ITO 8(3)(4), MUMBAI V. V. TUFF GLASS P.LTD, MUMBAI

ITA 6799/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8940 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2008-2009
• Appeal Filed On: 07-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH F, MUMBAI BEFORE SHRI I.P.BANSAL,JUDICIAL MEMBER & SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 6799/MUM/2011(A.Y. 2008-09) THE ITO 8(3) (4), ROOM NO.202, 2 ND FLOOR, AAYKAR BHAVAN, MUMBAI - 20 (APPELLANT) VS. M/S.V.TUFF GLASS PVT. LTD. SHOP NO.2, PAREKH PLAZA CHS, VILE PARLE (W), MUMBAI 400 056. PAN:AACCV 4800C (RESPONDENT) APPELLANT BY : SHRI AMARDEEP RESPONDENT BY : NONE DATE OF HEARING : 06/09/2012 DATE OF PRONOUNCEMENT : 12 /09/2012 ORDER PER I.P.BANSAL, J.M THIS IS AN APPEAL FILED BY THE REVENUE. IT IS DI RECTED AGAINST THE ORDER DATED 04/07/2011 PASSED BY LD. CIT(A)-18, MUMBAI FOR THE ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL READ AS UNDER: THE CIT APPEAL VIDE ORDER DATED 04/07/2011 HAS DEL ETED THE ADDITION MADE ON ACCOUNT OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE I.T. ACT AMOUNTING TO RS. 96,92,143/-. 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF D EEMED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT AMOUNTING TO RS. 96,92,143 /-. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN HOLDING THAT DEEMED DIVIDEND IS TAXABLE ON LY IN THE HANDS OF SHARE HOLDER AND NOT IN THE HANDS OF NON-SHARE HOLDERS BY RELYING ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMI K COLOURS 313 ITR 146 WITHOUT APPRECIATING THE FACTS OF THE CASE WHICH AR E CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE ABOVE CASE DECIDED BY THE SPE CIAL BENCH ITA NO. 6799/MUM/2011(A.Y. 2008-09) 2 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) HAS FAILED TO APPRECIATE THE CBDTS CIRCULAR NO.495 DATED 22.09.1987 WHEREIN THE CBDT HAS EXPLAINED THE PROVISIONS OF SE CTION 2(22)(E) AS UNDER: 4) THE NEW PROVISION WOULD, THEREFORE, BE APPLICAB LE IN A CASE WHERE A SHAREHOLDER HAS 10 PER CENT OR MORE OF THE EQUITY C APITAL. FURTHER, DEEMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CONCERN W HERE ALL THE FOLLOWING CONDITIONS ARE SATISFIED: (I) WHERE THE COMPANY MAKES THE PAYMENT BY WAY OF L OANS OR ADVANCES TO A CONCERN; (II) WHERE A MEMBER OR A PARTNER OF THE CONCERN HOL DS 10 PER CENT OF THE VOTING POWER IN THE COMPANY; AND (III) WHERE THE MEMBER OR PARTNER OF THE CONCERN IS ALSO BENEFICIALLY ENTITLED TO 20 PER CENT OF THE INCOME OF SUCH CONCE RN. WITH A VIEW TO AVOID THE HARDSHIP IN CASES WHERE AD VANCES OR LOANS HAVE ALREADY BEEN GIVEN, THE NEW PROVISIONS HAVE BE EN MADE APPLICABLE ONLY IN CASES WHERE LOANS OR ADVANCES AR E GIVEN AFTER 31ST MAY, 1987. THESE AMENDMENTS WILL APPLY IN RELATION TO ASSESSME NT YEAR 1988- 89 AND SUBSEQUENT YEARS. 5) THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A ) ON THE ABOVE GROUNDS TO BE SET ASIDE AND THAT OF THE ITO/AC/DCIT BE RESTORE D. 2. NONE APPEARED ON APPEARED ON BEHALF OF THE ASSESSE E. THEREFORE, WE HAVE HEARD LD. D.R AND PROCEED TO DECIDE THE ISSUE EX-PARTE QUA THE ASSESSEE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAS TAKEN A LOAN OF RS.96,92,143/- FROM M/ S. TOUGH GLASS PVT. LTD AND AFTER REPAYMENTS MADE DURING THE YEAR STILL THE RE WAS AN OUTSTANDING OF RS.15,73,396/ AS PAYABLE BY THE ASSESSEE COMPANY. THE AO ALSO NOTICED THAT THE FOLLOWING PERSONS ARE COMMON SHAREHOLDERS IN THE ASSESSEE COMPANY AND M/S. TOUGH GLASS P. LTD. ITA NO. 6799/MUM/2011(A.Y. 2008-09) 3 S.NO. NAME NO. OF SHARES IN M/S. V. TUFF GLASS P. LTD. AS ON 31/3/2008 % NO. OF SHARES IN M/S.TOUGH GLASS P. LTD. AS ON 31/3/2008 % 1. SHRI T.K.VERGHESE 4,00,000 40% 50,00,000 50% 2. SMT. ANITA VERGHESE 4,00,000 40% 50,00,000 50% IT WAS ALSO NOTICED BY THE AO THAT M/S. TOUGH GLAS S PVT. LTD. HAS ACCUMULATED PROFIT OF RS. 2,38,12,307/- AS ON 31/3/ 2008 AND RS. 1,20,65,157/- AS ON 31/3/2007. CONSIDERING ALL THE SE FACTS THE AO INVOKED PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX AC T,1961 (THE ACT) AND MADE ADDITION OF RS. 96,92,143/- TO THE ASSESSABLE INCOM E OF THE ASSESSEE. 4. BEFORE LD. CIT(A) IT WAS PLEADED THAT ASSESSEE C OMPANY IS NEITHER REGISTERED SHAREHOLDER OF M/S. TOUGH GLASS PVT. LT D. NOR IT WAS BENEFICIAL HOLDERS OF THE SHARES. SECTION 2(22)(E) OF THE ACT COULD NOT BE INVOKED UNLESS THE PERSON WHO HAS RECEIVED THE LOAN OR ADVANCES I S REGISTERED AS WELL AS BENEFICIAL OWNER OF THE SHARES OF THE COMPANY WHO H AS PROVIDED LOANS AND ADVANCES TO THE PAYEE ENTITY. RELIANCE WAS PLACED ON THE DECISION OF SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLORS , 313 ITR (AT) 146 (SB). 5. LD. D.R HAD FILED BEFORE US AN ADJOURNMENT LETTE R ON THE GROUND THAT CERTAIN DETAILS ARE CALLED FOR FROM THE AO FOR ARGU ING THE CASE EFFECTIVELY. HOWEVER, IT WAS SEEN THAT ALL THE FACTS ARE STATED IN THE ASSESSMENT ORDER CLEARLY AND THE ISSUE IS COVERED BY THE AFOREMENTIO NED SPECIAL BENCH DECISION WHICH IS ALSO APPROVED BY DELHI HIGH COUR T IN THE CASE OF CIT VS. ANKITECH PVT. LTD.340 ITR 14(DEL). THEREFORE, WE R EJECT THE ADJOURNMENT APPLICATION FILED BY THE LD. D.R AND PROCEED TO D ECIDE THE PRESENT APPEAL FIELD BY THE REVENUE ON MERIT. 7. WE HAVE HEARD LD. D.R. WE HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER. THE ASSESSEE COMPANY IS NOT A R EGISTERED SHAREHOLDER OF THE PAYER COMPANY. THE ADDITION HAS BEEN MADE ONLY ON THE GROUND THAT ITA NO. 6799/MUM/2011(A.Y. 2008-09) 4 THE DIRECTORS OF PAYER AND PAYEE COMPANY ARE COMMON . IF THE PAYEE COMPANY IS NOT REGISTERED SHAREHOLDER OF THE OTHER COMPANY, SECTION 2(22)(E) OF THE ACT COULD NOT BE APPLIED. THIS VIEW IS SUPP ORTED BY AFOREMENTIONED DECISION OF THE SPECIAL BENCH AS WELL AS THE DECIS ION OF HONBLE DELHI HIGH COURT. THEREFORE, WE DECLINE TO INTERFERE IN THE R ELIEF GIVEN BY LD. CIT(A) AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 12 TH DAY OF SEPT. 2012 SD/- SD/- (B.RAMAKOTAIAH ) (I.P.BANSAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 12 TH SEPT. 2012 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.R F BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR, I TAT, MUMBAI BENCHES MUMBAI. VM.