DCIT 7(1), MUMBAI V. MARKISH EXIM (I) P.LTD, MUMBAI

ITA 6958/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79525 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 19-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JIVANLAL LAVIDIYA
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUDICIAL MEMBER ITA NO. 6958/MUM/2012 ASSESSMENT YEAR: 2009-10 DCIT-7(1) R. NO. 622, AAYAKAR BHAVAN M.K. ROAD, CHURCHGATE MUMBAI- 4-- 020 VS. M/S. MARKISH EXIM (I) PVT. LTD. FLAT C, 2 ND FLOOR, ARTHUR HOUSE, 87 -A, DR. A.B. ROAD, WORLI, MUMBAI 400 018 (APPELLANT) (RESPONDENT) PERMANENT ACCOUNT NO. :-AAACP 4076 G ASSESSEE BY : SHRI HARI S. RAHEJA REVENUE BY : SHRI JIVANLAL LAVIDIYA DATE OF HEARING : 17.07.2014 DATE OF PRONOUNCEMENT : 23.07.2014 O R D E R PER DR. S.T.M. PAVALAN, JM: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE LD.CIT(A)-13, MUMBAI DATED 25.09.2012 FOR THE ASSES SMENT YEAR 2009-10. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS:- I) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DECIDING THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE, IGNORING THE SECOND LIMB OF THE SECTION 2(22)(E) WHICH COVERS A CASE OF A LOAN GIVEN TO A CONCERN HAVING COMMON SHAREHOLDER. II) THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN FOLLOWING THE SPECIAL BENCH DECISION IN THE CASE OF ACIT VS. BHAUMIK COLO UR (P) LTD, AND IGNORING ITS OWN DECISION IN THE CASE OF UNISOL INFRASERVICE S PVT. LTD., IN ITA NO.2088/MUM/2008 DATED 11.08.2009? 3. BRIEFLY STATED, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPORT OF GENERAL PRODUCTS AND DURING THE SCRUTINY ASSESSMENT PROCEED INGS, THE AO NOTICED THAT M/S. IB SERVICES GROUP LLC WAS A MAJORITY SHAREHOLDER WI TH A TOTAL SHAREHOLDING OF 99% IN ASSESSEES COMPANY AND M/S. IB SERVICES LLC WAS ALSO HAVING SUBSTANTIAL INTEREST IN THE COMPANIES NAMELY M/S. SPARKLING STARS SEAFOO DS PVT. LTD., M/S. PICKWICK ITA NO. 6958/MUM/2012 M/S. MARKISH EXIM (I) PVT. LTD ASSESSMENT YEAR: 2009-10 2 HYGIENIC PRODUCTS P. LTD. AND M/S. MENTOR HOLDING S HARES OF 99.98%, 99.98% AND 34% IN THE SAID CONCERNS RESPECTIVELY. THE AO ALSO NOTICED THAT M/S. IB SERVICES GROUP LLC WAS HOLDING MORE THAN 10% SHARE IN THE AS SESSEE COMPANY. M/S. IB SERVICES GROUP LLC WAS ALSO HOLDING MORE THAN 10% S HARE IN THE SAID THREE COMPANIES. THE AO FURTHER NOTICED THAT THE ASSESSEE COMPANY HAD RECEIVED LOANS FROM THE SAID COMPANIES, THE DETAILS OF THE LOANS F ILED BY THE ASSESSEE COMPANY IS STATED IN PAGES 2 AND 3 OF THE ORDER OF THE LD.CIT( A). THE AO, HELD THAT M/S. IB SERVICES GROUP LLC WAS A BENEFICIARY OWNER OF SHARE S WITH SHAREHOLDING OF MORE THAN 10% IN ASSESSEE COMPANY AS WELL AS IN THE OTHE R COMPANIES FROM WHOM THE ASSESSEE HAD RECEIVED HUGE ADVANCES. ACCORDINGLY, T HE AO HELD THAT THESE TRANSACTIONS SATISFIED ALL THE CONDITIONS REQUIRED FOR TREATING LOANS AND ADVANCES AS THE DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. ON APP EAL, THE LD.CIT(A) HELD THAT THE ASSESSEE HAD EXPLAINED THAT IT WAS NOT A SHAREHOLDE R IN ANY OF THE COMPANIES FROM WHOM LOANS ADVANCES WERE RECEIVED AND BY RELYING ON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF BHAUMIK COLOUR PVT. LTD. 118 ITD 1 (MUM)(SB) , AND THE DECISION OF THE HONBLE HIGH COURT IN THE C ASE OF CIT VS. M/S. UNIVERSAL MEDICARE PVT. LTD. 324 ITR 263 WHEREIN IT WAS HELD THAT A DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHA REHOLDER OF THE LENDER COMPANY AND NOT IN THE HANDS OF BELONGING CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER/PARTNER, DELETED THE ADDITION MADE BY THE AO . AGGRIEVED BY THE IMPUGNED DECISION, THE REVENUE IS IN APPEAL BEFORE US. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE MATE RIAL ON RECORD, IT IS PERTINENT TO MENTION THAT THE TRIBUNAL IN THE ASSES SEES OWN CASE FOR THE A.Y. 2007- 08 IN ITA NO. 704/MUM/2011 HAS DELETED THE ADDITION MADE/CONFIRMED U/S 2(22)(E) OF THE ACT, BASED ON THE FINDING THAT THE ASSESSEE IS NOT A SHAREHOLDER IN M/S. SPARKLING STARS SEAFOOD PVT. LTD. AND THEREBY THE T RIBUNAL RELIED ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF BHAUMIK COLOUR PVT. LTD. (SUPRA) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. M/S. UNIVERSAL MEDICARE PVT. LTD (SUPRA). THE PRESENT CASE IN HAND RELATES TO THREE COMPANIES WHICH INCLUDES M/S. SPARKLING STARS SEAFOODS PVT. LTD. INVOLVED IN THE A.Y. 2007-08. THE PERUSAL OF THE RELEVANT RECORDS REVEALS THAT THE ASSESSEE, DUR ING THE ASSESSMENT AS WELL AS FIRST APPELLATE PROCEEDINGS, HAS PROPERLY EXPLAINED THAT IT WAS NOT A SHAREHOLDER IN ANY OF ITA NO. 6958/MUM/2012 M/S. MARKISH EXIM (I) PVT. LTD ASSESSMENT YEAR: 2009-10 3 THE COMPANIES FROM WHOM LOANS OR ADVANCE HAVE BEEN RECEIVED. IT IS RELEVANT TO STATE THAT THE SAID FACT IS NOT DISPUTED BY THE REV ENUE. WHEN THE FACT BEING SO, WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE WIT H THE ORDER OF THE LD.CIT(A) APPLYING THE RATIO OF SPECIAL BENCH OF BHAUMIK COLO UR PVT. LTD. (SUPRA) AND THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF UNIVERSAL MEDICARE PVT. LTD. (SUPRA) TO THE FACTS OF THE ASSESSEE FOR DELET ING THE IMPUGNED ADDITION MADE BY THE AO. THEREFORE, THE IMPUGNED ADDITION OF THE LD. CIT(A) DESERVES TO BE SUSTAINED AND UPHELD. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JULY 2014. SD/- SD/- (SANJAY ARORA) (DR. S.T.M. PAVALAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 23.07.2014. *SRIVASTAVA COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.