M/s Zygo Bonsai Private Limited, Bangalore V. Income Tax Officer Ward-7(1)(4), Bangalore

ITA 591/BANG/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6394 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 07-04-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 25-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GANESH GHALE
• Assessee Lawyers: RAGHAVENDRA R CHAKRABORTY
• Keywords: Deemed dividend; Set aside
• Section: 2(22)(e)

Judgement Text

ITA NO.591/BANG/2019 M/S. ZYGO BONSAI PRIVATE LIMITED, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI B. R. BASKARAN, ACCOUNTANT MEMBER SMC ITA NO.591/BANG/2019 ASSESSMENT YEAR: 2011-12 M/S. ZYGO BONSAI PVT. LTD. SY.NO.21, KOLLUR VILLAGE ANTHARAHALLI DODDABALLAPUR BENGALURU PAN NO : AAACZ0447R VS. ITO WARD-7(1)(4) BENGALURU APPELLANT RESPONDENT APPELLANT BY : SHRI RAGHAVENDRA R. CHAKRABORTY, A.R. RESPONDENT BY : SHRI GANESH GHALE, STANDING COUNSEL DATE OF HEARING : 19.04.2021 DATE OF PRONOUNCEMENT : 20.04.2021 O R D E R THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 18.2.2019 PASSED BY LD. CIT(A)-7 BENGALURU AND IT R ELATES TO THE ASSESSMENT YEAR 2011-12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN CONFIRMING THE ADDITION M ADE BY THE A.O. U/S 2(22)(E) OF THE INCOME-TAX ACT,1961 ['THE ACT' FOR SHORT]. 2. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THIS IS A REOPENED ASSESSMENT. THE A.O. NOTICED THAT THE ASSE SSEE COMPANY HAS BORROWED LOAN FROM ANOTHER COMPANY NAMED M/S. S HRI HANUMAN JUTE MILLS PVT. LTD., KOLKATA. IT WAS ALSO NOTICED THAT THE ASSESSEE AND THE LENDER COMPANY ARE RELATED PARTIES UNDER COMMON ITA NO.591/BANG/2019 M/S. ZYGO BONSAI PRIVATE LIMITED, BANGALORE PAGE 2 OF 4 MANAGEMENT. BOTH COMPANIES HAS A COMMON DIRECTOR N AMED MR. HEMANT KUMAR JALAN, WHO HELD 98% SHAREHOLDINGS IN T HE ASSESSEE COMPANY AND ALSO HELD MORE THAN 10% OF VOTING RIGHT S IN THE LENDER COMPANY. ACCORDINGLY, THE A.O. TOOK THE VIEW THAT THE LOAN AMOUNT RECEIVED BY THE ASSESSEE COMPANY IS LIABLE TO BE TA XED U/S 2(22)(E) OF THE ACT AS DEEMED DIVIDEND, SINCE THE LOAN HAS BEEN RECEIVED BY A CONCERN IN WHICH SHRI HEMANT KUMAR JALAN IS A MAJ OR SHAREHOLDER. ACCORDINGLY, THE A.O. ASSESSED THE A MOUNT OF RS.34.55 LAKHS AS DEEMED DIVIDEND U/S 2(22)(E) OF T HE ACT IN THE HANDS OF THE ASSESSEE COMPANY HEREIN. THE LD. CIT( A) ALSO CONFIRMED THE SAME. 3. THE LD. A.R. SUBMITTED THAT THE DEEMED DIVIDEND IS ASSESSABLE ONLY IN THE HANDS OF THE SHAREHOLDERS. THE ASSESSEE COMPANY HEREIN IS NOT THE SHAREHOLDER IN THE LENDER COMPANY AND HENCE, THE A.O. WAS NOT JUSTIFIED IN ASSESSING THE LOAN AMOUNT AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPAN Y. IN SUPPORT OF THESE CONTENTIONS, THE LD. A.R. PLACED RELIANCE ON THE FOLLOWING DECISIONS: A) ANKITECH PVT. LTD. (ITA NO.462/2019) (DEL) B) UNIVERSAL MEDICARE PVT. LTD. 190 TAXMAN 144 (BOM) C) BHOUMIK COLOUR PVT. LTD. 118 ITD 1 (SB) 4. ON THE CONTRARY, THE LD. D.R. PLACED HIS RELIANC E ON THE DECISION RENDERED BY HONBLE SUPREME COURT IN THE C ASE OF GOPAL & SONS (HUF) VS. CIT (CIVIL APPEAL NO.12274 OF 2016 D ATED 4.1.2017). THE LD. D.R. SUBMITTED THAT THE DEEMED DIVIDEND CAN BE ASSESSED IN THE HANDS OF THE BENEFICIAL SHAREHOLDER. ITA NO.591/BANG/2019 M/S. ZYGO BONSAI PRIVATE LIMITED, BANGALORE PAGE 3 OF 4 5. I HEARD THE PARTIES ON THIS ISSUE AND PERUSED TH E RECORD. IN THE CASE OF GOPAL & SONS (HUF), THE HONBLE SUPREME COURT HAS HELD THE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT CA N BE ASSESSED IN THE HANDS OF BENEFICIAL SHAREHOLDER. HOWEVER, THE QUESTION THAT ARISES IN THE PRESENT CASE IS WHETHER THE ASSESSEE COMPANY IS BENEFICIAL SHAREHOLDER OR NOT? ADMITTEDLY, THE SHA REHOLDING IN BOTH ASSESSEE COMPANY AS WELL AS IN THE LENDER COMPANY W AS HELD BY MR. HEMANT KUMAR JALAN. THERE IS NO FINDING ON RECORD TO SHOW THAT MR. HEMANT KUMAR JALAN IS HOLDING THE SHARES IN LEN DER COMPANY ON BEHALF OF THE ASSESSEE COMPANY HEREIN I.E. IT IS NOT THE CASE OF THE A.O. THAT THE ASSESSEE COMPANY HEREIN IS THE BE NEFICIAL SHAREHOLDER. HENCE, IN MY VIEW, THE DECISION RENDE RED BY HONBLE SUPREME COURT IN THE CASE OF GOPAL & SONS (HUF) WIL L NOT APPLY TO THE FACTS OF THE PRESENT CASE. 6. ON THE CONTRARY, IN THE CASE OF ANKITECH PVT. LT D. (SUPRA), UNIVERSAL MEDICARE PVT. LTD. (SUPRA), THE HONBLE H IGH COURTS HAVE HELD THE VIEW TAKEN BY THE SPECIAL BENCH IN THE CAS E OF BHOUMIK COLOUR PVT. LTD. (SUPRA) THAT THE DEEMED DIVIDEND I S ASSESSABLE ONLY IN THE HANDS OF THE SHAREHOLDER. ADMITTEDLY, IN TH E INSTANT CASE, THE ASSESSEE COMPANY IS NOT THE SHAREHOLDER IN M/S. SRI HANUMAN JUTE MILLS PVT. LTD. HENCE, FOLLOWING THE DECISION RENDERED BY HONBLE DELHI & BOMBAY HIGH COURTS, I HOLD THAT DEE MED DIVIDEND IS NOT ASSESSABLE IN THE HANDS OF THE ASSESSEE COMP ANY AND THE SAME IS ASSESSABLE ONLY IN THE HANDS OF THE SHAREHO LDER SUBJECT TO THE PROVISIONS OF SEC.2(22)(E) OF THE ACT. ACCORDI NGLY, I SET ASIDE THE ORDER PASSED BY LD. CIT(A) AND DIRECT THE A.O. TO D ELETE THE IMPUGNED ADDITION. ITA NO.591/BANG/2019 M/S. ZYGO BONSAI PRIVATE LIMITED, BANGALORE PAGE 4 OF 4 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH APR, 2021 SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 20 TH APR, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.