Peter K.Manavalan, CHENNAI V. DCIT, CHENNAI

ITA 554/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9078 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-05-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 17-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K N DHANDA
• Assessee Lawyers: S SRIDHAR
• Keywords: Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.554/MDS/2015 ( )( / ASSESSMENT YEAR : 2005-06 SHRI PETER K. MANAVALAN, NO.20, CHESNEY TOWN HOUSE, ETHIRAJ SALAI, CHENNAI - 600 008. PAN : AAJPM 9088 P V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(2), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE -.+, / 0 / RESPONDENT BY : SHRI K.N. DHANDAPANI, JCIT 1 / 2% / DATE OF HEARING : 04.05.2016 3') / 2% / DATE OF PRONOUNCEMENT : 17.06.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 15, CHEN NAI, DATED 08.01.2015 AND PERTAINS TO ASSESSMENT YEAR 2005-06. 2. SHRI S. SRIDHAR, THE LD.COUNSEL FOR THE ASSESSEE , SUBMITTED THAT THE ASSESSEE WAS HOLDING 2,00,000 SHARES AS ON 31.03.2004 AS 2 I.T.A. NO.554/MDS/15 WELL AS ON 31.03.2005, WHICH IS LESS THAN 10% OF TO TAL SHARES OF THE COMPANY. ACCORDING TO THE LD. COUNSEL, WHEN THE AS SESSEE WAS HOLDING LESS THAN 10% SHARES, THE PROVISIONS OF SEC TION 2(22)(E) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IS NO T APPLICABLE AT ALL. THE LD.COUNSEL FURTHER SUBMITTED THAT ON 29.03.2004 , THE ASSESSEE TRANSFERRED 6,47,059 SHARES OF M/S SEVEN SEAS PETRO LEUM PVT. LTD. TO MRS. LINDA MANAVALAN. THE TRANSFER OF SHARES WA S APPROVED BY A RESOLUTION BY THE SHAREHOLDERS. A COPY OF THE RE SOLUTION WAS FILED BEFORE THE ASSESSING OFFICER AND THE CIT(APPEALS). THE LD.COUNSEL FURTHER SUBMITTED THAT THE MINISTRY OF CORPORATE AF FAIRS ALSO APPROVED THE TRANSFER OF SHARES. THE ASSESSING OFF ICER, HOWEVER, DOUBTED THE TRANSFER OF SHARES TO MRS. LINDA MANAVA LAN ON THE GROUND THAT APPROVAL OF MINISTRY OF CORPORATE AFFAI RS WAS GRANTED ON 15.05.2008. THEREFORE, ACCORDING TO THE LD. COUNSE L, THE AMOUNT RECEIVED FROM M/S SEVEN SEAS PETROLEUM PVT. LTD. BY THE ASSESSEE CANNOT BE CONSTRUED AS DEEMED DIVIDEND UNDER SECTIO N 2(22)(E) OF THE ACT. THE LD.COUNSEL PLACED HIS RELIANCE ON THE JUDGMENT OF KERALA HIGH COURT IN CIT V. SMT. S. PARVATHAVARTHIN I AMMAL (1996) 219 ITR 661 AND THE JUDGMENT OF RAJASTHAN HIGH COUR T IN CIT V. MANGAL CHAND (2002) 255 ITR 329. APART FROM THIS, THE LD.COUNSEL SUBMITTED THAT THERE WAS A BUSINESS TRANSACTION BET WEEN THE 3 I.T.A. NO.554/MDS/15 ASSESSEE AND THE COMPANY. THEREFORE, THE SAME HAS TO BE TAKEN AS BUSINESS TRANSACTION. HENCE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IS NOT APPLICABLE AT ALL. THE LD.COUNSE L HAS ALSO FILED COPIES OF THE SHARE TRANSFER FORM FOR TRANSFER OF S HARES TO MRS. LINDA MANAVALAN AND OTHER RELEVANT MATERIAL FILED B EFORE THE REGISTRAR OF COMPANIES FOR TRANSFER OF SHARES. THE LD.COUNSEL SUBMITTED THAT IN VIEW OF THE TRANSFER OF SHARES, T HE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING ` 37,50,000/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. 3. ON THE CONTRARY, SHRI K.N. DHANDAPANI, THE LD. D EPARTMENTAL REPRESENTATIVE, SUBMITTED THAT ASSESSEE IS A REGIST ERED SHAREHOLDER OF THE COMPANY, NAMELY, M/S SEVEN SEAS PETROLEUM PV T. LTD., HOLDING 8,47,059 SHARES WHICH COME TO NEARLY 23.52% OF THE TOTAL SHARES. ACCORDING TO THE LD. D.R., AS PER THE INFO RMATION RECEIVED FROM THE ASSISTANT REGISTRAR OF COMPANIES, THE SHAR EHOLDING OF THE ASSESSEE TO THE EXTENT OF 23.52% WAS CONFIRMED. IN THE RETURN OF INCOME FILED BY M/S SEVEN SEAS PETROLEUM PVT. LTD. FOR THE ASSESSMENT YEAR 2005-06, THE DETAILS WERE SHOWN INC LUDING HOLDING OF SHARES EXCEEDING 10% BY THE ASSESSEE. THE LD. D .R. SUBMITTED THAT NOW THE ASSESSEE CLAIMS THAT THE SHARES WERE T RANSFERRED TO HIS 4 I.T.A. NO.554/MDS/15 WIFE MRS. LINDA MANAVALAN. THE INFORMATION AVAILAB LE ON RECORD SHOWS THAT THE SHARES WERE TRANSFERRED ON 15.05.200 8. THEREFORE, ACCORDING TO THE LD. D.R., THE ASSESSEE MAY NOT BE HOLDING MORE THAN 10% SHARES AFTER 15.05.2008. HOWEVER, IT IS S EEN THAT THE ASSESSEE WAS HOLDING 23.52% SHARES. ACCORDING TO T HE LD. D.R., OTHER THAN THE PAPERS FILED BEFORE THE REGISTRAR OF COMPANIES, NO OTHER MATERIAL IS AVAILABLE ON RECORD TO SUGGEST TH AT THE SHARES WERE TRANSFERRED TO MRS. LINDA MANAVALAN. 4. THE LD. D.R. FURTHER SUBMITTED THAT THE ASSESSEE , BY REPLY DATED 07.03.2013, CLAIMED THAT 6,47,059 SHARES WERE TRANSFERRED AT A COST OF ` 10 EACH, HOWEVER, AS PER THE COPIES OF TRANSFER DEE D OBTAINED FROM THE COMPANY, IN THE SALE CONSIDERATIO N IT WAS DISCLOSED AS ` 2 PER SHARE. FROM THIS, ACCORDING TO THE LD. D.R., IT IS OBVIOUS THAT THE ASSESSEE HIMSELF DID NOT KNOW THE PRICE AT WHICH THE SHARES WERE TRANSFERRED. THIS GIVES AN INDICAT ION THAT NO TRANSFER OF SHARES ACTUALLY TOOK PLACE. THEREFORE, ACCORDING TO THE LD. D.R., THE CLAIM OF THE ASSESSEE THAT THE SHARES WERE TRANSFERRED TO MRS. LINDA MANAVALAN WAS AFTERTHOUGHT. MOREOVER , THE ASSESSEE HAS NOT RECEIVED ANY SALE CONSIDERATION FOR TRANSFE R OF SHARES TILL FILING OF RETURN OF INCOME. THEREFORE, ACCORDING T O THE LD. D.R., THE 5 I.T.A. NO.554/MDS/15 CLAIM OF TRANSFER OF SHARES IS NOT BONAFIDE ONE, HE NCE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ADDITION MAD E BY THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE ADMITTEDLY RECEIVED ADVANCE / LOAN FROM M/S SEVEN S EAS PETROLEUM PVT. LTD. THE ASSESSEE CLAIMS THAT HE IS HOLDING L ESS THAN 10% OF SHARES, THEREFORE, PROVISIONS OF SECTION 2(22)(E) O F THE ACT IS NOT APPLICABLE TO HIM. TO SUPPORT HIS CONTENTION, THE ASSESSEE FILED COPIES OF THE SHARE TRANSFER FORM FOR TRANSFER OF S HARES TO MRS. LINDA MANAVALAN AND OTHER RELEVANT MATERIAL THAT WE RE SAID TO BE FILED BEFORE THE REGISTRAR OF COMPANIES. THE COPIE S OF TRANSFER OF SHARES CERTIFICATE FILED BEFORE THE REGISTRAR OF CO MPANIES SHOWS THAT IT WAS DATED 29.03.2004. THE ASSESSEE HAS ALS O FILED COPIES OF ANNEXURES FILED ALONG WITH SHARE TRANSFER FORM THAT WERE FILED BEFORE THE REGISTRAR OF COMPANIES. THIS SHARE TRAN SFER FORM SUBMITTED BEFORE THE REGISTRAR OF COPIES WAS APPARE NTLY NOT CONSIDERED BY BOTH THE AUTHORITIES BELOW. THEREFOR E, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE CLAIM OF THE ASS ESSEE THAT THE SHARES WERE TRANSFERRED AS ON 29.03.2004 NEEDS TO B E CONSIDERED 6 I.T.A. NO.554/MDS/15 IN THE LIGHT OF THE MATERIAL FILED BY THE ASSESSEE. SINCE BOTH THE AUTHORITIES BELOW HAVE NOT EXAMINED THE SHARE TRANS FER FORM AND THE ANNEXURES THAT WERE FILED BEFORE THE REGISTRAR OF COMPANIES, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED. ACCORDINGLY, THE ORDERS OF THE AUTHO RITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL REC ONSIDER THE ISSUE AFRESH AFTER CONSIDERING THE SHARE TRANSFER FORM AN D OTHER ANNEXURES THAT WERE FILED BEFORE THE REGISTRAR OF C OMPANIES AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 17 TH JUNE, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 17 TH JUNE, 2016. KRI. 7 I.T.A. NO.554/MDS/15 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-15, CHENNAI 4. 1 92 /CIT-6, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.