ITO 8(1)-1, MUMBAI V. ARCO MICAVER P. LTD, MUMBAI

ITA 712/MUM/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 6366 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 29-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: SDHIRENDRA M SHAH
• Keywords: Deemed dividend

Judgement Text

I.T.A NO.712/ MUM/2010 ASSESSMENT YEAR: 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, MUMBAI. BEFORE SHRI N.V.VASUDEVAN (JUDICIAL MEMBER) AND SHRI PRAMOD KUMAR(ACCOUNTANT MEMBER) I.T.A NO.712/ MUM/2010 ASSESSMENT YEAR: 2006-07 INCOME TAX OFFICER, 8(1)-1, .. APPELLANT AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. VS ARCO MICAVER P. LTD. ,. RESPONDEN T UNIT NO.20, KEYTUO INDL. ESTATE, 220, KONDIVITA LANE, MAROL, ANDHERI(E), MUMBAI. PA NO.AAACA 4333 R APPELLANT BY: SHRI PEEYUSH JAIN RESPONDENT BY : SHRI SDHIRENDRA M.SHAH O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL, THE ASSESSING OFFICER HA S CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 4 TH NOVEMBER, 2009, FOR THE ASSESSMENT YEAR 2006-07, ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) ERRED IN DISALLOWING THE ADDITION MADE BY THE A O U/S.2(22)(E) OF ` .62,12,781/- IN RESPECT OF DEEMED DIVIDEND WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE COMPANY IS THE ACTUAL RECIPIENT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD CIT (A) ERRED IN NOT TAKING INTO CONSIDERATION THAT THE ASSESSEE COMPANY IS THE ACTUAL RECIPIENT AND THE HONBLE ITAT IN THE CASE O F M/S. UNISOL I.T.A NO.712/ MUM/2010 ASSESSMENT YEAR: 2006-07 2 INFRASTRUCTURE PVT LTD., VIDE ORDER NO.ITA NO.2088/ MUM/2008 DT.11.8.2009 HAS UPHELD THE ADDITION U/S.2(22)(E) I N THE HANDS OF THE RECIPIENT. 2. TO ADJUDICATE ON THESE GRIEVANCES, ONLY A FEW MA TERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF THE SCRUTINY ASSESSMENT P ROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE HAD RECEIVED ` .57,75,000/- FROM ACRO ELECTRONIC TECHNOLOGIES PVT LTD AND ` .4,37,781/- THAT THESE COMPANIES HAD RESERVES IN EX CESS OF AMOUNT SO PAID TO THE ASSESSEE, AND THAT ONE SHRI RAJENDRA RUIA, WHO OWNE D SHAREHOLDING OVER 20% IN ASSESSEES COMPANY, ALSO HAD SHAREHOLDINGS IN EXCES S OF 10% IN THESE COMPANIES. ON THESE FACTS, ASSESSING OFFICER TREATED THE AMOUNTS SO RECEIVED BY THE ASSESSEE AS DEEMED DIVIDEND U/S.2(22)(E) OF THE INCOME TAX ACT. AGGR IEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT (A). LEARNED CIT (A) TOOK NO TE OF THE ABOVE FACTS, AS ALSO OF SPECIAL BENCH DECISION OF THIS TRIBUNAL IN THE CASE OF ACIT V. BHAUMIK COLOUR PVT LTD., 27 SOT 270, AND DELETED THE ADDITION ON ACCOUNT OF ALLEGED DEEMED DIVIDEND, OBSERVING INTER ALIA, AS FOLLOWS: KEEPING IN VIEW THE FACTS AND CIRCUMSTANCES AND TH E DECISION OF HONBLE TRIBUNAL MUMBAI BENCH WHERE IT IS HELD THAT DEEMED DIVIDEND U/S.2(220(E) CAN ONLY BE TREATED IN THE HANDS OF TH E REGISTERED AND BENEFICIAL SHAREHOLDER OF THE LENDER COMPANY AND NO T IN THE HANDS OF THE BORROWING CONCERN IN WHICH SUCH SHAREHOLDER IS A ME MBER OR PARTNER HAVING SUBSTANTIAL INTEREST. INTENTION BEHIND THE PROVISION OF SECTION 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF THE SHA REHOLDER. THEREFORE, THE CONDITIONS LAID DOWN IN THE DECISION OF THE TRIBUNA L SPECIAL BENCH ARE NOT SATISFIED IN THE CASE OF THE APPELLANT COMPANY. TH EREFORE, THE AO HAS ERRED IN FURTHER EXTENDING THE SCOPE OF SECTION 2(2 2)(E) BY HOLDING THAT MEMBERS OF THE FAMILY ARE SHAREHOLDERS IN BOTH THE COMPANIES. THUS, THE ADDITION MADE BY THE AO OF ` .62,12,781/- IS NOT SUSTAINABLE, HENCE DELETED. THE GROUND OF APPEAL IS ALLOWED. 3. NOT SATISFIED BY THE RELIEF SO GRANTED BY THE CI T (A), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 4. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PE RUSED THE MATERIAL ON RECORD, WE ARE NOT INCLINED TO INTERFERE IN THE CONCLUSIONS AR RIVED AT BY THE CIT (A). IT IS SO FOR THE REASON THAT THE ISSUE IN APPEAL, AS RIGHTLY NOTED BY THE CIT(A), IS SQUARELY COVERED BY A SPECIAL BENCH DECISION OF THIS TRIBUNAL, WHICH IS A BINDING PRECEDENT FOR THIS, IN FAVOUR OF I.T.A NO.712/ MUM/2010 ASSESSMENT YEAR: 2006-07 3 THE ASSESSEE. WE HAVE ALSO TAKEN NOTE OF THE FACT THAT THE DIVISION BENCH DECISION OF THIS TRIBUNAL, IN THE CASE OF UNISOL INFRASTRUCTURE PVT LTD. (ITA NO.2088/MUM/08 ORDER DATED 11.7.2009), WHICH HAS BEEN REFERRED TO IN THE GROUN D OF APPEAL AND RELIED UPON BY THE REVENUE, HAS SINCE BEEN RECALLED VIDE ORDER DATED 7 TH APRIL, 2010. REVENUE THUS DERIVES NO ADVANTAGE FROM THIS DIVISION BENCH DECISION. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE APPROVE TH E CONCLUSIONS ARRIVED AT BY THE CIT (A) AND DECLINE TO INTERFERE IN THE MATTER. 5. IN THE RESULT, APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26 TH NOVEMBER, 2010. SD/- (N.V.VASUDEVAN) (JUDICIAL MEMBER) SD/- (PRAMOD KUMAR) (ACCOUNTANT MEMBER) MUMBAI, DATED 26 TH NOVEMBER , 2010 PARIDA COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)-16, MUMBAI 4. COMMISSIONER OF INCOME TAX, VIII, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI I.T.A NO.712/ MUM/2010 ASSESSMENT YEAR: 2006-07 4 I.T.A NO.712/ MUM/2010 ASSESSMENT YEAR: 2006-07 5