ITO 10(2)(3), MUMBAI V. INDUSTRIAL ESTERS & CHEMICALS P.LTD, MUMBAI

ITA 7005/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8399 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 31-10-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V KRISHNAMOORTY
• Assessee Lawyers: MANMOHAN AGARWAL
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 7005/MUM /2010 ASSESSMENT YEAR : 2007-08 THE INCOME TAX OFFICER 10(2)(3), ROOM NO. 431, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 20. VS. M/S INDUSTRIAL ESTERS & CHEMICALS P. LTD., 202, MADHAV APTS., JAWAHAR ROAD, GHATKOPAR (E), MUMBAI 400 077. PAN AAACI5231N (APPELLANT) (RESPONDENT) DEPARTMENT BY: SHRI V. KRISHNAMOORTY ASSESSEE BY : SHRI MANMOHAN AGARWAL DATE OF HEARING 06-11-2012 DATE OF PRONOUNCEMENT 09-11-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDER DTD. 9-8-2010 PASSED BY THE LD. CIT(A) 21, MUMBAI FOR THE A.Y. 2007-08. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE A SSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF REFINING OF USED AND WAS TE OIL. DURING THE COURSE OF ASSESSMENT PROCEEDING, THE A.O. FROM THE DETAILS AND BALANCE SHEET FILED BY THE ASSESSEE OF THE COMPANY OBSERVED THAT THE ASSESSEE HAS RECEIVED RS. 66,50,488/- FROM GOKUL PETROCHEMIC ALS PVT. LTD., A ITA NO. 7005/MUM/2010 2 SISTER CONCERN OF THE ASSESSEE COMPANY HAVING OPENI NG BALANCE AS ON 1- 4-2006 AT RS. 46,26,460/-. HE FURTHER OBSERVED THA T THERE ARE TWO COMMON DIRECTORS IN EACH OF THE TWO COMPANIES, VIZ. SHRI R.J. GUPTA & SMT. G.R. GUPTA HOLDING 36.57% AND 36.32% RESPECTIV ELY OF THE PAID UP SHARE CAPITAL OF THE ASSESSEE COMPANY AND THEY ARE ALSO HOLDING 39.57% AND 25.17% RESPECTIVELY OF THE PAID UP SHARE CAPITA L OF GOKUL PETROCHEMICALS PVT. LTD. HE FURTHER OBSERVED THAT T HE LENDING COMPANY VIZ. GOKUL PETROCHEMICALS PVT. LTD. HAS GOT RESERVE S OF RS. 1.49 CRORES AS ON 1-4-2006 AND ACCORDINGLY HE HELD THAT THE LENDIN G OF LOAN OF RS. 66,50,488/- ATTRACTS THE PROVISION OF SECTION 2(22) (E) OF THE INCOME TAX ACT, 1961 (THE ACT). HOWEVER, HE ADDED RS. 20,24,02 8/- [RS. 66,50,488/- (-) RS. 46,26,460/-] BEING ADDITIONAL SUM RECEIVED DURING THE YEAR UNDER THE HEAD INCOME FROM OTHER SOURCES. ON APPEAL, T HE LD. CIT(A) WHILE OBSERVING THAT IT IS A TRADE ADVANCE CANNOT BE CONS IDERED AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT, RELIED ON THE DEC ISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN ACIT VS. BHAUMIK COLOURS ( 2009) 18 DTR (MUMBAI)(TRIB) 451/118 ITD 1 (MUM) (SB) AND DELETED THE ADDITION MADE BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING GROUND OF APPEAL: - ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 202402 8/- MADE ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. ITA NO. 7005/MUM/2010 3 4. AT THE TIME OF HEARING THE LD . D.R. SUPPORTS THE ORDER OF THE A.O. 5. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSES SEE RELIED ON THE ORDER OF THE LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE ASSESSEE COMPANY IS NOT HOLDING ANY SHARE IN THE LENDER COMP ANY I.E. NEITHER THE ASSESSEE COMPANY IS A REGISTERED SHARE HOLDER NOR B ENEFICIAL SHARE HOLDER IN THE SAID COMPANY. 7 . IN BHAUMIK COLOUR (P.) LTD. (SB) (SUPRA), IT HAS BE EN HELD (PARA 41, AT PAGE 27 OF 118 ITD): ON THE FIRST QUESTION : DEEMED DIVIDEND CAN BE ASS ESSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDE R COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN SHAREHOLDER. ON THE SECOND QUESTION: THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2(22)(E) REFERS TO BOTH A REGISTERED SHAREH OLDER AND BENEFICIAL SHAREHOLDER. IF A PERSON IS REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER THEN THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. 8. IN CIT V/S UNIVERSAL MEDICARE PRIVATE LIMITED (2 010)324 ITR 263 (BOM), THEIR LORDSHIPS AFTER CONSIDERING THE AFORES AID DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL HAS HELD (PAGE 269, P LACITUM 10): ..THE DEFINITION DOES NOT ALTER THE LEGAL POSI TION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHARE- HOLDER. CONS EQUENTLY IN THE PRESENT CASE THE PAYMENT, EVEN ASSUMING THAT IT WAS A DIVIDEND, WOULD HAVE TO BE TAXED NOT IN THE HANDS OF THE ASSESSEE B UT IN THE HANDS OF THE SHAREHOLDER. THE TRIBUNAL WAS, IN THE CIRCUMSTANCES , JUSTIFIED IN COMING ITA NO. 7005/MUM/2010 4 TO THE CONCLUSION THAT, IN ANY EVENT, THE PAYMENT C OULD NOT BE TAXED IN THE HANDS OF THE ASSESSEE. WE MAY IN CONCLUDING NOT E THAT THE BASIS ON WHICH THE ASSESSEE IS SOUGHT TO BE TAXED IN THE PRE SENT CASE IN RESPECT OF THE AMOUNT OF RS. 32,00,000 IS THAT THERE WAS A DIV IDEND UNDER SECTION 2(22)(E) AND NO OTHER BASIS HAS BEEN SUGGESTED IN THE ORDER OF THE ASSESSING OFFICER. RESPECTFULLY FOLLOWING THE ABOVE BINDING DECISIONS, WE HOLD THAT THE PROVISIONS OF SECTION 2(22)(E) ARE NOT APPLICABLE I N THE CASE OF THE ASSESSEE AND ACCORDINGLY WE ARE INCLINED TO UPHOLD THE FINDINGS OF THE LD. CIT(A) IN DELETING THE ADDITION MADE BY THE A.O. T HE GROUNDS TAKEN BY THE REVENUE ARE, THEREFORE, REJECTED. 9. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED ON 9-11-2012. SD/- (N.K. BILLAIYA ) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 9-11-2012 RK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 21, MUMBA I 4. COMMISSIONER OF INCOME TAX M.C. X, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH I, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI