ITO WD 8(2)(1), MUMBAI V. ILLUSION DENTAL LABORATORY P.LTD, MUMBAI

ITA 5619/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4231 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2016
• Appeal Filed By: Department
• Bench Allotted: I
• Assessment Year: 2009-2010
• Appeal Filed On: 05-09-2014
• Court: TRIBUNAL
• Department Lawyers: Y S JADHAV
• Assessee Lawyers: DILIP T WARAH
• Keywords: Deemed dividend
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUM BAI .. , , BEFORE SHRI R. C. SHARMA, AM AND SHRI MAHAVIR SINGH , JM ./ I.T.A. NO. 5619/MUM/2014 ( / ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER, WARD 8(2)(1), ROOM NO. 212, 2 ND FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. ILLUSION DENTAL LABORATORY PRIVATE LIMITED 402/403, AKRUTI ARCADE, J. P. ROAD, ANDHERI(W), MUMBAI - 400 058 ./ ./PAN/GIR NO. AABCI 3029 F ( # /APPELLANT ) : ( $% # / RESPONDENT ) # & / APPELLANT BY : SHRI Y. S. JADHAV $% #& / RESPONDENT BY : SHRI DILIP T. WARAH ( ) &* + / DATE OF HEARING : 28.3.2016 ,-./ &* + / DATE OF PRONOUNCEMENT : 07.04.2016 / O R D E R PER MAHAVIR SINGH, JM: THIS APPEAL BY REVENUE IS ARISING OUT OF ORDER OF C IT(A)-17, MUMBAI IN APPEAL NO. CIT(A)-17/IT/113/13-14 DATED 04.6.2014. ASSESSM ENT WAS FRAMED BY ITO U/S. 143 R/W. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2009-10 VIDE HIS ORDER DATED 26.03. 2013. 2. AT THE OUTSET, IT IS NOTICED THAT THE REGISTRY H AS NOTED THAT THIS APPEAL IS TIME BARRED BY 33 DAYS, BUT SUBSEQUENTLY THE REVENUE FIL ED A LETTER DATED 17.9.2014 2 ITA NO. 5619/MUM/2014 (A.Y. 2009-10) ITO VS. ILLUSION DENTAL LABORATORY PRIVATE LIMITED RECTIFYING THE DEFECT THAT THIS APPEAL IS WITHIN TI ME AND THE OBJECTION REGARDING PRIMA FACIE TIME BARRED BY 33 DAYS IS DUE TO WRONG MENTION OF C OMMUNICATION DATE I.E., 04.6.2014 INSTEAD OF 10.7.2014 IN COLUMN NO. 9 OF F ORM NO. 36. IN VIEW OF THE ABOVE EXPLANATION, WE FEEL THAT THE APPEAL IS WITHIN TIME AND THERE IS NO DELAY. 3. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST THE ORDER OF CIT(A) DELETING THE ADDITION MADE BY THE AO ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT AMOUNTING TO RS.57,75,431/-. FOR THIS, REVE NUE HAS RAISED FOLLOWING GROUNDS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.57, 75,431/- U/S. 2(22)(E) OF THE ACT IGNORING THE FACT THAT THE PROVISIONS OF SECTIO N 2(22)(E) ARE SQUARELY APPLICABLE TO THE ASSESSEES CASE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.57, 75,431/- U/S. 2(22)(E) OF THE ACT HOLDING THAT DEEMED DIVIDEND IS TAXABLE ONLY IN THE HANDS OF SHAREHOLDERS BY PLACING RELIANCE UPON THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOURS (2009) SOT (MUM-SB) IGNORING THE IN TENT OF LEGISLATURE AS CLARIFIED IN CBDT CIRCULAR NO. 495 DATED 22.09.1987 ? 4. BRIEFLY STATED FACTS ARE THAT THE A.O. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS NOTICED THAT THE ASSESSEE HAS RECEIVED A LOAN OF RS.57,75,431/- FROM LAXMI DENTAL EXPORT PRIVATE LIMITED. ACCORDING TO A O, TWO SHAREHOLDERS NAMELY SHRI RAJESH KHAKAHAR AND SHRI SAMEER MERCHANT WERE HOLDING SHARE CAPITAL OF 42% AND 25% IN THE ASSESSEE COMPANY RESPECTIVELY AND AL SO 30% AND 20% RESPECTIVELY IN LAXMI DENTAL EXPORT PRIVATE LIMITED. ACCORDING TO A O, THE LATER COMPANY WAS HAVING ACCUMULATED PROFIT OF RS.2,97,15,305/- AND R S.6,49,29,108/- AS ON 31.3.2008 AND 31.3.2009. ACCORDING TO AO, IN VIEW OF THE PROV ISION OF SECTION 2(22)(E) OF THE ACT, THIS LOAN RECEIVED FROM LAXMI DENTAL EXPORT PR IVATE LIMITED BY THE ASSESSEE IS TAXABLE IN THE HANDS OF THE ASSESSEE AS DEEMED DIVI DEND IN VIEW OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT. AGGRIEVED, ASSESSEE PR EFERRED APPEAL BEFORE THE CIT(A), WHO DELETED THE ADDITION BY RELYING ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. BHAUMIK COLOUR (P.) LTD. (2009) 118 ITD 1 (SB), WHICH WAS 3 ITA NO. 5619/MUM/2014 (A.Y. 2009-10) ITO VS. ILLUSION DENTAL LABORATORY PRIVATE LIMITED EVENTUALLY CONFIRMED BY THE HONBLE BOMBAY HIGH COU RT IN THE CASE OF CIT VS. M/S. UNIVERSAL MEDICARE PRIVATE LIMITED (2010) 324 ITR 2 62 (BOM). AGGRIEVED AGAINST THE ACTION OF CIT(A), THE REVENUE IS IN SECOND APPE AL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND FROM THE FACTS O F THE CASE THAT THE ASSESSEE HAS OBTAINED LOAN OF RS.57,75,431/- FROM LAXMI DENTAL E XPORT PRIVATE LIMITED, BUT IT IS NEITHER A SHAREHOLDER IN THAT COMPANY, NOR BENEFICI AL OWNER TO THE EXTENT OF 10% OR MORE IN THAT COMPANY. NO DOUBT, THERE ARE THE OTHER SHAREHOLDERS WHO MAY BE INTER- EXCHANGEABLE SHAREHOLDERS IN THE COMPANIES. IT IS T HE SETTLED POSITION OF LAW THAT ANY LOAN OR ADVANCE RECEIVED BY THE ASSESSEE FROM ENTIT Y IN A SITUATION HAVING COMMON SHAREHOLDERS BETWEEN THE ASSESSEE AND THE ENTITY GI VING LOAN OR ADVANCE IS TO BE TREATED AS TAXABLE AS DEEMED DIVIDEND IN VIEW OF SE CTION 2(22)(E) OF THE ACT ONLY IN CASE THAT PARTY IS A REGISTERED SHAREHOLDER OF THE LENDING ENTITY AND NOT IN THE HANDS OF THE ASSESSEE WHO IS NOT A REGISTERED SHAREHOLDER OF THE LENDING ENTITY. WE FIND THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD. SUPRA HELD THAT AS A MATTER OF FACT, NO LOAN OR ADVANCE WAS GR ANTED TO THE ASSESSEE AND SINCE THE AMOUNT IN QUESTION HAD ACTUALLY BEEN DEFLECTED AND NOT REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. HENCE, THE FIRST REQUIREME NT OF SECTION 2(22)(E) IS THAT A PAYMENT MADE BY COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY INTERESTED BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER OR TO ANY CONCE RN TO WHICH SUCH SHAREHOLDER IS A MEMBER OR PARTNER SUBJECT TO THE FULFILLMENT OF REQ UIREMENT OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT. SECTION 2(22)(E) OF THE ACT IS TO BROADEN THE AMBIT OF THE EXPRESSION DIVIDEND BY INCLUDING CERTAIN PAYMENTS W HICH THE COMPANY HAS MADE BY WAY OF LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF O F OR FOR INDIVIDUAL BENEFIT OF THE SHAREHOLDER. IN THE PRESENT CASE, NONE OF THE CONDI TIONS ARE FULFILLED REASON BEING THAT THE ASSESSEE IS NEITHER SHAREHOLDER, NOR BENEFICIAL OWNER IN THE COMPANY WHO HAS PROVIDED LOAN TO ASSESSEE, I.E., LAXMI DENTAL EXPOR T PRIVATE LIMITED. IN VIEW OF THE 4 ITA NO. 5619/MUM/2014 (A.Y. 2009-10) ITO VS. ILLUSION DENTAL LABORATORY PRIVATE LIMITED ABOVE, AND RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE BOMBAY HIGH COURT, WE DECIDE THE ISSUE AGAINST THE REVENUE AND IN FAVO UR OF THE ASSESSEE. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON APRIL, 07TH, 2016 SD/- SD/- (R. C. SHARMA) (MAHAVIR SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ( MUMBAI; 1) DATED : 07.04.2016 .)../ ROSHANI , SR. PS !'#$%&' &$ / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $% # / THE RESPONDENT 3. ( 2* ( ) / THE CIT(A) 4. ( 2* / CIT CONCERNED 5. 56 7$*)89 , +89/ , ( / DR, ITAT, MUMBAI 6. 7 : ; / GUARD FILE ! / BY ORDER, / (DY./ASSTT. REGISTRAR) , ( / ITAT, MUMBAI