ASST CIT 4(3), MUMBAI V. NANDLAL BANKATLAL P.LTD, MUMBAI

ITA 57/MUM/2014

• Counselvise Citation: 5719914 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR YOGESH KAMAT
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO. 57 /MUM/2014 ( / ASSESSMENT YEAR: 2010-11) A.C. I . T . 4(3), R.NO. 649, 5 TH FLOOR, AAYAKAR BHAVAN, MUMBAI 400 020 / VS. NANDLAL BANKATLAL PVT. LTD. 103, PROSPECT CHAMBERS, 317/321, DR. D.N.ROAD, FORT, MUMBAI 400 001 ./ PAN : AAACN 1292J ( / APPELLANT ) .. ( / RESPONDENT ) / REVENUE BY : DR. YOGESH KAMAT / ASSESSEE BY : SHRI K. SHIVRAM / DATE OF HEARING : 09-06-2015 / DATE OF PRONOUNCEMENT : 01.07.2015 / O R D E R PER SANJAY GARG, J.M . THIS APPEAL BY THE REVENUE ARISES OUT OF ORDER PASS ED BY THE CIT(A)-8, MUMBAI ON 18.10.2013. THE ONLY ISSUE RAISED IN THIS APPEAL OF THE REVENUE IS AGAINST THE DELETION OF ADDITION MADE BY THE AO INV OKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. 2. THE GROUND OF APPEAL TAKEN BY THE REVENUE READS AS UNDER: 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.13,86,379/-, ST ATING THAT THE UNSECURED LOANS TAKEN BY THE APPELLANT FROM M/S. NSECURE SOFT WARE PVT. LTD., CANNOT BE I.T.A. NO. 57 /MUM/2014 NANDLAL BANKATLAL PVT . LTD. 2 CONSIDERED AS DEEMED DIVIDEND S THE APPELLANT IS NO T A SHAREHOLDER IN M/S. NSECURE SOFTWARE PVT. LTD. HOWEVER, THE ADDITION WA S MADE BY THE ASSESSING OFFICER TREATING IT AS DEEMED DIVIDEND U/S.2(22)(E) OF THE INCOME TAX ACT,1961, ON ACCOUNT OF UNSECURED LOAN BORROWED BY THE ASSESS EE FROM THE COMPANY M/S. NSECURE SOFTWARE PVT. LTD., BY INVOKING THE PART OF SECTION 2(22)(E) WHICH SAYS 'LOAN GIVEN TO ANY CONCERN IN WHICH SUCH SHAREHOLDE R HAS SUBSTANTIAL INTEREST' AND NOT ACCEPTING THE ASSESSEE'S SUBMISSION THAT TH E UNSECURED LOAN CANNOT BE CONSIDERED AS DEEMED DIVIDEND AS THE ASSESSEE IS NO T A SHAREHOLDER OF M/S. NSECURE SOFTWARE PVT. LTD'. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE RECEIVED ADVANCE OF RS. 13,86,379/- FROM M/S. NSECURE SOFTWA RE PVT. LTD. WHICH WAS SOUGHT TO BE TAXED BY THE ASSESSING OFFICER (AO) AS DEEMED INCOME OF THE ASSESSEE BY INVOKING S. 2(22)(E) OF THE ACT. THE LE ARNED CIT(A) OBSERVED THAT ALTHOUGH THE SHAREHOLDING PATTERNS OF LENDING COMPA NY AND ASSESSEE- COMPANY WOULD SHOW SOME SHAREHOLDERS ARE IN COMMON AS CONTEMPLATED U/S. 2(22)(E) BUT THE ASSESSEE-COMPANY WAS NOT A SH AREHOLDER IN LENDING COMPANY NAMELY M/S. NSECURE SOFTWARE PVT. LTD. FROM WHOM SAID LOAN WAS RECEIVED. HE THEREFORE, HELD THAT CASE OF ASSESSEE DOES NOT FALL WITHIN THE SCOPE AND AMBIT OF SECTION 2(22(E) OF THE ACT. 3. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THIS ISSUE IS NO L ONGER RES INTEGRA IN VIEW OF THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE C ASE OF ACIT VS. BHAUMIK COLOURS [2009] 27 SOT 270 (MUM) (SB) IN WHICH IT HA S BEEN HELD THAT IF THE LOAN IS GIVEN TO ANY CONCERN IN WHICH SUCH SHAREHOL DER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS SUBSTANTIAL INTEREST TH EN DIVIDEND IS TAXABLE IN THE HANDS OF SUCH SHAREHOLDER AND NOT IN THE HANDS OF THE CONCERN WHICH HAS RECEIVED THE ADVANCE BUT NOT A SHAREHOLDER PER SE . WE ARE ALSO GOVERNED BY THE DECISIONS OF THE HONBLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS. JINESH P. SHAH [2015] 372 ITR 392 (BOM.) (HC); CIT VS. IMP ACT CONTAINERS (P) LTD. [2014] 367 ITR 246 (BOM.) (HC) AND CIT VS. UNIVERSA L MEDICARE (P) LTD. [2010] 324 ITR 263 (BOM.) (HC) IN WHICH THE AFORESAID PROP OSITION OF THE SPECIAL BENCH HAS BEEN APPROVED. ON FACTS, SINCE THE COMPAN Y IS NOT A SHAREHOLDER I.T.A. NO. 57 /MUM/2014 NANDLAL BANKATLAL PVT . LTD. 3 IN THE COMPANY GRANTING THE LOANS AND ADVANCES TO I T, WE FIND THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY JUDICIAL PRECED ENTS NOTED ABOVE. THEREFORE, THE ORDER OF THE CIT(A) DESERVES TO BE U PHELD ON THIS ISSUE. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.07.201 5. $ %& '( 01.07.2015 ) * SD/- SD/- (G.S. PANNU) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER % MUMBAI ; ' DATED 01 .07.2015 *SHARWAN COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.