ITO 10(2)(3), MUMBAI V. GREENTEX WOOLD P. LTD, MUMBAI

ITA 6193/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8379 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 06-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 07-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI H. L. KARWA, PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO. 6193/MUM/2011 ASSESSMENT YEAR : 2006-07 THE INCOME TAX OFFICER WARD -10(2)(3), ROOM NO.431, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400 020. VS. M/S. GREENTEX WOOLS P. LTD. GOKALCHAND RATANCHAND WOLLEN MILL COMPOUND, L.B.S. MARG, GHATKOPAR, MUMBAI-400 086 PAN NO. AAACG 4780 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MOHIT JAIN RESPONDENT BY : NONE DATE OF HEARING : 06.11.2012 DATE OF PRONOUNCEMENT : 09.11.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 3.6.2011 OF CIT(A) FOR THE ASSESSMENT YEAR 2006-07. THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING ADDITI ON OF RS.19,85,443/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(E ) OF THE ACT. 2. FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSMENT P ROCEEDINGS NOTED THAT THE ASSESSEE HAD RECEIVED LOAN/ADVANCE OF RS. 19,85,443/- FROM M/S. GRANTEX & CO. P. LTD. THE AO ALSO NOTED THA T SHRI RAVIKANT KAPOOR AND SHRI RAJIV RANJAN KAPOOR WERE SHARE HOLDE RS IN THE ITA NO.6193/M/2011 A.Y. 2006-07 2 ASSESSEE COMPANY AS WELL AS IN THE LOANEE COMPANY HAVING SHA RE HOLDING OF MORE THAN 10%. THE AO, THEREFORE, ASKED T HE ASSESSEE TO EXPLAIN AS TO WHY THE LOAN/ADVANCE TAKE BY THE ASSESSEE SH OULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF A CT. THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS NOT A SHARE HOLDER OF M/S. GRANTEX & CO. P. LTD. AND, THEREFORE, LOAN/ADVANCE C OULD NOT BE ASSESSED AS DEEMED DIVIDEND IN CASE OF THE ASSESSEE. IT WAS A LSO SUBMITTED THAT LOAN/ADVANCE HAD BEEN RECEIVED IN THE O RDINARY COURSE OF BUSINESS AND, THEREFORE SECTION 2(22)(E) WOULD NOT A PPLY IN CASE OF THE ASSESSEE. THE AO HOWEVER DID NOT ACCEPT THE CONTENTIO NS RAISED AND HELD THAT PROVISIONS OF SECTION 2(22)(E) WERE APPLI CABLE AS THERE WERE COMMON SHARE HOLDERS HOLDING MORE THAN 10% OF SHA RES IN EACH COMPANY. ACCORDINGLY, THE AO ASSESSED THE SUM OF RS.19,85,44 3/- AS DEEMED DIVIDEND IN CASE OF THE ASSESSEE. 3. ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFOR E CIT(A) THAT LOAN/ADVANCES HAD BEEN RECEIVED IN THE ORD INARY COURSE OF BUSINESS AS ASSESSEE HAD LET OUT THE PREMISES BELONGING TO I T FOR STORAGE OF FINISHED GOODS OF THE LENDING COMPANY. INSTEA D OF TAKING A FIXED DEPOSIT, THE ASSESSEE HAD BEEN RECEIVING MONEY FROM TIME TO TIME WHICH WAS IN CONNECTION WITH THE BUSINESS. IT WAS A LSO SUBMITTED THAT ASSESSEE WAS NOT SHARE HOLDER OF M/S. GRANTEX AND CO . (P) LTD. AND, THEREFORE PROVISIONS OF SECTION 2(22)(E) WERE NOT APPLICABLE. ITA NO.6193/M/2011 A.Y. 2006-07 3 ACCORDINGLY IT WAS URGED THAT ADDITION MADE SHOULD BE D ELETED. CIT(A) AGREED WITH THE SUBMISSIONS OF THE ASSESSEE THAT PROVISION S OF SEC 2(22)(E) WERE APPLICABLE ONLY IN CASE OF SHARE HOLDER A S HELD BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK CO LOURS (118 ITR 1). SINCE THE ASSESSEE WAS NOT A SHARE HOLDER IN THE LEND ING COMPANY, CIT(A) DIRECTED THE AO TO DELETE THE ADDITION MADE B Y HIM AS DEEMED DIVIDEND AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL B EFORE TRIBUNAL. 4. AT THE TIME OF HEARING OF THE APPEAL NO ONE APPE ARED ON BEHALF OF THE ASSESSEE TO ARGUE THE CASE AND AN ADJOURNMENT APPL ICATION HAD BEEN RECEIVED BY THE BENCH. AS THE ISSUE WAS FOUND COVERE D IN FAVOUR OF THE ASSESSEE, THE ADJOURNMENT APPLICATION WAS REJECTED AND THE CASE WAS HEARD. THE ISSUE IS REGARDING TAXABILITY OF LOAN /ADVANCES RECEIVED BY THE ASSESSEE FROM M/S. GRANTEX & CO . P. LTD. THE AO HAD TREATED LOAN/ADVANCES AS DEEMED DIVIDEND UNDER SECTION 2 (22)(E) ON THE GROUND THAT THE ASSESSEE COMPANY AND LENDING COMPANY HAD COMMON SHAREHOLDER HOLDING MORE THAN 10% SHARE IN EACH COMPANY . THE VIDE TAKEN BY THE AO HAS NOT BEEN ACCEPTED BY CIT (A) WHO HAS HELD THAT PROVISIONS OF SECTION 2(22)(E) CAN BE APPLIED ONLY IF LOAN/ADVANCE HAS BEEN RECEIVED BY A SHARE HOLDER. THE VIEW TAKEN BY CIT(A) IS SUPPORTED BY THE DECISION THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF BHAUMIK COLOUR (SUPRA) WHICH HAS ALSO BEEN UP HELD BY THE HON'BLE HIGH COURT OF BOMBAY IN CASE OF UNIVERSAL MEDICA RE PRIVATE ITA NO.6193/M/2011 A.Y. 2006-07 4 LIMITED (324 ITR 263). THERE IS NO DISPUTE RAISED BY T HE LD. DR REGARDING THE ASSESSEE NOT BEING A SHARE HOLDER OF LEND ING COMPANY . WE THEREFORE SEE NO INFIRMITY IN THE ORDER OF CIT(A ) IN DELETING THE ADDITION AND THE SAME IS THEREFORE UPHELD. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.11.2012. SD/- SD/- (H.L. KARWA ) PRESIDENT (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 09.11.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.