ITO 5(1)(1), MUMBAI V. ATLAS EQUIFIN P.LTD, MUMBAI

ITA 6029/MUM/2012

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7769 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: RAJEEV WAGLE
• Keywords: Wholly owned subsidiary; Deemed dividend; Scheme of amalgamation
• Section: 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ITA NO. 6029/MUM/2012 , / ASSESSMENT YEAR: 2009-10 ITO -5(1)(1) ROOM NO.570, 5TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. VS. M/S. ATLAS EQUIFIN PVT.LTD. 11, NEW SURYA KIRAN CHS A.K. MARG, B/H. TEJPAL HALL, GOWALIA TANK,MUMBAI-400 036. PAN: AACCA 7723 P ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: SHRI RAJEEV WAGLE / DATE OF HEARING: 07.02.2017 / DATE OF PRONOUNCEMENT:17.03.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , -PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 02/07/2012 OF THE CIT ( A)-9,MUMBAI THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,ENGAG ED IN THE BUSINESS OF SALE OF FILM RIGHTS AND INVESTMENT ACTIVITIES, FILED ITS RETURN OF INCOME O N 30/09/2009, DECLARING TOTAL INCOME AT RS.NIL. THE AO COMPLETED THE ASSESSMENT ON 26/12/2011, U/S. 143 (3) OF THE ACT,DETERMINING ITS INCOME AT RS.4.52 CRORES. 2 .EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE D ISALLOWANCE OF RS. 4.40 CRORES MADE BY THE AO U/S.2(22)(E) OF THE ACT.DURING THE ASSESSMENT PR OCEEDINGS,THE AO FOUND THAT ON 03/04/ 2008,10/04/2008 AND 07/05/2008 M/S. ACE TELEFILMS I NDIA PRIVATE LTD (ATIPL) GAVE LOANS TO THE ASSESSEE OF RS.3.71 CRORES,RS. 29 LAKHS AND RS. 40 LAKHS RESPECTIVELY.VIDE HIS LETTER DATED 15/ 11/2011 THE AO DIRECTED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE PROVISIONS OF SECTION 2(22)(E) SHOULD NOT BE APPLIED ON THE AFORESAID TRANSACTIONS BECAUSE THE ASSESSEE HAD SUBSTANTIAL SHARES OF ATIPL.AFTER CONSIDERING THE SUBMISSION OF THE ASSES SEE, THE AO RELIED UPON THE CASE OF OSCAR INVESTMENTS LTD.(98 ITD 339) AND HELD THAT A SUM OF RS. 4.04 CRORES WAS TO BE TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 6029/M/12 (09-10) M/S.ATLAS EQUIFIN 2 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). BEFORE HIM IT WAS ARGUED THAT AS P ER THE APPROVAL OF THE HONBLE HIGH COURT THERE WAS AMALGAMATION OF BOTH THE ENTITIES I.E. TH E ASSESSEE AND ATIPL,THAT THERE WAS NO LENDER AND/OR NO BORROWER OR FOR THAT MATTER ALONE OR ADVA NCE WAS NEITHER GIVEN OR TAKEN, THAT THE PROVISIONS OF SECTION 2(22)(E) WERE NOT APPLICABLE. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THA T HONBLE BOMBAY HIGH COURT VIDE ITS ORDER DATED 26/02/2010 THE SCHEME OF AMALGAMATION OF ATPI L WITH THE ASSESSEE UNDER SECTION 139 TO 394 OF THE COMPANIES ACT,THAT ATIPL HAD BEEN DISSOL VED AND IT HAD CEASED TO EXIST FOR ALL PRACTICAL PURPOSES IN THE AY OF LAW, THAT ALL THE I NTEREST OF THE TRANSFEROR COMPANY INCLUDING ALL THE DEBTS,LIABILITIES,DUTIES,OBLIGATIONS AND ALL TH E ASSETS AND PROPERTIES OF THE ASSESSEE GOT MERGED /AMALGAMATED WITH THE NEW COMPANY WITH EFFECT FROM 01/04/2008, THAT CLAUSES 4(2) AND (8) OF THE AMALGAMATION ORDER REVEALED THAT FOR ACCOUNTING AND TAXATION PURPOSES THE EFFECTIVE DATE WAS 01/04/1996,THAT THERE WAS A TIME GAP BETWEEN THE AM ALGAMATION SCHEME AND PERIOD WHEN SAME WAS SANCTIONED BY THE COURT,THAT AFTER THE SANCTION THE EFFECTIVE DATE OF AMALGAMATION WAS THE DATE WHEN SCHEME WAS ARRIVED AT AND WHEN THE DATE W AS FIXED UNDER THE SCHEME.HE REFERRED TO THE CASES OF GENERAL RADIO AND APPLIANCES COMPANY L TD.,ORISSA MINING CORPORATION LTD (208 CTR 380)AND DIRECTED THE AO TO REDUCE THE ADDITION MADE U/S.2(22)(E),POST AMALGAMATION. 4. DURING THE COURSE OF HEARING BEFORE US THE DEPARTME NTAL REPRESENTATIVE STATED THAT MATTER COULD BE DECIDED ON MERITS. THE AUTHORISED REPRESEN TATIVE (AR) CONTENDED THAT ASSESSEE HAD A WHOLLY OWNED SUBSIDIARY COMPANY NAMELY ATI PL, THAT THE ASSESSEE AND ATIPL APPLIED TO THE HONBLE HIGH COURT OF BOMBAY FOR AMALGAMATION U/S.3 91-394 OF THE COMPANIES ACT,1956 WITH EFFECT FROM THE APPOINTED DATE I.E. 01/04/2008, THA T THE SCHEME WAS APPROVED BY THE HONBLE COURT ON 26/02/2010 EFFECTIVE FROM 1 ST ,APRIL,2008, 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD MADE AN ADDITION OF RS.4.04 CRORES TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE HEAD DEEMED DIVIDEND INVOKING THE PROVISIONS OF SECTION 2(22)(E),THAT AS PER THE AO ATPIL HAD ADVANCED CERTAIN AMOUNTS TO THE ASSESSEE IN THE MON THS OF APRIL AND MAY OF 2008,THAT THE HONBLE BOMBAY HIGH COURT HAD APPROVED THE SCHEME O F AMALGAMATION OF TWO COMPANIES W.E.F. 01/04/2008.THEREFORE,QUESTION OF TWO COMPANIES EXIS TING AFTER 01/04/2008 WOULD DID NOT ARISE. SETTLED PRINCIPLES OF TAXATION JURISPRUDENCE HOLD T HAT ONE CANNOT GIVE LOAN TO ONESELF.AS THAT THE 6029/M/12 (09-10) M/S.ATLAS EQUIFIN 3 AMOUNTS IN QUESTION WERE SELF WITHDRAWALS,SO,IN OUR OPINION,THE AO HAD WRONGLY INVOKE THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT.THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO,CONFIRMING THE SAME,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH MARCH, 2017. 17 , 2017 SD/- S D/- ( /SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 17.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.