DCIT, Jaipur V. SHRI NARAYAN DAS MUKHIJA, Jaipur

ITA 700/JPR/2012

• Counselvise Citation: 70023114 RSA 2012
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 27-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G G MUNDRA
• Keywords: Opportunity of being heard; Deemed to accrue or arise in india; Deemed dividend

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 700/JP/2012 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2009-10 DY. COMMISSIONER OF INCOME TAX, CIRCLE-2, JAIPUR. CUKE VS. NARAYAN DAS MUKHIJA, MUKHIJA CHAMBERS, M.I. ROAD, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AECPM 1619 K VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI KAILASH MANGAL (JCIT) FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI G.G. MUNDRA (C.A.) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 15/01/2015 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 27/03/2015 VKNS'K @ ORDER PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 16/05/2012 PASSED BY THE LEARNED CIT (A)-I, JAIPUR FOR A.Y. 2009-10. THE SOLE GROUND OF APPEAL IS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O. UNDER THE PROVISION OF SECTION 2(22)(E) OF THE I.T. ACT. ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 2 2. THE SOLE GROUND OF APPEAL IS AGAINST DELETING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 2(22)(E) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT). THE ASSESSEE HAD INCOME FROM PRODUCTION/DISTRIBUTION OF FILMS AND FINANCE AND DE ALING IN SHARES. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSEE IS THE BENEFICIARY OWNER OF SHARES HAVING MORE THAN 17.5% OF THE VOTING POWER IN M/S NAVCHITRA (P) LTD. WHEREAS THE COMPANY HAS ACCUMULA TED PROFIT OF RS. 96,25,132/- AS ON 31/3/2009 AND RS. 58,66,993/- AS ON 01/4/2008. THE ASSESSEE WAS HAVING AN OPENING CREDIT BALANCE OF RS. 41,20,849/- AS ON 1 ST APRIL. 2008. THERE WERE VARIOUS CREDIT AND DEBIT TRA NSACTIONS IN THIS ACCOUNT AND ON 14/10/2008 HAD A PEAK DEBIT BALANCE OF RS. 43,87,756/- . AT THE END OF YEAR I.E. ON 31/3/2009 THE ASSESSEE HAD CREDIT BALANCE OF RS. 91,57,427/-. THE LD ASSESSING OFFICER GAVE RE ASONABLE OPPORTUNITY OF BEING HEARD ON LOAN TAKEN FROM THE C OMPANY M/S NAVCHITRA DISTRIBUTORS (P) LTD., SHOULD NOT BE TREA TED DIVIDEND U/S 2(22)(E) OF THE ACT, WHICH WAS REPLIED BY THE ASSESSE E VIDE LETTER DATED 19/12/2011, WHICH HAS BEEN REPRODUCED BY THE ASSESS ING OFFICER AT PAGE NOS. 4 AND 5 OF THE ASSESSMENT ORDER. AFTER CO NSIDERING THE ASSESSEES REPLY, THE LD ASSESSING OFFICER HELD THA T AS PER HON'BLE SUPREME COURT DECISION IN THE CASE OF MISS. P. SHAR DA (1998) 229 ITR ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 3 444 (SC), THE HONBLE COURT HELD THAT WITHDRAWAL BY THE SHAREHOLDER FROM THE COMPANY-AMOUNTED TO LOAN OR ADVANCE BY THE COMPANY TO SHAREHOLDER-LEGAL FICTION EMBODIED IN SEC. 2(22)(E) CAME INTO PLAY AS SOON AS MONIES WERE PAID BY THE COMPANY. HE FURTHER RELIED ON THE DECISION IN THE CASE OF MRS. TARULATA SHYAM VS. CIT REPORTED IN 108 ITR 345 AND HELD THAT DEBIT BALANCE IN THE ACCOUNTS OF THE SHARE HOLDERS ARE LOANS AND ADVANCES GIVEN BY THE COMPANY TO ATTRACT THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT. M/S NAVCHITRA DISTRIBU TORS PVT. LTD. WAS NOT IN MONEY LENDING BUSINESS BUT IT CARRY ON THE BUSIN ESS OF DISTRIBUTION/EXHIBITION/ PRODUCTION/FINANCING OF CI NEMATOGRAPHIC FILMS, TALKIES, SHORT FILMS, ADVERTISING FILMS, T.V. FILMS AND ANY OTHER MOVIE FILMS OF EVERY DESCRIPTION. THE LD ASSESSING OFFICER ALSO STATED DETAILS AND VARIOUS ITEMS OF BUSINESS DONE BY THE COMPANY O N PAGE NO. 5 OF THE ASSESSMENT ORDER AND ALSO DISCUSSED THE OBJECT INCIDENTAL OR ANCILLARY AS PER MEMORANDUM OF ASSOCIATION AND OTHE R OBJECTS. THE COMPANY HAD ACCUMULATED PROFIT AS ON 31/3/2009 AT R S. 96,25,132/-. THE ASSESSEE HAD DEBIT BALANCE OF RS. 84,51,349/- BU T THE DEEMED DIVIDEND IS TO BE RESTRICTED TO THE EXTENT OF AVAIL ABLE ACCUMULATED PROFIT WHICH IS IN THIS CASE IS RS. 37,58,138/-. THE SIMILA R ADDITIONS WERE MADE ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 4 IN A.Y. 2006-07, 2007-08 AND 2008-09 U/S 2(22)(E) O F THE ACT. ACCORDINGLY, HE ADDED RS. 37,58,138/- U/S 2(22)(E) OF THE ACT. 3. BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER BEFORE THE LEARNED CIT( A), WHO HAD ALLOWED THE APPEAL BY OBSERVING AS UNDER:- I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE A.R. AND FIND THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE COVERED BY THE ORDER OF THE ITAT, J AIPUR BENCH IN THE CASE OF THE ASSESSEE FOR A.Y. 2008-09, ITA N O. 709/JP/2011 DATED 20/04/2012 WHEREIN ON THE SAME FAC TS THE HONBLE ITAT HAD ADJUDICATED IN FAVOUR OF THE APPELL ANT. IT IS PERTINENT TO NOTE THAT THE HONBLE ITAT VIDE ITS ORD ER NOS. 817/JP/09 AND 832/JP/2010 DATED 25/03/2011 IN THE C ASE OF THE ASSESSEE FOR ASSESSMENT YEARS 2006-07 AND 2007- 08 ALSO ADJUDICATED IN FAVOUR OF THE APPELLANT ON THE SAME FACTS. THE HONBLE ITAT IN ITS ORDER FOR A.Y. 2006-07 AND 2007 -08 (SUPRA) ON PAGE 12 OF ITS ORDER, PARA 13 HAS GIVEN THE FOLL OWING FINDINGS:- IN CASE OF REMAINING TWO LOANS GIVEN BY M/S NAVCHI TRA DISTRIBUTORS PVT. LTD. AND M/S NATRAJ INDIA LTD. DIRECTLY TO THE ASSESSEE, WE FIND THAT IN THESE CASES THERE WAS NO LOAN AND ADVANCE W HICH IS COVERED IN SECTION 2(22)(E) AS THE AMOUNT WAS GIVEN BY THE ASSESSEE AND TAKEN BY THE ASSESSEE WERE OUT OF FINANCING ACTIVIT Y. THERE IS NO DISPUTE THAT THESE COMPANIES WERE INDULGING IN FINA NCING ACTIVITIES AND AMOUNT OF LOAN TAKEN FROM THE ASSESSEE AND GIVE N TO THE ASSESSEE WERE OUT OF THIS FINANCING ACTIVITY. THERE FORE, THE CASAE OF THE ASSESSEE COVERS BY THE EXCEPTION CLAUSE (II) OF SECTION 2(22)(E) OF THE ACT. ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 5 SINCE THE HONBLE ITAT HAS CONSISTENTLY ADJUDICATED IN FAVOUR OF THE ASSESSEE ON THE SAME FACTS AS MENTIONED ABOVE, THE MATTER IS COVERED BY THE ORDER OF THE HONBLE ITAT BENCH (S UPRA). THE A.O. HAS NOT BROUGHT ANY NEW ARGUMENTS OR EVIDENCE TO CONTROVERT THE FINDING OF THE HONBLE ITAT, JAIPUR B ENCH, THEREFORE, THE ADDITION OF RS. 37,58,138/- IS DELET ED. 4. NOW THE REVENUE IS IN APPEAL BEFORE US. THE LEARNE D D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFF ICER. 5. AT THE OUTSET, THE LEARNED A.R. FOR THE ASSESSEE SUBMITTED THAT THE IDENTICAL ISSUE IN A.Y. 2006-07, 2007-08 AND 20 08-09 HAS BEEN DECIDED BY THE HONBLE ITAT, JAIPUR BENCH, JAIPUR IN ASSESSEES OWN CASE IN ITA NO. 709/JP/2011 FOR A.Y. 2008-09 THEN I TA NO. 817/JP/2009 AND 832/JP/2010 FOR A.Y. 2006-07 AND 20 07-08 IN FAVOUR OF THE ASSESSEE. THEREFORE, HE PRAYED TO CONFIRM THE ORDER OF THE LD CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE FA CTS AND CIRCUMSTANCES OF THE CASE, THE IDENTICAL ISSUE HAS BEEN DECIDED B Y THE COORDINATE BENCH IN ASSESSEES OWN CASE VIDE ORDER DATED 25/03/ 2011 FOR A.Y. 2006-07 AND 2007-08 PASSED IN ITA NO. 817/JP/2009 A ND 832/JP/2010. THE RELEVANT PORTION OF THE ORDER OF THE COORDINATE BENCH IS REPRODUCED AS UNDER:- ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 6 12. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED THEM CAREFULLY. AFTER CONSIDERING THE SUBMISSIONS AND P ERUSING THE MATERIAL ON RECORD, WE FIND NO INFIRMITY IN THE ORD ER OF LD. CIT (A). THE LD. CIT (A) HAS EXAMINED THE FACTS OF THE CASE IN RESPECT OF EACH COMPANY WHO HAS ADVANCED LOAN TO THE ASSESS EE DIRECTLY OR TO THE COMPANY WHERE ASSESSEE IS HAVING SUBSTANTIAL INTEREST. IN THREE CASES I.E. M/S. NAVRANG COMPLEX PVT. LTD., M/S. NAVCHITRA DISTRIBUTORS (MULTIPLEX) PVT. LTD. A ND M/S. NAVRANG REFRACTORIES PVT. LTD. THE PROVISIONS OF SE CTION 2(22)(E) ARE NOT APPLICABLE. THE LD. D/R FAIRLY STATED THAT IN THESE CASES THE CONDITIONS OF SECTION 2(22)(E) ARE NOT SATISFIE D FOR ATTRACTING THESE PROVISIONS. HOWEVER, HE HAS PLACED RELIANCE O N THE ORDER OF THE AO FOR THE REASON THAT DEPARTMENT IS IN APPE AL. FINDING OF LD. CIT (A) HAS BEEN REPRODUCED SOMEWHERE ABOVE IN THIS ORDER AND THOSE FINDINGS OF LD. CIT (A) REMAINED UN CONTROVERTED. THEREFORE, IN THESE CASES WE HOLD THAT THE LD. CIT (A) WAS JUSTIFIED IN DELETING THE ADDITIONS. FOR THE SAKE O F FURTHER CLARIFICATION, WE WOULD LIKE TO MENTION THAT IN CASE OF M/S. NAVRANG REFRACTORIES, THE TRANSACTIONS BETWEEN TWO CONCERNS ARE NOT ADVANCE BUT TRANSACTIONS OF SALE OF FIRE BR ICKS. THEREFORE, THERE IS NO QUESTION OF ATTRACTING PROVI SIONS OF SECTION 2(22)(E). IN CASE OF M/S. NAVRANG COMPLEX PVT. LTD. TO M/S. NAVCHITRA DISTRIBUTORS PVT. LTD. AND IN CASE O F M/S. NAVCHITRA DISTRIBUTORS (MULTIPLEX) PVT. LTD., IT IS SEEN THAT IN BOTH THESE CASES ASSESSEE HOLDS 10% SHARE IN THE LENDER COMPANY BUT DOES NOT HOLD SUBSTANTIAL INTEREST I.E. 20% SHA RE HOLDING IN THE COMPANY WHO HAS RECEIVED MONEY I.E. M/S. SHRI N AVCHITRA ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 7 DISTRIBUTORS PVT. LTD. THEREFORE, CONDITIONS ARE N OT SATISFIED FOR ATTRACTING SECTION 2(22)(E) PROVISIONS. ACCORDINGL Y WE HOLD THAT LD. CIT (A) WAS JUSTIFIED IN CANCELING THE ADDITION OF RS. 20,87,632/- AND RS. 13,49,731/- IN CASE OF THESE TWO COMPANIES. MOREOVER, THE ASSESSEE IS NOT A DIRECT SHAREHOLDER AND, THEREFORE, DECISION OF SPECIAL BENCH IN CASE OF BHO WMICK IS SQUARELY APPLICABLE WHEREIN IT IS HELD THAT DEEMED INCOME CAN BE ASSESSEE IN CASE OF SHAREHOLDER ONLY. THE AMOUN T WAS NOT GIVEN TO THE ASSESSEE DIRECTLY, THEREFORE, IT CANNO T BE TREATED AS DEEMED INCOME IN THE HANDS OF THE ASSESSEE. BY RESPECTFULLY FOLLOWING THE ORDER OF THE COORDINAT E BENCH IN ASSESSEES OWN CASE, WE CONFIRM THE ORDER OF THE LD. CIT(A). 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 27/03/2015. SD/- SD/- VKJ-IH-RKSYKUH VH-VKJ-EHUK (R.P.TOLANI) (T.R. MEENA) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 27 TH MARCH, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE DCIT, CIRCLE-2, JAIPUR 2. IZR;FKHZ @ THE RESPONDENT- NARAYAN DAS MUKHIJA, JAIPUR. 3. VK;DJ VK;QDR @ CIT ITA 700/JP/2012_ DCIT VS. NARAYAN DAS MUKHIJA 8 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 700/JP/2012) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR