ITO WD 8(2)(2), MUMBAI V. KONJAL MACHINES P.LTD, MUMBAI

ITA 6080/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71961 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 05-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , BEFORE SHRI D. MANMOHAN, VP AND SHRI SANJAY ARORA, AM I.T.A. NO. 6080/MUM/2012 ( ASSESSMENT YEAR: 2009-10) INCOME TAX OFFICER WARD 8(2)(2), 2 ND FLOOR, ROOM NO.216-A, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 VS. KONJAL MACHINES PVT. LTD. A/6, MIDC, 5 TH FLOOR, ANDHERI (E), MUMBAI - 400 093 ! ' ./PAN/GIR NO. AAACK2484P ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) !#& / APPELLANT BY : SHRI M.L. PERUMAL $%!#'& / RESPONDENT BY : NONE ( )*'+, DATE OF HEARING : 04.12.2013 -./'+, / DATE OF PRONOUNCEMENT : 13.12.2013 0 O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-17, MUMBAI (CIT(A) FOR SH ORT) DATED 09.07.2012, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSES SMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMEN T YEAR (A.Y.) 2009-10 VIDE ORDER DATED 09.12.2011. 2 ITA NO. 6080/MUM/2012 (A.Y. 2009-10) ITO VS. KONJAL MACHINES PVT. LTD. 2. THE ONLY ISSUE ARISING IN THIS APPEAL IS THE AP PLICABILITY OR OTHERWISE OF THE PROVISION OF SECTION 2(22)(E) OF THE ACT IN THE FAC TS AND CIRCUMSTANCES OF THE CASE. THE ASSESSEE, A COMPANY IN WHICH PUBLIC IS NOT SUBSTANT IALLY INTERESTED, WAS OBSERVED BY THE ASSESSING OFFICER (AO) DURING THE COURSE OF ITS ASS ESSMENT PROCEEDINGS TO HAVE RECEIVED UNSECURED LOAN/S OF RS.301.16 LAKHS FROM M/S. SHETR ON ENTERPRISES P. LTD. (SEPL), A GROUP COMPANY, DURING THE RELEVANT PREVIOUS YEAR. E XAMINING THE SHAREHOLDING PATTERN OF THE LONER AND LOANEE COMPANIES, IT WAS FOUND BY HIM THAT THREE INDIVIDUAL SHAREHOLDERS, HOLDING A MINIMUM OF 20% EACH OF THE VOTING POWER I N SEPL, HAD AN EQUAL SHARE IN THE ASSESSE-COMPANY, I.E., AT 20% EACH. THE PROVISION O F SECTION 2(22)(E) OF THE ACT WAS IN HIS VIEW ATTRACTED; THE WORD CONCERN OCCURRING IN THE PROVISION HAVING BEEN DEFINED (VIDE EXPLANATION 3 THEREOF) TO MEAN INTER ALIA A COMPANY. THE PAYER COMPANY (SEPL) HAVING AN ACCUMULATED PROFIT OF RS.15,81,783/- (AS ON 31.03.2009), THE LOAN TO THE ASSESSEE WAS TO THAT EXTENT LIABLE TO BE DEEMED AS DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY. RELIANCE WAS PLACED BY HIM ON A NUMBER OF CASES LAWS. THE LEARNED CIT(A) ALLOWED RELIEF TO THE ASSESSEE BY FOLLOWING THE DEC ISION BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF CIT VS. BHAUMIK COLOR P. LTD . [2009] 118 ITD 1 (MUM) (SB), SO THAT THE REVENUE IS IN APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOR P. LTD (SUPRA) HAS CLARIFIED THAT THE PROVISION OF SECTION 2(22)(E) WO ULD APPLY ONLY TO A PERSON WHO IS BOTH THE REGISTERED AS WELL AS THE BENEFICIAL SHAREHOLDE R IN THE LENDING COMPANY. FURTHER, THE DEEMED DIVIDEND COULD NOT BE BROUGHT TO TAX IN THE HANDS OF ANY PERSON OTHER THAN SUCH A SHAREHOLDER. IN THE FACTS OF THE INSTANT CASE, THE ASSESSE-COMPANY IS NOT A SHAREHOLDER OF THE PAYER OR THE LENDING COMPANY. IT HAS ALSO NOT B EEN ESTABLISHED THAT THE LOAN UNDER REFERENCE WAS FOR AND BEHALF OF OR FOR THE BENEFIT OF THE THREE SHAREHOLDERS, IN WHICH CASE, AGAIN, THE IMPUGNED AMOUNT COULD BE TAXED IN THEIR HANDS INASMUCH AS ITS STANDS CLARIFIED THAT DEEMED DIVIDEND U/S. 2(22)(E) COULD ONLY BE TA XED IN THE HANDS OF A SHAREHOLDER. THIS 3 ITA NO. 6080/MUM/2012 (A.Y. 2009-10) ITO VS. KONJAL MACHINES PVT. LTD. PROPOSITION HAS IN FACT BEEN SUBSEQUENTLY ENDORSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD . [2010] 324 ITR 263 (BOM). CONTINUING FURTHER, WE OBSERVE THAT THE AO HAD ALSO MADE A PROTECTIVE ASSESSMENT FOR RS. 1,16,168/- ON THE BASIS THAT THIS AMOUNT HA S BEEN RECEIVED BY THE ASSESSEE ON CURRENT ACCOUNT, SO THAT ADDITION TO THIS EXTENT, T HOUGH INCLUDED IN THE SUM OF RS. 15.82 LACS FOR WHICH SUBSTANTIVE ADDITION STANDS MADE BY HIM, WOULD IN ANY CASE SURVIVE. THOUGH THIS MATTER HAS NOT BEEN SPECIFICALLY AGITAT ED BY THE ASSESSEE BEFORE THE FIRST APPELLATE AUTHORITY, WE FIND THAT THE SAID AMOUNT F ORMS PART OF THE AGGREGATE AMOUNT OF RS. 301.16 LACS ADVANCED BY SEPL TO THE ASSESSEE DU RING THE YEAR. FURTHER, THE BASIS OF THE DELETION BY THE LD. CIT(A) IS THE DECISION BY T HE SPECIAL BENCH IN THE CASE OF BHAUMIK COLOR P. LTD . (SUPRA), WHICH WOULD, FOR THE REASONS AFORE-STATE D, APPLY EQUALLY TO THE SUM OF RS. 1.16 LACS, SO THAT NO SEPARATE CAUSE QUA THIS AMOUNT OBTAINS. ACCORDINGLY, RESPECTFULLY FOLLOWING THE DECISION BY THE SPECIAL BENCH IN THE CASE OF BHAUMIK COLOR P. LTD . (SUPRA), WE CONFIRM THE IMPUGNED ORDER, SO THAT N O INTERFERENCE AT OUR END IS CALLED FOR. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 13, 2013 SD/- SD/- (D. MANMOHAN) (SANJAY ARORA) / VICE PRESIDENT / ACCOUNTANT MEMBER ( 1* MUMBAI; 2 DATED : 13.12.2013 3 . ./A.K. PATEL, PS ! ' #$%& '&$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. ( 4+ ( ) / THE CIT(A) 4. ( 4+ / CIT CONCERNED 5. 5)67 $3+389 , , 89/ , ( 1* / DR, ITAT, MUMBAI 6. 7: ;* / GUARD FILE 4 ITA NO. 6080/MUM/2012 (A.Y. 2009-10) ITO VS. KONJAL MACHINES PVT. LTD. ! ( / BY ORDER, ) / (* + (DY./ASSTT. REGISTRAR) , ( 1* / ITAT, MUMBAI