The ACIT, 4(1), Indore V. Shri Narendra Narang L/H. of Late Shri Yogesh Narang, Indore

ITA 593/IND/2010

• Counselvise Citation: 59322714 RSA 2010
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 24-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Section: 133A

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 593/IND/2010 A.Y. 2007-08 ACIT-4(1), INDORE ... APPELLANT VS LATE YOGRAJ NARANG THROUGH L/H SHRI NARENDRA NARANG INDORE PAN ABMPM-5919R ... RESPONDENT CO NO. 29/IND/2010 ARISING OUT OF ITA NO. 593/IND/2010 LATE YOGRAJ NARANG THROUGH L/H SHRI NARENDRA NARANG INDORE ... OBJECTOR VS ACIT-4(1), INDORE ... RESPONDENT 2 REVENUE BY : SHRI ARUN DEWAN, SR. DR ASSESSEE BY : SHRI PRAKASH JAIN DATE OF HEARING : 17.10.2011 DATE OF PRONOUNCEMENT : 17.10.2011 O R D E R PER JOGINDER SINGH BY WAY OF THE PRESENT APPEAL THE REVENUE CHALLENGE S THE ORDER DATED 17.6.2010 OF THE LEARNED COMMISSIONER O F INCOME TAX (APPEALS) DELETING THE ADDITION OF RS. 29,14,14 1/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEN D INCOME U/S 2(22)(E) OF THE ACT WHEREAS BY WAY CROSS OBJECT ION THE ASSESSEE CHALLENGES THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) IN TREATING THE SHORT TERM CAP ITAL GAINS EARNED OF RS. 6,59,241/- ON SALE OF SHARES AS BUSIN ESS INCOME. 2. DURING HEARING WE HAVE HEARD SHRI ARUN DEWAN, LE ARNED SENIOR DR AND SHRI PRAKASH S. JAIN, LD. COUNSEL FOR ASSESSEE. THE CRUX OF ARGUMENTS ON BEHALF OF THE REVENUE IS I N SUPPORT TO THE ASSESSMENT ORDER WHEREAS THE LEARNED COUNSEL FO R THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 3 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON FILE. BRIEF FACTS OF THE CASE ARE THAT A SURVEY ACTION U/S 133A WAS CARRIED OUT AT THE BUSIN ESS PREMISES OF THE ASSESSEE ON 15 TH MARCH, 2007. AN INFORMATION WAS RECEIVED BY THE LEARNED ASSESSING OFFICER FROM ANOTHER ASSESSING OFFICER THAT LATE SHRI YOGRAJ NARANG WAS A BENEFICIAL OWNER OF SHARES OF SUPER GALVANISED SHEETS PRIVATE LIMITED TO THE EXTENT OF 6.73% IN THE CAPACITY OF YOGRAJ NA RANG HUF. THE ASSESSEE IN HIS INDIVIDUAL CAPACITY WAS HOLDING 5.4% SHARES OF THE AFORESAID SAME COMPANY. THE STAND OF THE ASSESSING OFFICER IS THAT THE ASSESSEE WAS BENEFICI AL OWNER OF MORE THAN 10% SHARES, THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE APPLICABLE. NOW THE QUESTIO N ARISES WHETHER THE SHARES OF HUF CAN BE CLUBBED IN THE IND IVIDUAL SHARES FOR THE PURPOSE OF INVOKING THE PROVISIONS O F SECTION 2(22)(E) OF THE ACT ? THE OBVIOUS ANSWER IS NO B ECAUSE IT IS A SETTLED POSITION OF LAW THAT THE SHARES OF HUF CA NNOT BE CLUBBED IN THE INDIVIDUAL CAPACITY. IT IS NOT THE INTENTION OF THE LEGISLATURE TO CLUB THE SHARES OF INDIVIDUAL TO THE HUF FOR THE 4 PURPOSE OF INVOKING THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT. EXPLANATION 3(A) OF SECTION 2(22)(E) FOR THE PURPOSES OF THIS CLAUSE CONCERN MEANS A HINDU UNDIVIDED FAMIL Y OR A FIRM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUA LS OR A COMPANY. IN SECTION 2(22)(E) OF THE ACT, HUF CATEG ORY IS SEPARATELY DEALT WITH, THEREFORE, IT IS NOT THE INT ENTION OF THE LEGISLATURE TO CLUB THE HOLDINGS OF INDIVIDUAL WITH THE HUF. THE HUF SHARES ARE 6.73% WHEREAS INDIVIDUAL SHARES ARE 5.40% OF THE TOTAL ISSUED CAPITAL. EVEN IN JCIT V. KUNAL ORG ANICS PRIVATE LIMITED; 164 TAXMAN 169 (AHD) IT WAS HELD THAT INDI VIDUAL AND HUF ARE TWO DIFFERENT ENTITIES AND, THEREFORE, THEI R SHARE HOLDINGS CANNOT BE CLUBBED FOR APPLYING PROVISIONS OF SECTION 2(22)(E) OF THE ACT. IDENTICAL RATIO WAS LAID DOWN IN APPEAL NO. 4 (MUM)/2006 ORDER DATED JUNE 25, 2008. THE RATIO LAID DOWN IN THE CASE OF CIT VS. RAJ KUMAR; 300 ITR 462 (DEL) CLEARLY SUPPORTS OUR VIEW. WE, THEREFORE, DISMISS THE APPE AL OF THE REVENUE. 5 SO FAR AS THE CROSS OBJECTION IS CONCERNED, IT WAS NOT PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE. T HEREFORE, IT IS DISMISSED AS NOT PRESSED. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE C ROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.10.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE DN/-