ITO 4(1)(1), MUMBAI V. CRESCENT FINSTOCK LTD, MUMBAI

ITA 6955/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92463 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 29-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Wholly owned subsidiary; Deemed dividend

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI . . , . , BEFORE SHRI I.P. BANSAL, JM AND RAJENDRA, AM ./ I.T.A. NO.6955/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 THE ITO - 4(1)(1), ROOM NO.636, 6 TH FLOOR, AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 / VS. M/S. CRESCENT FINSTOCK LTD. KANTA TERRACE, 1 ST FLOOR, KALBADEVI ROAD, MUMBAI 400 002 ./ ./ PAN/GIR NO. : AAACC6420F ( / APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY SHRI PREMANAND J. R ESPONDENT BY SHRI DHARMESH SHAH ' #$ / DATE OF HEARING : 28/04/2015 ' #$ / DATE OF PRONOUNCEMENT : /2015 / O R D E R PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT IS D IRECTED AGAINST ORDER PASSED BY LD. CIT(A)-8, MUMBAI DATED 19/9/2013 FOR ASSESSMENT YEAR 2010-11. GROUNDS OF APPEAL READ AS UNDER: 1. 'ON THE FACTS AND IN THE 'CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING AND NOT TREATING THE LO AN OBTAINED FROM THE SUBSIDIARY COMPANY OF RS.43,56,279/-AS DEEMED DIVID ENDS UJS.2(22)(E) OF THE ACT, ADDED BACK BY THE AO'X. 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) ERRED IN HOLDING THAT DOUBLEDOT FINANCE L TD- A COMPANY LISTED IN VADODARA STOCK EXCHANGE IS A COMPANY IN WHICH TH E PUBLIC ARE SUBSTANTIALLY INTERESTED U/S.2(18)(B)(C) OF THE ACT , IN WHICH 59.8% OF THE EQUITY SHARE CAPITAL IS HELD BY THE ASSESSEE COMPAN Y'. ./ I.T.A. NO.6955/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 2 3. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OF FICER BE RESTORED.' 2. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS OBTAINED LOAN OF RS.43,56,279/- FROM ITS SUBSIDIARY NAMELY DOUBLEDOT FINANCE LTD.(DFL). IT WAS FURTHER NOTICED BY THE AO THAT THE PAID UP SHAR E CAPITAL OF DFL IS RS.17.51 CRORES AND ASSESSEE COMPANY WAS HOLDING1.0 4 CRORES SHARES OUT OF 1.75 CRORES, WHICH WORKS OUT TO 59.80% OF THE PAID UP SHARE CAPITAL OF DFL. THE ACCUMULATED PROFIT AVAILABLE WITH DFL WERE AMOU NTING TO RS.19.09 CRORES, THEREFORE, AO INVOKED PROVISIONS OF SECTIO N 2(22)(E) OF THE INCOME TAX ACT,1961(THE ACT) AND ADDED THE AFOREMENTIONED LOAN TO THE INCOME OF THE ASSESSEE AS DEEMED DIVIDEND. LD. CIT(A) HAS DE LETED THIS ADDITION FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2008-09 VID E WHICH SIMILAR DISALLOWANCE OF RS.1.81 CRORES WAS DELETED. IT IS OBSERVED BY LD. CIT(A) THAT THE ISSUE IN THE PRESENT YEAR IS IDENTICAL TO THE I SSUE RAISED BY THE AO IN THE ASSESSMENT YEAR 2008-09. IT IS IN THESE CIRCUMSTAN CES THE IMPUGNED ADDITION HAS BEEN DELETED BY LD. CIT(A). THE REVEN UE IS AGGRIEVED, HENCE, HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. AT THE OUTSET IT WAS BROUGHT TO OUR NOTICE BY LD . AR THAT AGAINST THE AFOREMENTIONED DECISION OF LD. CIT(A) IN RESPECT OF ASSESSMENT YEAR 2008- 09, REVENUE HAD FILED AN APPEAL RAISING GRIEVANCE A BOUT DELETION OF ADDITION MADE UNDER SECTION 2(22)(E) OF THE ACT AND THE SAID APPEAL OF THE REVENUE IS DISMISSED BY ITAT. REFERENCE WAS MADE TO THE ORDER OF THE TRIBUNAL DATED 18/07/2014 PASSED IN ITA NO.1546/MUM/2012, COPY OF WHICH IS PLACED ON OUR RECORD AND ALSO GIVEN TO LD. DR. LD. DR DID NO T CONTROVERT THE ABOVE SUBMISSIONS OF LD. AR. FOR THE SAKE OF COMPLETENES S THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IS REPRODUCED BELOW: THIS APPEAL FILED BY THE REVENUE ON 5.3.2012 IS AG AINST THE ORDER OF THE CIT (A)-8, MUMBAI DATED 26.12.2011 FOR THE ASSESSMENT Y EAR 2008-2009. 2. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GR OUNDS WHICH READ AS UNDER: ./ I.T.A. NO.6955/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 3 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT (A) ERRED IN DELETING THE ADDITION AMOUNTING TO RS.1,85,02,274/- U/S 2(22)(E) ON ACCOUNT OF DEEMED DIVIDED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE IMPUGNED ORDER OF THE CIT (A) IS CONTRARY TO LAW TO BE SET A SIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. DURING THE PROCEEDINGS BEFORE US, AT THE OUTSET, BOTH THE PARTIES BROUGHT OUR ATTENTION TO THE ABOVE GROUNDS AS WELL AS THE O RDERS OF THE REVENUE AUTHORITIES AND DEMONSTRATED THAT THE COMPANY IN QU ESTION NOT A PRIVATE LIMITED COMPANY WHICH IS ALONE IS ATTRACTED TO THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. THE SAID COMPANY IS A PUBLIC C OMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED. CONSIDERING THE ABOVE DIS TINCTION, THE CIT (A) GRANTED RELIEF TO THE ASSESSEE . IN THIS REGARD, THEY BROUG HT OUR ATTENTION TO PARA 4.8 OF THE IMPUGNED ORDER. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE O RDERS OF THE REVENUE AUTHORITIES IN GENERAL AND ORDER OF THE CIT (A) IN PARTICULAR. ON PERUSAL OF THE SAID ORDER OF THE CIT (A), WE FIND THE SAID PARA 4. 8 IS RELEVANT IN THIS REGARD AND THE SAME READS AS UNDER: 4.8. I HAVE CONSIDERED THE CONTENTION OF THE AO AS WELL AS THE LD AR. FROM THE ABOVE DISCUSSION, THE FOLLOWING POINTS EMERGE. I. THE SUBSIDIARY COMPANY VIZ DOUBLEDOT FINANCE LI MITED IS NOT A PRIVATE LIMITED COMPANY BUT IS A COMPANY IN WHICH P UBLIC IS SUBSTANTIALLY INTEREST AS MORE THAN 51% (58.53%) OF THE EQUITY SHARE CAPITAL OF DOUBLEDOT FINANCE LIMITED HAS BEEN HELD UNCONDITIONALLY THROUGHOUT THE FINANCIAL YEAR BY CRESCENT FINSTOCK LIMITED (THE APPELLANT COMPANY). II. CRESCENT FINSTOCK LIMITED IS A COMPANY LISTED ON THE VADODARA STOCK EXCHANGE. III. VADODARA STOCK EXCHANGE IS A RECOGNIZED STOCK EXCHANGE (SEBI APPROVED) FOR THE PURPOSES OF THE INCOME TAX ACT. IV. THE CBDT CIRCULAR 372 OF 1983 CLEARLY STATED T HAT A SUBSIDIARY OF A COMPANY WHICH IS A LISTED COMPANY OR A WHOLLY OWNED SUBSIDIARY OF SUCH SUBSIDIARY COMPANY REFERRED TO EARLIER ARE BOT H COMPANIES IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED. V. THIS VIEW IS ROE THAN AMPLY REINFORCED BY THE C ASES CITED BY THE APPELLANT AND DISCUSSED EARLIER IN THE ORDER. VI. IT IS NOT ENVISAGED BY LAW THAT ONLY WHOLLY OW NED SUBSIDIARY OF A LISTED COMPANY SHALL BE COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED. VII. IF ONE WERE TO CAREFULLY CONSIDER THE TOTALIT Y OF THE PROVISION AS CONTAINED IN SECTION 2(18)(B), IT IS ABUNDANTLY CLE AR THAT THE STIPULATION OF WHOLLY OWNED SUBSIDIARY APPLIES ONLY TO THE HO LDING COMPANY AND NOT TO THE COMPANY IN WHICH THE SHARES ARE HELD. VIII. SECTION 2(18)(B) HAS ALSO MADE A FURTHER DIST INCTION BETWEEN SUBSIDIARY COMPANIES WHICH ARE IN THE NATURE OF MAN UFACTURING ./ I.T.A. NO.6955/MUM/2013 ( / ASSESSMENT YEAR : 2010-11 4 COMPANIES AND NONMANUFACTURING COMPANIES IN ORDER T O QUALIFY AS A SUBSIDIARY IT IS SUFFICIENT THAT ONLY 40% OF THE SH ARES BE HELD BY THE HOLDING COMPANY WHEREAS IN THE NON-MANUFACTURING SE CTION IT HAS TO BE NOT LESS THAN 50%. 5. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THA T THE CIT (A) HAS RIGHTLY ADJUDICATED THE ISSUE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 4. IN THIS VIEW OF THE SITUATION, AFTER HEARING BO TH THE PARTIES, AS IT WAS NOT CONTROVERTED BY LD. DR THAT FACTS AND CIRCUMSTA NCES OF THE PRESENT YEAR ARE IDENTICAL TO THE FACTS AS APPEARED IN ASSESSMEN T YEAR 2008-09, RESPECTFULLY FOLLOWING THE AFOREMENTIONED ORDER OF THE TRIBUNAL, WE FIND NO INFIRMITY IN THE IMPUGNED RELIEF GRANTED BY LD. CIT (A) TO THE ASSESSEE. WE DECLINE TO INTERFERE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON`01/0 5/2015 ' * +, 01/05/2015 ' SD/- SD/- (RAJENDRA) . . (I.P.BANSAL) /ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; + DATED 01/05/2015 !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. /# ( ) / THE CIT(A)- 4. /# / CIT 5. 01 #23 , $ 23 , / DR, ITAT, MUMBAI 6. 4 / GUARD FILE. / BY ORDER, 0# # //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . . .VM , SR. PS