROAC H IN MATTERS INSTITUTED IN THIS COURT. BUT THE MESSAGE DOES NOT APPEAR TO H AVE PERCOLATED DOWN TO ALL THE OTHER COURTS IN THE HIERARCHY. AND SUCH A L IBERAL APPROACH IS ADOPTED ON PRINCIPLE AS IT IS REALIZED THAT:- 'ANY APPEAL OR ANY APPLICATION, OTHER THAN AN APPLICATION UNDER ANY OF THE PROVISIONS OF ORDER XX I OF THE CODE OF CIVIL PROCEDURE, 1908, MAY BE ADMITTED AFTER THE PRESCRIBED PERIOD IF THE APPELLA NT OR THE APPLICANT SATISFIES THE COURT THAT HE HAD SUFFICIENT CAUSE FOR NOT PREFERRING THE APPEAL OR MAKING THE APPLICATION WITHIN SUCH PERIOD. 1. ORDINARILY A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING AN APPEAL LATE. 2. REFUSING TO CONDONE DELAY CAN RESULT IN A MERITO RIOUS MATTER BEING THROWN OUT AT THE VERY THRESHOLD AND CAUSE OF JUSTI CE BEING DEFEATED. AS AGAINST THIS WHEN DELAY IS CONDONED THE HIGHEST THA T CAN HAPPEN IS THAT A CAUSE WOULD BE DECIDED ON MERITS AFTER HEARING TH E PARTIES. 3. 'EVERY DAY'S DELAY MUST BE EXPLAINED' DOES NOT M EAN THAT A PEDANTIC APPROACH SHOULD BE MADE. WHY NOT EVERY HOUR'S DELAY , EVERY SECOND'S DELAY? THE DOCTRINE MUST BE APPLIED IN A RATIONAL C OMMON SENSE PRAGMATIC MANNER. 4. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERA TIONS ARE PITTED AGAINST EACH OTHER, CAUSE OF SUBSTANTIAL JUSTICE DE SERVES TO BE PREFERRED FOR THE OTHER SIDE CANNOT CLAIM TO HAVE VESTED RIGH T IN INJUSTICE BEING DONE BECAUSE OF A NON-DELIBERATE DELAY. 5. THERE IS NO PRESUMPTION THAT DELAY IS OCCASIONED DELIBERATELY, OR ON ACCOUNT OF CULPABLE NEGLIGENCE, OR ON ACCOUNT OF MA LA FIDES. A LITIGANT DOES NOT STAND TO BENEFIT BY RESORTING TO DELAY. IN FACT HE RUNS A SERIOUS RISK. 6. IT MUST BE GRASPED THAT JUDICIARY IS RESPECTED N OT ON ACCOUNT OF ITS POWER TO LEGALIZE INJUSTICE ON TECHNICAL GROUNDS BU T BECAUSE IT IS CAPABLE OF REMOVING INJUSTICE AND IS EXPECTED TO DO SO. I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 5 OF 9 6. HONBLE CALCUTTA HIGH COURT IN THE CASE OF INDIA N OIL CORPORATION LIMITED VS.- CEGAT & OTHERS 2002 (104) ECR 609 LAI D DOWN THE FOLLOWING GUIDELINES:- 11. RULES OF LIMITATION ARE NOT MEANT TO DESTROY T HE RIGHTS OF PARTIES. THEY ARE MEANT TO SEE THAT PARTIES DO NOT RESORT TO DILATORY TACTICS, BUT SEEK THEIR REMEDY PROMPTLY. THE OBJECT OF PROVIDING A LEGAL REMEDY IS TO REPAIR THE DAMAGE CAUSED BY REASON OF LEGAL INJURY. THE LAW OF LIMITATION FIXES A LIFE SPAN FOR SUCH LEGAL REMEDY FOR THE REDRESS OF THE LEGAL INJURY SO SUFFERED. TIME IS PRECIOUS AND WAST ED TIME WOULD NEVER REVISIT. DURING THE EFFLUX OF TIME, NEWER CAUSES WO ULD SPROUT UP NECESSITATING NEWER PERSONS TO SEEK LEGAL REMEDY BY APPROACHING THE COURTS. SO A LIFESPAN MUST BE FIXED FOR EACH REMEDY . UNENDING PERIOD FOR LAUNCHING THE REMEDY MAY LEAD TO UNENDING UNCERTAIN TY AND CONSEQUENTIAL ANARCHY. THE LAW OF LIMITATION IS THU S FOUNDED ON PUBLIC POLICY. IT IS ENSHRINED IN THE MAXIM 'INTEREST REIP UBLICAE UP SIT FINISLITIUM' (IT IS FOR THE GENERAL WELFARE THAT A PERIOD BE PUT TO LITIGATION). RULES OF LIMITATION ARE NOT MEANT TO D ESTROY THE RIGHTS OF THE PARTIES. THEY ARE MEANT TO SEE THAT PARTIES DO NOT RESORT TO DILATORY TACTICS BUT SEEK THEIR REMEDY PROMPTLY. THE IDEA IS THAT EVERY LEGAL REMEDY MUST BE KEPT ALIVE FOR A LEGISLATIVELY FIXED PERIOD OF TIME. 12. A COURT KNOWS THAT REFUSAL TO CONDONE DELAY WOU LD RESULT IN FORECLOSING A SUITOR FROM PUTTING FORTH HIS CAUSE. THERE IS NO PRESUMPTION THAT DELAY IN APPROACHING THE COURT IS ALWAYS DELIBERATE. THIS COURT HAS HELD THAT THE WORDS 'SUFFICIENT CAUS E' UNDER SECTION 5 OF THE LIMITATION ACT SHOULD RECEIVE A LIBERAL CONSTIT UTION SO AS TO ADVANCE SUBSTANTIAL JUSTICE VIDE SHAKUNTALA DEVI JAIN V. KU NTAL KUMARI AND STATE OF W.B. V. ADMINISTRATOR, HOWRAH MUNICIPALITY. 13. IT MUST BE REMEMBERED THAT IN EVERY CASE OF DEL AY, THERE CAN BE SOME LAPSE ON THE PART OF THE LITIGANT CONCERNED. THAT A LONE IS NOT ENOUGH TO TURN DOWN HIS PLEA AND TO SHUT THE DOOR AGAINST HIM . IF THE EXPLANATION DOES NOT SMACK OF MALA FIDES OR IT IS NOT PUT FORTH AS PART OF A DILATORY STRATEGY, THE COURT MUST SHOW UTMOST CONSIDERATION TO THE SUITOR. BUT WHEN THERE IS REASONABLE GROUND TO THINK THAT THE D ELAY WAS OCCASIONED BY THE PARTY DELIBERATELY TO GAIN TIME, THEN THE CO URT SHOULD LEAN AGAINST ACCEPTANCE OF THE EXPLANATION. WHILE CONDON ING THE DELAY, THE COURT SHOULD NOT FORGET THE OPPOSITE PARTY ALTOGETH ER. IT MUST BE BORNE IN MIND THAT HE IS A LOSER AND HE TOO WOULD HAVE IN CURRED QUITE LARGE LITIGATION EXPENSES. IT WOULD BE A SALUTARY GUIDELI NE THAT WHEN COURTS CONDONE THE DELAY DUE TO LATCHES ON THE PART OF THE APPLICANT, THE COURT SHALL COMPENSATE THE OPPOSITE PARTY FOR HIS LOSS . 7. AS COULD BE SEEN FROM THE FACTS OF THE PRESENT C ASE, THE ASSESSEE DOES NOT STAND TO GAIN BY FILING THIS APPEAL WITH A DELAY OF 303 DAYS. AT THE SAME TIME, NO RIGHTS ARE CRYSTALLIZED IN FAVOUR OF THE REVENUE BY AFFLUX OF TIME. IN OUR CONSIDERED OPINION, THE HIGH EST THAT WOULD HAPPEN I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 6 OF 9 BY CONDONING THE DELAY IS THAT A CAUSE WOULD BE DEC IDED ON MERITS AFTER HEARING THE PARTIES. WITH THIS VIEW OF THE MATTER, WE HOLD THAT NON- CONDONATION OF DELAY WOULD AMOUNT TO PREFERRING TEC HNICAL CONSIDERATION, AS ENVISAGED THE POSSIBILITY OF RENDERING JUSTICE O N THE MERITS OF THE CASE. THEREFORE, DELAY IS TO BE CONDONED AND WE CONDONE T HE SAME. 8. NOW COMING TO THE MERITS OF THE CASE, CHALLENGE IS ONLY IN RESPECT OF THE ADDITION MADE BY THE LD. CIT UNDER SECTION 263 ORDE R TO A TUNE OF RS.95,70,953/-. ACCORDING TO THE LD. CIT, THE UNSECURED LOAN ADVANC ED BY M/S. MASCOT WOODCRAFT PVT. LIMITED IS HIT BY SECTION 2(22)(E) OF THE ACT AND IT SHALL BE DEEMED AS DIVIDEND. THE REASON GIVEN BY THE LD. CIT IS THAT T HE TWO PARTNERS OF THE ASSESSEE- FIRM, NAMELY MRS. KAMALA SAHA AND MR. ASIM KUMAR SA HA MONDAL, WERE HOLDING 60% AND 40% OF SHARES RESPECTIVELY IN THE ASSESSEE- FIRM. MRS. KAMALA SAHAS SHAREHOLDING IN M/S. SAHA & SARKAR SAW MILL PVT. L TD. WAS AT 6.18% AND IN M/S. MASCOT WOODCRAFTS PVT. LTD. AT 11.67%, WHEREAS MR. ASIM KUMAR SAHA MONDAL WAS HOLDING 6.57% OF SHARES IN MASCOT WOODCRAFTS PV T. LIMITED AND AS SUCH ANY LOAN OR ADVANCE GIVEN BY M/S. MASCOT WOODCRAFT PVT. LIMITED IN THE HANDS OF THE PERSON WITH SHARES OF 10% OR MORE SHALL BE DEEMED T O BE THE DIVIDEND. ON THIS PREMISES, THE LD. CIT PROCEEDED TO ADD RS.95,70,953 /-. 9. THE ASSESSEE IS CHALLENGING THIS FINDING BY CONT ENDING THAT THE DEEMED DIVIDEND, IF ANY, IS TAXABLE IN THE HANDS OF THE PE RSON, WHO IS THE SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF THE PERS ONS OR ENTITIES OTHER THAN THE SHAREHOLDER. FACT REMAINS IN THIS MATTER IS THAT M/ S. BIRENDRA KUMAR SAHA IS NOT THE SHAREHOLDER OF M/S. MASCOT WOODCRAFTS PVT. LTD. , BUT IT IS ONLY SMT. KAMALA SAHA, WHO IS THE SHAREHOLDER, AND ULTIMATELY DEEMED DIVIDEND CAN BE ASSESSED ARISING OUT OF THE LOANS ADVANCED BY M/S. MASCOT WO ODCRAFTS PVT. LTD. IN THE HANDS OF MRS. KAMALA SAHA. IN SUPPORT OF HIS CONTEN TION, LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE DECISION OF ITAT, M UMBAI BENCH IN THE CASE OF ACIT VS.- BHAUMIK COLOUR (P) LIMITED REPORTED IN ( 2009) 118 ITD 1 (MUM.)(SB) I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 7 OF 9 AND THE DECISION OF THE ITAT, KOLKATA BENCH IN THE CASE OF SHIV TRANSPORT & TRAVELS VS.- ITO REPORTED IN (2016) 67 TAXMANN.COM 108 (KOLKATA-TRIB.). IN BHAUMIK COLOUR (P) LIMITEDS CASE, A COORDINATE BEN CH OF THIS TRIBUNAL HELD THAT SECTION 2(32) DEFINES THE EXPRESSION PERSON WHO HA S A SUBSTANTIAL INTEREST IN THE COMPANY IN RELATION TO A COMPANY, MEANS A PERSON W HO IS THE BENEFICIAL OWNER OF SHARES, NOT BEING SHARES ENTITLED TO A FIXED RAT E OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS, CARRYING NOT LESS THAN 20% OF THE VOTING POWER. UNDER THE INCOME TAX ACT, 1922, TWO CATEGORI ES OF PAYMENT WERE CONSIDERED AS DIVIDEND, VIZ. (A) ANY PAYMENT BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER WAS CONSIDERED AS DIVIDEND PAID TO SHAR EHOLDER OR (B) ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER WAS CONSIDERED AS DIVIDEND. IN 1961 ACT, THE VERY SAME TWO CATEGORIES OF PAYMENT WERE CONSIDERED AS DIVIDEND BUT AN ADDITIONAL CONDI TION, THAT PAYMENT SHOULD BE TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICI AL OWNER OF SHARES AND WHO HAS A SUBSTANTIAL INTEREST IN THE COMPANY, VIZ. SHA REHOLDING WHICH CARRIES NOT LESS THAN 20% OF THE VOTING POWER, WAS INTRODUCED. THERE FORE, THAT THE EXPRESSION SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL O WNER OF SHARES REFERRED TO IN FIRST LIMB OF SECTION 2(22)(E) REFERS TO BOTH A REG ISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THAN THE PROVISIONS OF SECTI ON 2(22)(E) WILL NOT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER B UT NOT A REGISTERED SHAREHOLDER THAN ALSO THE FIRST LIMB OF PROVISIONS OF SECTION 2 (22)(E) WILL NOT APPLY. 10. IN THE CASE OF SHIV TRANSPORT & TRAVELS (SUPRA) , THE SINGLE MEMBER COURT BENCH OF THIS TRIBUNAL FOLLOWED THE SAME AND OBSERV ED IN PARAGRAPHS NO. 15 & 16 AS UNDER:- 15. THE SPECIAL BENCH FURTHER HELD AS FOLLOWS:- 34. WE ARE OF THE VIEW THAT THE PROVISIONS OF SEC.2 (22)(E) DOES NOT SPELL OUT AS TO WHETHER THE INCOME HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER OR THE CONCERN(NON-SHAREHOLDER). THE PROVISIONS ARE AMBIGU OUS. IT IS THEREFORE NECESSARY TO EXAMINE THE INTENTION BEHIND ENACTING THE PROVISIONS OF SEC.2(22)(E) OF THE ACT. I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 8 OF 9 35. THE INTENTION BEHIND ENACTING PROVISIONS OF SEC TION 2(22)(E) ARE THAT CLOSELY HELD COMPANIES (I.E. COMPANIES IN WHICH PUB LIC ARE NOT SUBSTANTIALLY INTERESTED), WHICH ARE CONTROLLED BY A GROUP OF MEM BERS, EVEN THOUGH THE COMPANY HAS ACCUMULATED PROFITS WOULD NOT DISTRIBUT E SUCH PROFIT AS DIVIDEND BECAUSE IF SO DISTRIBUTED THE DIVIDEND INCOME WOULD BECAME TAXABLE IN THE HANDS OF THE SHAREHOLDERS. INSTEAD OF DISTRIBUTING ACCUMULATED PROFITS AS DIVIDEND, COMPANIES DISTRIBUTE THEM AS LOAN OR ADVA NCES TO SHAREHOLDERS OR TO CONCERN IN WHICH SUCH SHAREHOLDERS HAVE SUBSTANTIAL INTEREST OR MAKE ANY PAYMENT ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SUCH SHAREHOLDER. IN SUCH AN EVENT, BY THE DEEMING PROVISIONS SUCH PAYMENT BY THE COMPANY IS TREATED AS DIVIDEND. THE INTENTION BEHIND THE PROVISIONS OF SE CTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHOLDER. THE DEEMING P ROVISIONS AS IT APPLIES TO THE CASE OF LOANS OR ADVANCES BY A COMPANY TO A CON CERN IN WHICH ITS SHAREHOLDER HAS SUBSTANTIAL INTEREST, IS BASED ON T HE PRESUMPTION THAT THE LOAN OR ADVANCES WOULD ULTIMATELY BE MADE AVAILABLE TO T HE SHAREHOLDERS OF THE COMPANY GIVING THE LOAN OR ADVANCE. THE INTENTION O F THE LEGISLATURE IS THEREFORE TO TAX DIVIDEND ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT IN THE HANDS OF THE CONCERN. 36. THE BASIS OF BRINGING IN THE AMENDMENT TO SEC.2 (22)(E) OF THE ACT BY THE FINANCE ACT, 1987 W.E.F 1-4-88 IS TO ENSURE THAT PE RSONS WHO CONTROL THE AFFAIRS OF A COMPANY AS WELL AS THAT OF A FIRM CAN HAVE THE PAYMENT MADE TO A CONCERN FROM THE COMPANY AND THE PERSON WHO CAN CONTROL THE AFFAIRS OF THE CONCERN CAN DRAWN THE SAME FROM THE CONCERN INSTEAD OF THE COMPANY DIRECTLY MAKING PAYMENT TO THE SHAREHOLDER AS DIVIDEND. THE SOURCE OF POWER TO CONTROL THE AFFAIRS OF THE COMPANY AND THE CONCERN IS THE BASIS ON WHICH THESE PROVISIONS HAVE BEEN MADE. IT IS THEREFORE PROPER TO CONSTRUE THOSE PROVISIONS AS CONTEMPLATING A CHARGE TO TAX IN THE HANDS OF THE S HAREHOLDER AND NOT IN THE HANDS OF A NON-SHAREHOLDER VIZ., CONCERN. A LOAN OR ADVANCE RECEIVED BY A CONCERN IS NOT IN THE NATURE OF INCOME. IN OTHER WO RDS THERE IS A DEEMED ACCRUAL OF INCOME EVEN U/S.5(1)(B) IN THE HANDS OF THE SHAREHOLDER ONLY AND NOT IN THE HANDS OF THE PAYEE VIZ., NON-SHAREHOLDER (CONCERN). SEC.5(1)(A) CONTEMPLATES THAT THE RECEIPT OR DEEMED RECEIPT SHO ULD BE IN THE NATURE OF INCOME. THEREFORE THE DEEMING FICTION CAN BE APPLIE D ONLY IN THE HANDS OF THE SHAREHOLDER AND NOT THE NON-SHAREHOLDER VIZ., THE C ONCERN. 37. THE DEFINITION OF DIVIDEND U/S.2(22)(E) OF THE ACT IS AN INCLUSIVE DEFINITION. SUCH INCLUSIVE DEFINITION ENLARGES THE MEANING OF T HE TERM DIVIDEND ACCORDING TO ITS ORDINARY AND NATURAL MEANING TO IN CLUDE EVEN A LOAN OR ADVANCE. ANY LOAN OR ADVANCE CANNOT BE DIVIDEND ACC ORDING TO ITS ORDINARY AND NATURAL MEANING. THE ORDINARY AND NATURAL MEANING O F THE TERM DIVIDEND WOULD BE A SHARE IN PROFITS TO AN INVESTOR IN THE S HARE CAPITAL OF A LIMITED COMPANY. TO THE EXTENT THE MEANING OF THE WORD DIV IDEND IS EXTENDED TO LOANS AND ADVANCES TO A SHAREHOLDER OR TO A CONCERN IN WHICH A SHAREHOLDER IS SUBSTANTIALLY INTERESTED DEEMING THEM AS DIVIDEND I N THE HANDS OF A SHAREHOLDER THE ORDINARY AND NATURAL MEANING OF THE WORD DIVIDEND IS ALTERED. TO THIS EXTENT THE DEFINITION OF THE TERM DIVIDEND CAN BE SAID TO OPERATE. IF THE DEFINITION OF DIVIDEND IS EXTENDE D TO A LOAN OR ADVANCE TO A NON SHAREHOLDER `THE ORDINARY AND NATURAL MEANING O F THE WORD DIVIDEND IS TAKEN AWAY. IN THE LIGHT OF THE INTENTION BEHIND TH E PROVISIONS OF SEC.2(22)(E) AND IN THE ABSENCE OF INDICATION IN SEC.2(22)(E) TO EXTEND THE LEGAL FICTION TO A CASE OF LOAN OR ADVANCE TO A NON-SHAREHOLDER ALSO, WE ARE OF THE VIEW THAT LOAN I.T.A. NO. 541/KOL./2014 ASSESSMENT YEAR: 2008-2009 PAGE 9 OF 9 OR ADVANCE TO A NON-SHAREHOLDER CANNOT BE TAXED AS DEEMED DIVIDEND IN THE HANDS OF A NON-SHAREHOLDER. 16. THE AFORESAID VIEW HAS SINCE BEEN APPROVED IN S EVERAL DECISIONS RENDERED BY HONBLE HIGH COURT OF BOMBAY AND DELHI IN THE CASE OF CIT V S. UNIVERSAL MEDICARE PVT. LTD., 324 ITR 263 (BOM) AND CIT VS. ANKITECH PVT.LTD. & OTHER S 340 ITR 14 (DEL.). SINCE THE ASSESSEE IN THE PRESENT CASE IS NOT A SHAREHOLDER I N THE LENDER COMPANY, I AM OF THE VIEW THAT THE ABOVE DECISION IS SQUARELY APPLICABLE TO T HE FACTS OF THE ASSESSEES CASE. 11. HERE IN THIS CASE, M/S. BIRENDRA CHANDRA SAHA A DMITTEDLY IS NOT A SHAREHOLDER IN M/S. MASCOT WOODCRAFT PVT. LTD. AND THE LOAN WAS ADVANCED TO THE ASSESSEE-COMPANY. THE BENEFICIARY SHAREHOLDER OF M/ S. MASCOT WOODCRAFT PVT. LIMITED, I.E. SMT. KAMALA SAHA IS NOT THE REGISTERE D SHAREHOLDER OF M/S. MASCOT WOODCRAFTS PVT. LIMITED. IN THESE CIRCUMSTANCES, TH E DECISION OF THIS TRIBUNAL IN THE CASE OF BHAUMIK COLOUR (P) LIMITED IS APPLICABL E ON ALL FOURS. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE LD. CIT IS NOT JUSTIFIED IN MAKING THE ADDITION OF RS.95,70,953/- UNDER SECTION 2(22)(E) OF THE ACT AS DEEMED DIVIDEND. WE ACCORDINGLY ALLOW THIS APPEAL. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TR EATED AS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 26, 20 16. SD/- SD/- (WASEEM AHMED) (K. NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER KOLKATA, THE 26 TH DAY OF AUGUST, 2016 COPIES TO : (1) MR. BIRENDRA CHANDRA SAHA, 65/1, M.D. ROAD, NIMTALLA, KOLKATA-700 006 (2) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-39, KOLKATA, 18, RABINDRA SARANI, KOLKATA-700 001 (3) COMMISSIONER OF INCOME TAX, KOLKATA-XIII, KOLK ATA; (4) THE DEPARTMENTAL REPRESENTATIVE (5) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.