Vipul Logistic And Warehousing Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5454/DEL/2010

• Counselvise Citation: 545420114 RSA 2010
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 04-09-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 03-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJIV JAIN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH H NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI A.N. PAHUJA ITA NO. 5454/DEL/2010 ASSESSMENT YEAR: 2006-07 VIPUL LOGISTIC AND WAREHOUSING VS. INCOME-TAX OFFI CER, PVT. LTD., 404-PRAGATI TOWER 26, WARD 17(3), RAJENDRA PLACE, NEW DELHI. NEW DELHI. (PAN: AACCV1545R) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI SANJIV J AIN, CA RESPONDENT BY: SHRI SANJAY KUMA R JAIN, SR. DR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 20.10.2010 PASSED FOR ASSESSMENT YEAR 2006-07. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE ADDITION OF RS.60 LACS IN AN EX PART E ORDER BY TREATING IT AS A DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE INCOME-T AX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT A IS A PRIV ATE LIMITED COMPANY. IT HAS FILED ITS RETURN OF INCOME ON 24.11.2006 DECLAR ING NIL INCOME. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMEN T AND A NOTICE UNDER SEC. 143(2) OF THE ACT DATED 29.9.2007 WAS ISSUED AND SE RVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASS ESSING OFFICER THAT THE 2 ASSESSEE HAS RECEIVED A SUM OF RS.60 LACS FROM M/S. VIPUL OVERSEAS PVT. LTD. HE WAS OF THE OPINION THAT THIS AMOUNT IS TO B E TREATED AS DEEMED DIVIDEND UNDER SEC. 2(22)(E) OF THE ACT. LEARNED AS SESSING OFFICER HAS NARRATED FOLLOWING CIRCUMSTANCES FRO TREATING IT AS A DEEMED DIVIDEND: A. THE ADVANCE IS GIVEN BY A COMPANY I.E. M/S. VIPU L OVERSEAS PVT. LTD. B. THE COMPANY IS ONE WHICH THE PUBLIC ARE NOT SUBS TANTIALLY INTERESTED. C. THE PAYMENT HAS BEEN MADE AS AN ADVANCE. D. THE PAYMENT HAS BEEN MADE TO A CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER AND HAS SUBSTANTIAL INTERES T (IN BOTH THE COMPANIES SMT. ARCHANA GARG AND SHRI SURENDER GARG HOLD MORE THAN 20% OF SHAREHOLDING. 3. APPEAL TO THE LEARNED CIT(APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE. THE APPEAL HAS BEEN DISMISSED EX PARTE BE CAUSE ASSESSEE DID NOT RESPOND TO THE NOTICE. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE BY THE DECISIONS OF THE HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF CI T VS. NAVYUG PROMOTERS PVT. LTD. REPORTED IN 203 TAXMAN PAGE 618 AND IN TH E CASE OF CIT VS. M/S. 3 GOPAL CLOTHING CO. PVT. LTD. REPORTED IN 207 TAXMAN PAGE 134 AND IN THE CASE OF CIT VS. ANKIT TECH PVT. LTD. REPORTED IN 19 9 TAXMAN 341. HE POINTED OUT THAT IN ORDER TO ATTRACT THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT, PAYMENT MUST BE MADE TO THE PERSON WHO IS A REGISTE RED SHAREHOLDER OF SHARES AND IN THE CASE OF ASSESSEE, IT SHOULD BE RE GISTERED SHAREHOLDER OF M/S. VIPUL OVERSEAS PVT. LTD. HE TOOK US THROUGH PAGE NO S. 22 & 23 OF THE PAPER BOOK WHEREIN LIST OF SHAREHOLDERS OF VIPUL LOGISTIC AND WAREHOUSING PVT. LTD. I.E. ASSESSEE AS WELL AS M/S. VIPUL OVERSEAS P VT. LTD. I.E. PAYERS HAVE BEEN PLACED ON RECORD. ON THE STRENGTH OF THESE DET AILS, HE SUBMITTED THAT THE ASSESSEE IS NOT THE SHAREHOLDER OF M/S. VIPUL OVERS EAS PVT. LTD. ON THE STRENGTH OF THESE DECISIONS, HE SUBMITTED THAT THE AMOUNTS RECEIVED BY THE ASSESSEE FROM M/S. VIPUL OVERSEAS PVT. LTD. CANNOT BE TREATED AS DEEMED DIVIDEND. LEARNED DR ON THE OTHER HAND SUBMITTED TH AT LEARNED FIRST APPELLATE AUTHORITY HAD NO OCCASION TO EXAMINE ALL THESE DETAILS, BECAUSE ASSESSEE DID NOT APPEAR BEFORE THE LEARNED CIT(APPE ALS). LEARNED ASSESSING OFFICER HAS ALSO NOT RECORDED ANY FINDING ON THIS ASPECT. THEREFORE, IT IS DIFFICULT TO DETERMINE WHETHER ASS ESSEE IS A SHAREHOLDER OF M/S. VIPUL OVERSEAS PVT. LTD. OR NOT. 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE RECORD CAREFULLY THE LIST OF SHAREHOLDERS WAS PRODUCED BEF ORE THE ASSESSING OFFICER AS POINTED OUT IN THE PAPER BOOK. HOWEVER, NO FINDI NG IS DISCERNIBLE FROM THE ASSESSMENT ORDER. IT APPEARS THAT LEARNED ASSESSING OFFICER DEEMED THE LOANS AS DIVIDEND ONLY ON THE BASIS OF THAT TWO PERSONS, NAMELY, SHRI SURINDER GARG AND SMT. ARCHANA GARG ARE HOLDING SHARES MORE THAN 10% IN BOTH THE COMPANIES. ACCORDING TO THESE DECISIONS, THIS ASPEC T IS IRRELEVANT AND MERELY ON THE BASIS OF COMMON SHAREHOLDER, LOAN ADVANCED B Y ONE COMPANY TO THE OTHER COMPANY CANNOT BE TREATED AS DEEMED DIVIDEND. HON'BLE HIGH COURT HAS SPECIFICALLY HELD THAT PAYMENT MUST BE MADE TO THE PERSON WHO IS A REGISTERED SHAREHOLDER. THE FINDINGS RECORDED BY TH E HON'BLE HIGH COURT IN THE CASE OF GOPAL CLOTHING (SUPRA) READ AS UNDER: WE NEED NOT EXAMINE THE SECOND ASPECT ON MERITS. T HE FIRST ASPECT, I.E., WHETHER OR NOT THE RESPONDENT ASSESSEE HAD TH E REQUISITE VOTING RIGHTS AND SHAREHOLDING OF COMMON SHAREHOLDERS CAN BE TAKEN INTO CONSIDERATION FOR APPLYING SECTION 2(22)(E) OF THE ACT STANDS DECIDED BY THIS COURT IN CIT VS. ANKITECH PRIVATE LTD. (201 1) 242 CTR 129(DELHI). IN THE SAID DECISION, IT HAS BEEN HELD THAT TO ATTRACT THE PROVISIONS OF SEC. 2(22)(E) OF THE ACT, PAYMENT MUS T BE MADE TO THE PERSON, WHO IS A REGISTERED HOLDER OF SHARES AND TH E SHAREHOLDER ALONE. EVEN AFTER THE AMENDMENT WITH EFFECT FROM 1988 AND INTRODUCTION OF 5 THE WORDS A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES CANNOT BE CONSTRUED TO IN A WAY ALTER THE POSITION THAT THE S HAREHOLDER HAS TO BE THE REGISTERED SHAREHOLDER. THE AMENDMENT IMPOSES A N ADDITIONAL CONDITION THAT THE REGISTERED SHAREHOLDER MUST ALSO BE THE BENEFICIAL SHAREHOLDER OF THE COMPANY THAT HAS FURNISHED LOAN/ ADVANCE. THE FACT THAT THE SHAREHOLDERS OF THE ASSESSEE COMPANY WERE ALSO SHAREHOLDERS OF THE COMPANY WHICH HAD GIVEN LOAN/ADVANCE IS NO T SUFFICE AND DOES NOT MEET THE REQUIREMENT OF SEC. 2(22)(E) OF T HE ACT. THE VOTING RIGHTS OF THE SHAREHOLDER, I.E., THE ASSESSEE CAN A ND SHOULD ALSO BE TAKEN INTO CONSIDERATION. 6. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE TH IS ISSUE FOR A LIMITED PURPOSE TO THE ASSESSING OFFICER. HE SHALL VERIFY W HETHER THE ASSESSEE IS A SHAREHOLDER OF M/S. VIPUL OVERSEAS, IF IT IS FOUND THAT ASSESSEE IS A SHAREHOLDER HAVING MORE THAN 10% HOLDING THEN THE L OAN RECEIVED BY THE ASSESSEE WOULD BE TREATED AS DEEMED DIVIDEND. IN CA SE, IT IS FOUND THAT ASSESSEE IS NOT THE SHAREHOLDER OF M/S. VIPUL OVERS EAS THEN THE LOAN WILL NOT BE TREATED AS DEEMED DIVIDEND. THE APPEAL OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 19.10.20 12 SD/- SD/- ( A.N. PAHUJA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19/10/2012 MOHAN LAL 6 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR