ITO 10(1)(4), MUMBAI V. KAGAL BEARING P. LTD, MUMBAI

ITA 7015/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62516 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P K B MENON
• Assessee Lawyers: SHAILESH BARNE
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI B.R. MITTAL, J.M. AND SHRI RAJENDRA SI NGH, A.M. ITA NO. 7015/MUM/2010 ASSESSMENT YEAR : 2007-08 ASSTT. COMMISSIONER OF INCOME TAX , RANGE-10(1) ROOM NO.455, AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. M/S. KAGAL BEARING PVT. LTD. B-57/547, GANDHI NAGAR BANDRA(E) MUMBAI-400 051. PAN NO. AACCK 6840 M (APPELLANT) VS. (RESPONDENT) APPELLANT BY : SHRI P.K. B. MENON RESPONDENT BY : SHRI SHAILESH BARNE DATE OF HEARING : 29.5.2012 DATE OF PRONOUNCEMENT : 6.6.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 12.7.2010 OF CIT(A) FOR THE ASSESSMENT YEAR 2007-08. T HE ONLY DISPUTE RAISED IN THIS APPEAL IS REGARDING ADDITION MA DE UNDER SECTION 2(22)(E) AS DEEMED DIVIDEND. 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSM ENT PROCEEDINGS NOTED THAT THE ASSESSEE COMPANY WHICH WAS ENGAG ED IN ITA NO.7015/M/10 A.Y.07-08 2 THE BUSINESS OF MANUFACTURING OF BEARINGS, HAD RECEIVED A SUM OF RS. 15.00 LACS FROM M/S. PRECIMEX BEARING P. LTD. AND THE A MOUNT SHOWN IN THE BALANCE SHEET OF THE ASSESSEE WAS AS SHARE APPLICATION MONEY. THE SHARE HOLDERS OF THE COMPANY AND THEIR SPOUSES WERE H OLDING THE ENTIRE SHARE CAPITAL OF M/S. PRECIMEX BEARING P. LTD. T HE AO ALSO NOTED THAT IN THE BOOKS OF M/S. PRECIMEX BEARING P. LTD., TH E AMOUNT GIVEN TO THE ASSESSEE HAD BEEN SHOWN AS LOANS AND ADVANCES. THE AO, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE AM OUNT SHOULD NOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22) (E). THE ASSESSEE EXPLAINED THAT PROVISIONS OF SECTION 2(22)(E) WERE NOT APPLICABLE IN CASE OF SHARE APPLICATION MONEY. THE AO, H OWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT THE AMOUNT RECEIVED HAD BEEN SHOWN AS LOANS AND ADVANCES IN T HE BOOKS OF THE SAID COMPANY. THE AO ALSO OBSERVED THAT THE AMO UNT RECEIVED BY THE ASSESSEE WAS FAR IN EXCESS OF THE AUTHORIZED SHARE CAP ITAL OF M/S. PRECIMEX BEARING P. LTD. AND THEREFORE, IT COULD ONLY BE CONSIDERED AS ADVANCE. THE AO ACCORDINGLY ASSESSED THE AMOUNT AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). 3. THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED B EFORE CIT(A) THAT THE ASSESSEE WAS NOT A SHARE HOLDER OF M/S. P RECIMEX BEARING P. LTD. AND THEREFORE, THE PROVISIONS OF SECT ION 2(22)(E) WERE NOT APPLICABLE. RELIANCE WAS PLACED ON THE DECISION OF TH E SPECIAL ITA NO.7015/M/10 A.Y.07-08 3 BENCH OF THE TRIBUNAL IN THE CASE OF ACIT VS. BHOUMIK C OLOUR (P) LTD. (27 SOT 270). IT WAS ALSO SUBMITTED THAT THE PROVISIO NS COULD NOT BE APPLIED IN CASE OF SHARE APPLICATION MONEY. CIT(A) AGRE ED WITH THE SUBMISSION OF THE ASSESSEE THAT THE PROVISIONS OF SECTION 2(22 )(E) WERE NOT APPLICABLE IN CASE OF SHARE APPLICATION MONEY . IT WAS ALSO OBSERVED BY HIM THAT THE ASSESSEE WAS NOT A SHARE HOLDER O F M/S. PRECIMEX BEARING P. LTD. THEREFORE, THE PROVISIONS OF SECTION 2(22)(E) COULD NOT BE APPLIED IN VIEW OF THE JUDGMENT IN CASE O F BHAUMIK COLOURS (P.) LTD. (118 ITD 1(MUM.)(SB). CIT(A) ACCORDI NGLY DELETED THE ADDITION MADE BY AO AGGRIEVED BY WHICH, THE REVE NUE IS IN APPEAL. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDIN G ADDITION OF AMOUNT RECEIVED BY THE ASSESSEE AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). THE ASSESSEE HAD RECEIVED A SUM OF RS.15.00 LACS DURING THE YEAR FROM M/S. PRECIMEX BEARING P. LTD. IN WHICH THE SHARE HOLDERS OF THE ASSESSEE COMPANY WERE HOLDING SHARES. THE AO HAD TREAT ED THE AMOUNT AS DEEMED DIVIDEND UNDER SECTION 2(22)(E). HOWEV ER, THE PROVISIONS OF SECTION 2(22)(E) ARE APPLICABLE ONLY IN RE SPECT OF LOANS/ADVANCES RECEIVED FROM THE COMPANY IN WHICH THE A SSESSEE IS A SHARE HOLDER. THIS VIEW IS SUPPORTED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN CASE OF BHAUMIK COLOURS (P.) L TD. (118 ITR 1). THERE IS NO DISPUTE THAT THE ASSESSEE COMPANY WAS NOT A SH ARE HOLDER ITA NO.7015/M/10 A.Y.07-08 4 IN M/S. PRECIMEX BEARING P. LTD. FROM WHICH THE IMPUG NED AMOUNT HAD BEEN RECEIVED. THEREFORE, THE PROVISIONS OF SECTION 2(22 )(E) ARE NOT APPLICABLE AND NO ADDITION CAN BE MADE UNDER THE SAID SECTION. WE, THEREFORE, SEE NO INFIRMITY IN THE ORDER OF CIT(A) I N DELETING THE ADDITION AND THE SAME IS THEREFORE UPHELD. 5. IN THE RESULT APPEAL BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 6.6.2012. SD SD (B.R. MITTAL ) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 6.6.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.