ALFA SAI MINERALS P.LTD, MUMBAI V. ASST CIT 2(1), MUMBAI

ITA 6396/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1755 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-09-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 30-10-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VINITA J MENON
• Keywords: Period of limitation; Deemed dividend; Time period of passing order

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A, MUMBAI !', !# $% &&, ' $% ! ( BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO.6396/M/2013 ( '+ , '+ , '+ , '+ , / ASSESSMENT YEAR: 2007-08) M/S. ALFA SAI MINERALS PVT. LTD., 5, GROUND FLOOR, VARMA CHAMBERS, HOMJI STREET, FORT, MUMBAI 400 001 PAN: AACCA 7176L + + + + / VS. ACIT -2(1), AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI ( -. / APPELLANT) ( /0-. /RESPONDENT) PRESENT FOR: ASSESSEE BY : MS. NEELAM JADHAV, A.R. REVENUE BY : MS. VINITA J. MENON, D.R. + 1 2# / DATE OF HEARING : 16.09.2015 34, 1 2# / DATE OF PRONOUNCEMENT : 30.12.2015 $!5 / O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 06.07.2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2007-08. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER TREATING THE AMOUNT RECEIVED BY THE ASSESSE E COMPANY FROM THE M/S. VULCAN DISTILLERIES PVT. LTD. AS A DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT WITHOUT APPRECIATING THAT ASSES SEE COMPANY IS NOT THE SHAREHOLDERS OF M/S. VULCAN DISTILLERIES PVT. L TD. THEREFORE SECTION 2(22)(E) WILL NOT BE APPLICABLE TO THE FACT S OF THE PRESENT CASE. 2. THE LEARNED CIT(A) ERRED IN MAKING THE ADDITION UNDER SECTION 2(22)(E) OF THE ACT, OF RS. 29,00,000/- IN RESPECT OF FUNDS RECEIVED ITA NO.6396/M/2013 M/S. ALFA SAI MINERALS PVT. LTD. 2 FROM THE M/S. VULCAN DISTILLERIES PVT. LTD. AS A IN TER-CORPORATE DEPOSITS. 3. WITHOUT PREJUDICE, THE CALCULATION OF RS. 29,00, 000/- FOR DISALLOWANCE WAS INCORRECT. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL. 3. AT THE OUTSET, THE LD. D.R. HAS POINTED OUT THAT THE ORDER OF THE LD. CIT(A) IS DATED 06.07.2010 WHEREAS THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL ON 30.10.13 AND HENCE THE SAME IS TIME BARRE D. WHEREAS THE LD. A.R. OF THE ASSESSEE HAS STATED THAT THE ASSESSEE HAD RE CEIVED THE ORDER ONLY ON 27.09.2013 AND HENCE THE APPEAL HAS BEEN PREFERRED WITHIN THE LIMITATION PERIOD. 4. WE FIND THAT EARLIER AN APPLICATION IN THIS RESP ECT WAS MOVED BY THE DEPARTMENT THAT THE APPEAL WAS TIME BARRED. THE TR IBUNAL VIDE ORDER DATED 23.03.15 HAD DIRECTED THE D.R. TO VERIFY THE DATE O F COMMUNICATION OF ORDER OF LD. CIT(A) TO THE ASSESSEE. HOWEVER, NO EVIDENCE H AS BEEN BROUGHT ON RECORD BY THE REVENUE THAT THE ORDER WAS COMMUNICATED TO T HE ASSESSEE BEFORE 27.09.13. HENCE, THIS OBJECTION OF THE REVENUE IS THEREFORE DISMISSED. 5. NOW COMING TO THE MERITS OF THE CASE. THE ISSUE IS RELATING TO THE TREATMENT OF THE AMOUNT RECEIVED BY THE ASSESSEE CO MPANY FROM M/S. VULCAN DISTILLERIES PVT. LTD. AS DEEMED DIVIDEND UNDER SEC TION 2(22)(E) OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVED THAT THE ASSESSEE HAD RECEIV ED FUNDS FROM M/S. VULCAN DISTILLERIES PVT. LTD. UP TO THE ACCUMULATED PROFIT S IN THE BALANCE SHEET OF THE COMPANY. THE DIRECTOR OF THE SAID COMPANY NAMELY C APTAIN PRAMOD S. SALVI WAS HAVING SHAREHOLDING OF 79.92% AND WHEREAS HE WA S HAVING SHAREHOLDING OF 63.39% IN M/S. VULCAN DISTILLERIES PVT. LTD. TH E AO HELD THAT THE LENDING COMPANY HAD ADEQUATE ACCUMULATED PROFITS. SO PROVI SIONS OF SECTION 2(22)(E) GET ATTRACTED. THE LD. A.R. OF THE ASSESSEE HAS BR OUGHT OUR ATTENTION TO THE ITA NO.6396/M/2013 M/S. ALFA SAI MINERALS PVT. LTD. 3 VARIOUS DECISIONS OF THE TRIBUNAL IN THE OWN CASE O F THE ASSESSEE IN EARLIER ASSESSMENT YEARS I.E. A.Y. 2005-06 IN ITA NO.7697/M /2011 DATED 03.05.13 AND HAS STATED THAT THE ISSUE IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE. 6. WE HAVE GONE THROUGH THE SAID DECISIONS AND FOUN D THAT IN EARLIER ASSESSMENT YEARS, THE ISSUE HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THE DECISION FOR THE ASSESSMENTS YEAR 2005-06 DATED 03.05.13 VIDE ITA NO.7697/M/2011. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND HAVE GONE THROUGH THE RECORD. THE LEARNED CO-ORDINATE BENCH O F THE TRIBUNAL VIDE ORDER DATED 08.04.2011 IN THE ASSESSEE'S OWN CASE FOR A.Y 2006- 07 IN ITA NO. 2579/MUM/2010 HAS HELD AS UNDER: 4. 'WE HAVE HEARD THE LD. D.R. NONE WAS PRESENT FOR THE ASSESSEE. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN OUR OPINION, THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) HA S TO BE DELETED AS PRESENT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND ALSO BY T HE DECISION OF THE SPECIAL BENCH OF THE ITAT MUMBAI IN THE CASE OF BHAUMIK COL OURS P. LTD 313 ITR (AT)46 (MUM) (SB). IN THE CASE BHAUMIK COLOURS P. L TD.(SUPRA) IT IS HELD AS UNDER: '44. THE DEFINITION OF DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT IS AN INCLUSIVE DEFINITION. SUCH INCLUSIVE DEFINITION ENL ARGES THE MEANING OF THE TERM 'DIVIDEND' ACCORDING TO ITS ORDINARY AND N ATURAL MEANING. THE ORDINARY AND NATURAL MEANING OF THE TERM DIVIDE ND WOULD BE A SHARE IN PROFITS TO AN INVESTOR IN THE SHARE CAPITA L OF LIMITED COMPANY. TO THE EXTENT THE MEANING OF THE WORD 'DIV IDEND' IS EXTENDED TO LOANS AND ADVANCES TO A SHAREHOLDER OR TO A CONCERN IN WHICH A SHAREHOLDER IS SUBSTANTIALLY INTERESTED DEE MING THEM AS DIVIDEND IN THE HANDS OF A SHAREHOLDER THE ORDINARY AND NATURAL MEANING OF THE WORD 'DIVIDEND' IS ALTERED. TO THIS EXTEND THE DEFINITION OF THE TERM 'DIVIDEND' CAN BE SAID TO OP ERATE. IF THE DEFINITION OF 'DIVIDEND' IS EXTENDED TO A LOAN OR A DVANCE TO A NON- SHAREHOLDER THE ORDINARY AND NATURAL MEANING OF THE WORD DIVIDEND IS TAKEN AWAY. IN THE LIGHT OF THE INTENTION BEHIND THE PROVISIONS OF SECTION 2(22)(E) TO EXTEND THE LEGAL FICTION TO A CASE OF LOAN OR ADVANCE TO A NON-SHAREHOLDER ALSO, WE ARE OF THE VI EW THAT LOAN OR ADVANCE TO A NON-SHAREHOLDER CANNOT BE TAXED AS DEE MED DIVIDEND IN THE HANDS OF THE NON-SHAREHOLDER. 45. THE BASIC CHARACTERISTIC OF DIVIDEND AS HELD BY THE APEX COURT IN THE CASE OF KANTILAL MANILAL V. CIT [1961] 41 ITR 275 IS A SHARE OF PROFITS OF THE COMPANY GIVEN TO ITS PAYMENT OF DIVI DEND TO ANY PERSON OTHER THAN THE REGISTERED SHAREHOLDER. IF ON E WERE TO ITA NO.6396/M/2013 M/S. ALFA SAI MINERALS PVT. LTD. 4 BREAKUP THE NATURAL MEANING THE FOLLOWING COMPONENT S EMERGE (A) DIVIDEND IS A SHARE OF PROFITS OF THE COMPANY (B) P AID TO ITS SHAREHOLDERS. SECTION 2(22) OF THE ACT ARTIFICIALLY EXTENDS THE SCOPE OF DIVIDEND FROM BEING MORE THAN ONLY A DISTRIBUTIO N OF PROFITS TO COVER CERTAIN OTHER TYPES DISBURSEMENTS SUCH AS LOA NS PAID, ETC. (THE FIRST INGREDIENT MENTIONED ABOVE). IT DOES NOT HOWE VER ALTER THE SECOND COMPONENT OF ITS NATURAL MEANING, VIZ., PAID TO ITS SHAREHOLDER. IN OTHER WORDS ALL THAT SECTION 2(22) SEEKS TO DO IS TO EXPAND THE VARIOUS TYPES PAYMENTS THAT MAY BE REGAR DED AS DIVIDEND. THE APEX COURT WHILE CONSIDERING WHAT CAN COME WITHIN THE ARTIFICIAL DEFINITION OF DIVIDEND UNDER SECTION 2(22) IN THE CASE OF CIT V. NALIN BEHARI LALL SINGHA [1969] 74 ITR 849 (SC) DESCRIBED THE SCOPE OF THE DEFINITION OF DIVIDEND THUS (PAGE 851 OF 74 ITR): 'THE DEFINITION IS, IT IS TRUE, AN INCLUSIVE DEFINI TION AND A RECEIPT BY A SHAREHOLDER WHICH DOES NOT FALL WITHIN THE DEFINITI ON MAY POSSIBLY BE REGARDED AS DIVIDEND WITHIN THE MEANING OF THE ACT UNLESS THE CONTEXT NEGATIVES THAT VIEW.' 5. THE DECISION OF THE HON'BLE SPECIAL BENCH IN THE CASE OF BHAUMIK COLOURS LTD. (SUPRA) HAS BEEN AFFIRMED BY THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF CIT VS. UNIVERSAL MEDICARE (P) LTD . 324 ITR 263 AND THE OPERATIVE PART OF THE SAID DECISION IS AS UNDER:- HOWEVER, EVEN ON THE SECOND ASPECT WHICH HAS WEIGHE D WITH THE TRIBUNAL, WE ARE OF THE VIEW THAT THE CONSTRUCTION WHICH HAS BEEN PLACED ON THE PROVISIONS OF SECTION 2(22)(E) IS CORRECT. SECTION 2(22)(E) DEFINES THE AMBIT OF THE EXPRESSION 'DIVIDEND'. AL L PAYMENTS BY WAY OF DIVIDEND HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE SHAREHOLDER. THE EFFECT OF SECTION 2(22) IS TO PROVIDE AN INCLUSIVE DEFINITION OF THE EXPRESSION D IVIDEND. CLAUSE (E) EXPANDS THE NATURE OF PAYMENTS WHICH CAN BE CLASSIF IED AS A DIVIDEND. CLAUSE (E) OF SECTION 2(22) INCLUDES A PAYMENT MADE BY THE COMPANY IN WHICH THE PUBLIC IS NOT SUBSTANTIALLY IN TERESTED BY WAY OF AN ADVANCE OR LOAN TO A SHAREHOLDER OR TO ANY CONCE RN TO WHICH SUCH SHAREHOLDER IS A MEMBER OR PARTNER, SUBJECT TO THE FULFILLMENT OF THE REQUIREMENTS WHICH ARE SPELT OUT IN THE PROVISION. SIMILARLY, A PAYMENT MADE BY A COMPANY ON BEHALF, OF FOR THE IND IVIDUAL BENEFIT, OF ANY SUCH SHAREHOLDER IS TREATED BY CLAUSE (E) TO BE INCLUDED IN THE EXPRESSION 'DIVIDEND'. CONSEQUENTLY, THE EFFECT OF CLAUSE (E) OF SECTION 2(22) IS TO BROADEN THE AMBIT OF THE EXPRESSION 'DIVIDEN D' BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER. THE DEFINITION DOES NOT ALTER THE LEGAL POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER. CONSEQUENTLY IN THE PRESENT CASE THE P AYMENT, EVEN ASSUMING THAT IT WAS A DIVIDEND, WOULD HAVE TO BE T AXED NOT IN THE HANDS OF THE ASSESSEE BUT IN THE HANDS OF THE SHARE HOLDER. THE TRIBUNAL WAS, IN THE CIRCUMSTANCES, JUSTIFIED IN CO MING TO THE CONCLUSION THAT, IN ANY EVENT, THE PAYMENT COULD NO T BE TAXED IN THE ITA NO.6396/M/2013 M/S. ALFA SAI MINERALS PVT. LTD. 5 HANDS OF THE ASSESSEE. WE MAY IN CONCLUDING NOTE TH AT THE BASIS ON WHICH THE ASSESSEE IS SOUGHT TO BE TAXED IN THE PRE SENT CASE IN RESPECT OF THE AMOUNT OF RS.32,00,000/- IS THAT THE RE WAS A DIVIDEND UNDER SECTION 2(22)(E) AND NO OTHER BASIS HAS BEEN SUGGESTED IN THE ORDER OF THE ASSESSING OFFICER. 6. IN THE PRESENT, CASE, NOWHERE IT IS A CASE OF TH E A.O. THAT THE ASSESSEE- COMPANY IS A SHAREHOLDER OF M/S. ALFA DISTILLERIES P. LTD. OR M/S. VULCAN DISTILLERIES P. LTD. AND AS THE ASSESSEE IS NOT THE SHAREHOLDER OF THOSE COMPANIES, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE TREATING THE ADVANCES/LOANS BORROWED BY THE ASSESSEE COMPANY FROM THOSE TWO COMPANIES. THE LD. CIT(A) TRIED TO DISTINGUISH THE CASE OF THE ASSESSEE WITH THAT OF BHAUMIK COLOURS P. LTD. (SUPRA). WE MAY NOT E HERE THAT JUDICIAL DISCIPLINE REQUIRE THAT ALL AUTHORITIES BELOW SHOUL D FOLLOW THE RATIO AND PRINCIPLES LAID DOWN BY THE HIGHER COURTS AND TRIBU NAL IN JUDICIAL SPIRIT. WE, THEREFORE, DELETE THE ADDITION MADE BY THE A.O. IN ENTIRETY AND ALLOW GROUNDS TAKEN BY THE ASSESSEE.' THE LEARNED DR COULD NOT BRING TO OUR NOTICE ANY NE W FACTS OR EVIDENCE WHICH COULD DISTINGUISH THE CASE OF THE ASSESSEE AS WAS BEFORE THE TRIBUNAL FOR A.Y. 2006-07 4. FACTS AND CIRCUMSTANCES BEING SIMILAR AND WITH N O DISTINGUISHING FEATURE TO TAKE A DIFFERENT VIEW, RESPECTFULLY FOLLOWING THE DECISI ON OF THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR A.Y. 2006-07, WE DO NOT FIND ANY REASO N TO INTERFERE WITH THE ORDER OF THE CIT(A). THERE IS NO MERIT IN THE APPEAL OF THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS HERE BY DISMISSED. 7. THE LD. D.R. HAS FAIRLY ADMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. FOLLOWING THE DECISION OF THE TRIBUNAL IN THE EARLIER ASSESSMENT YEARS, THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.12.2015. $!5 1 34, # ! 6 7$+8 30.12.2015 4 1 & SD/- SD/- ( !' / RAJENDRA) ( && / SANJAY GARG) !# $% / ACCOUNTANT MEMBER ' $% / JUDICIAL MEMBER /MUMBAI ; 7$+ / DATED 30.12 . 2015 * KISHORE ITA NO.6396/M/2013 M/S. ALFA SAI MINERALS PVT. LTD. 6 $!5 1 /'2IJ K!J,2 $!5 1 /'2IJ K!J,2 $!5 1 /'2IJ K!J,2 $!5 1 /'2IJ K!J,2/COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED TO TOTO TO : :: : 1. -. / THE APPELLANT 2. /0-. / THE RESPONDENT. 3. \2 () / THE CIT(A)- 4. \2 / CIT 5. JB& /'2'+ , , / THE DR CONCERNED BENCH, 6. &F G / GUARD FILE. $!5+ $!5+ $!5+ $!5+ / // / BY ORDER, 0J2 /'2 //TRUE COPY// K KK K/ // /L L L L ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI