ITO 8(1)(2), MUMBAI V. COUNT N DENIER YARNS P.LTD, MUMBAI

ITA 6706/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93328 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2015
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 15-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 19-11-2013
• Court: TRIBUNAL
• Department Lawyers: UDAYA BHASKAR JAKKE
• Assessee Lawyers: R C JAIN
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.A. NO. 6706/M/2013 (AY:2010 - 2011 ) ITO 8(1)(2), ROOM NO.205, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 20. / VS. M/S. COUNT N. DENIER YARNS PVT LTD., 22, SHARDA BHAVAN, NANDA PATKAR MARG, NEHRU ROAD, VILE P A RLE (E), MUMBAI 400 057. ./ PAN : AADCC4247P ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI UDAYA BHASKAR JAKKE, DR / RESPONDENT BY : SHRI R.C. JAIN, AR / DATE OF HEARING : 15.07.2015 / DATE OF PRONOUNCEMENT : 29 .07.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 19.11.2013 IS AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 6.8.2013 FOR THE ASSESSMENT YEAR 2010 - 2011. IN THIS APPEAL ASSESSEE, RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE ADDITION OF DEEMED DIVIDEND OF RS. 27,81,000/ - MADE U/S 2(22)(E) WITHOUT APPRECIATING THAT THE DEPARTMENT HAS NOT ACCEPTED THE RATIO OF THE DECISION IN THE CASE OF BHAUMIK COLOURS (2009) 027 SOT 0270 (MUM)(SB) AND HAS CONTESTED IT IN SEVERAL CASES FILED BEFORE THE HONBLE BOMBAY HIGH COURT, WHICH HAVE BEEN ADMITTED AND ARE PENDING FOR ADJUDICATION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE ADDITION OF DEEMED DIVIDEND OF RS. 27,81,000/ - MADE U/S 2(22)(E) WITHOUT APPRECIATING THE FACT THAT THE ADDITION WAS MADE IN ACCORDANCE WITH THE CONTENTS AND SPIRIT OF PARA 10 OF CBDTS CIRCULAR NO .495 DATED 22.9.1987. 2. THE ONLY ISSUE RAISED IN GROUNDS RELATE TO THE DELETION OF ADDITION OF RS. 27,81,000/ - MADE BY THE AO INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT WHEN THE ASSESSEE IS NOT A REGISTERED SHAREHOLDER. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING, JOB WORK AND COMMISSION INCOME FROM YARN AND FABRIC. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. 5,61,900/ - . ASSESSMENT WAS CO MPLETED U/S 143(3) 2 OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS. 41,67,447/ - . IN THE ASSESSMENT, AO MADE CERTAIN ADDITIONS AND THE ADDITION OF RS. 27,81,000/ - MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT IS THE ISSUE FOR ADJUDICAT ION IN THIS APPEAL . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) GRANTED RELIEF. ASSESSEE ARGUED THAT THE SAID PROVISIONS ARE INAPPLICABLE AS THE ASSESS EE IS NOT A REGISTERED SHAREHOLDER. THE GIVER AND RECEIVER OF LOANS / ADVANCES ARE CONNECTED BY THE COMMON SHAREHOLDERS ONLY. AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. DURING THE PROCEEDING BEFORE US, L D COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE FACT DETAILED IN PARA 5 OF THE AOS ORDER, AND STATED THAT THE ASSESSEE IS NOT A REGISTERED SHAREHOLDER IN THE COMPANY I.E., M/S. COUNT N DENIER EXIM PT LTD. DURING THE FIRST APPELLATE PROCEEDINGS, C IT (A) GRANTED RELIEF RELYING ON THE SPECIAL BENCH DECISION IN THE CASE OF M/S. BHAUMIK COLOURS (2009) 027 SOT 0270 (MUM)(SB) , WHICH IS RELEVANT FOR THE PROPOSITION THAT T HE PROVISIONS OF SECTION 2(22)( E) CANNOT BE INVOKED WHEN THE ASSESSEE IS NOT A REGIST ERED SHAREHOLDER OF THE SAID COMPANY . CONSIDERING THE SAID RATIO OF THE DECISION, WHICH WAS SUBSEQUENTLY AFFIRMED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE 324 ITR 363 , CIT (A) GRANTED RELIEF TO THE ASSESSEE. THE CONTENTS OF PARA 4.3 OF THE IMPUGNED ORDER ARE RELEVANT IN THIS REGARD. 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDER OF THE AO. 5. AFTER HEARING BOTH THE PARTIES ON THIS ISSUE AND ON PERUSAL OF THE CIT (A)S ORDER, WE FIND THE FOLLOWING RELEVANT PORTION FROM PARA 4.3 IS REQUIRED TO BE EXTRACTED AND THE SAME READS AS UNDER: IN THE PRESENT CASE, PROVISIONS OF SECTION 2(22)(E) CANNOT BE APPLIED IF THE APPELLANT IS NOT A REGISTERED SHAREHOLDER OF THE PAYER COMPANY, ACCORDINGLY THE AO IS DIRECTED TO DELETE THE ADDITION AFTER VERIFYING THE POSITION THAT THE APPELLANT IS NOT A REGISTERED SHAREHOLDER, AS IS AVERRED. 6. THUS, THE ASSESSEE (I.E., M/S. COUNT N. DENIER YARNS PVT LTD ) DOES NOT HAVE ANY REGISTERED SHARES WITH THE GROUP COMPANY IE M/S. COUNT N DENIER EXIM PT LTD (RECIPIENT OF THE LOANS / ADVANCES). THERE IS NO DISPUTE ON THIS FACT. HOWEVER, BOTH THESE COMPANIES ARE CONNECTED BY THE COMMON INVESTORS / REGISTERED SHAREHOLDERS. CONSIDERING THE ABOVE FACT AS WELL AS THE LEGAL PROPOSITION LAID DOWN BY THE AFOREMENT IONED PRECEDENTS, WE ARE OF THE OPINION, THE ABOVE DECISION OF THE 3 CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONO UNCED IN THE OPEN COURT ON 29 TH JULY, 2015. SD/ - SD/ - (AMIT SHUKLA) (D. KARUNAKRA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 29 .7 .2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI