ITO 7(2)(2), MUMBAI V. SAMARTH LIFE SCIENCE P.LTD, MUMBAI

ITA 63/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75818 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI .. , , . . !' # $%& , $ BEFORE SHRI H L KARWA, PRESIDENT & SHRI N K BILLAIY A, AM $ ./ ITA NO.63/MUM/2013 ' (' / ASSESSMENT YEAR 2006-07 ITO 7(2)(2), MUMBAI. VS. SAMARTH LIFE SCIENCE P. LTD., SAMARTH HOUSE, RAM MANDIR ROAD, GOREGAON (W), MUMBAI-400104 PAN AABCS4014L ( )* /APPELLANT) ( +,)* /RESPONDENT) +, $ ./ C.O. NO. 39/MUM/2014 (ARISING OUT OF ITA NO.63/MUM/2013 FOR ASSESSMENT Y EAR 2006-07) SAMARTH LIFE SCIENCE P. LTD MUMBAI ITO 7(2)(2), MUMBAI. (CROSS-OBJECTOR) ( +,)* /RESPONDENT) APPELLANT BY : SHRI ASHOK SURI CROSS-OBJECTOR BY: SHRI SNEHAL R SHAH $ - ./# / DATE OF HEARING :20.03.2014. 01( - ./# / DATE OF PRONOUNCEMENT : 20.03.2014 %2 %2 %2 %2 / O R D E R PER BENCH: THIS APPEAL BY THE REVENUE AND THE CROSS-OBJECTION BY THE ASSESSEE ARE AGAINST THE VERY SAME ORDER OF THE CIT(A) 13, MUM BAI DATED 25.10.2012 PERTAINING TO A.Y. 2006-07. ITA NO.63/MUM/2013 CO 39/MUM/2014 2 2. ITA NO. 63/MUM/2013 THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE CIT( A) ERRED IN DELETING THE ADDITION OF RS.1,75,25,296/- U/S. 2(22)(E) OF THE A CT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DU RING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAS AC CEPTED A LOAN OF RS.1,75,25,296/- FROM M/S. SAMARTH PHARMA PRIVATE L IMITED. THE AO FURTHER NOTICED THAT MR. RAJIV SHAH WHO IS HOLDING 30.48% O F SHARES OF THE ASSESSEE COMPANY IS ALSO HOLDING 29.6% SHARES OF M/S. SAMART H PHARMA PRIVATE LIMITED. THE AO FURTHER NOTICED THAT THE LENDER COMPANY HAD ACCUMULATED PROFITS OF RS.12,44,62,873/-. THE AO WAS OF THE BELIEF THAT T HE LOAN OF RS.1,75,25,296/- TAKEN BY THE ASSESSEE COMPANY FROM M/S. SAMARTH PHA RMA PRIVATE LIMITED WAS CLEARLY COVERED BY THE PROVISIONS OF SECTION 2(22)( E) OF THE ACT. THE AO ISSUED A SHOW CAUSE NOTICE. THE ASSESSEE WAS ASKED TO EXPLA IN WHY THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT SHOULD NOT BE APPLIED I N RESPECT OF THE LOAN TAKEN FROM M/S. SAMARTH PHARMA PRIVATE LIMITED. THE ASSESSEE FILED DETAILED REPLY STATING THAT THE ASSESSEE IS NEITHER REGISTERED NOR BENEFICIAL S HAREHOLDER OF LENDER COMPANY - M/S. SAMARTH PHARMA PRIVATE LIMITED. THE ASSESSEE FURTHER STATED THAT DEEMED DIVIDEND CAN BE TAXED ONLY IN THE HANDS OF SHAREHOL DERS. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND FAVOUR FROM THE AO, WHO WENT ON TO TREAT THE ENTIRE LOAN OF RS.1,75,25,296/- AS DEEMED DIVIDEND U/S. 2(22)(E) O F THE ACT. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER BEFORE THE CITA) AND RE ITERATED THE FACTS AS WERE STATED BEFORE THE AO. AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) AT PARA 3.3 ON PAGE 7 OBSERVED THAT THE ASSE SSEE WAS NOT HOLDING SHARES OF THE LENDER COMPANY. THE CIT(A) FOLLOWED THE DECISI ON OF THE TRIBUNAL, SPECIAL BENCH, MUMBAI, IN THE CASE OF BHAUMIK COLOURS P. LT D. 313 ITR 146. THE CIT(A) ALSO CONSIDERED THE DECISION OF THE HONBLE DELHI H IGH COURT IN THE CASE OF BHARTI OVERSEAS TRADING CO. 249 CTR 554 AND THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. LTD. 324 ITR 263. AFTER CONSIDERING THESE JUDICIAL DECISIONS, THE CIT(A) CONCLUDED THAT THE A SSESSEE WAS NOT A SHAREHOLDER OF ITA NO.63/MUM/2013 CO 39/MUM/2014 3 THE LENDER COMPANY AND, THEREFORE, THE PROVISIONS O F SECTION 2(22)(E) ARE NOT APPLICABLE. AGGRIEVED, BY THIS THE REVENUE IS BEFO RE US. 4. THE LEARNED DR STRONGLY RELIED UPON THE FINDINGS OF THE AO. THE COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEF ORE THE LOWER AUTHORITIES AND RELIED UPON THE ORDER OF THE CIT(A). 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE JUDICIAL DECISIONS RELIED UPON BY THE CIT(A). IT IS AN UNDI SPUTED FACT THAT THE ASSESSEE COMPANY IS NOT HOLDING ANY SHARES IN THE LENDER COM PANY. M/S. SAMARTH PHARMA PRIVATE LIMITED. IT IS ALSO UNDISPUTED FACT THAT T HE PROVISIONS OF SECTION 2(22)(E) APPLY ONLY IN CASE OF REGISTERED OR BENEFICIAL SHAR E HOLDER. SINCE THE ASSESSEE IS NEITHER REGISTERED NOR A BENEFICIAL SHARE HOLDER OF THE LENDER COMPANY, THE RATIO OF THE DECISION OF THE TRIBUNAL SPECIAL BENCH CLEARLY APPLY ON THE FACTS OF THE CASE, WHICH IS WELL SUPPORTED BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF UNIVERSAL MEDICAL PVT. LTD. (SUPRA). C ONSIDERING THE FACTS IN TOTALITY IN THE LIGHT OF THE JUDICIAL DECISIONS, NO INTERFERENC E IS CALLED FOR IN THE FINDINGS OF THE CIT(A). THE APPEAL FILED BY THE REVENUE IS ACCORDI NGLY DISMISSED. 6. C.O. NO. 39/MUM/2014 IN ITS CO THE ASSESSEE HAS CHALLENGED THE VALIDITY OF RE-OPENING OF ASSESSMENT. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE ON MERITS OF THE CASE, WE DO NOT FIND IT NECESSARY TO DELIBERATE ON THE CROSS-OBJECTION FILED BY THE ASSESSEE. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND THE CROSS- OBJECTION FILED BY THE ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF MARCH, 2014. SD/- SD/- (H L KARWA) (N K BILLAIYA) /PRESIDENT # # # # $%& $%& $%& $%& / ACCOUNTANT MEMBER MUMBAI; 3% DATED : 20 TH MARCH, 2014. SA ITA NO.63/MUM/2013 CO 39/MUM/2014 4 %2 %2 %2 %2 - -- - +. +. +. +. 4 (. 4 (. 4 (. 4 (. / COPY OF THE ORDER FORWARDED TO : 1. )* /THE APPELLANT. 2. +,)* / THE RESPONDENT. 3. 5 ( ) / THE CIT(A), MUMBAI. 4. 5 / CIT 5. 67 +. , , / DR, E BENCH, ITAT, MUMBAI %2 $ / BY ORDER, $, . +. //TRUE COPY// / $8 9 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI