ACIT, Erode V. SKM Shree Shivakumar, Erode

ITA 73/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 8751 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 14-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR U ANJANEYALU
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Capital asset; Deemed dividend

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.73/MDS/2016 ( )( / ASSESSMENT YEAR : 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, COIMBATORE. V. SKM SHREE SHIVAKUMAR, 41, PERIYAR NAGAR, ERODE 638 001. PAN : AJCPS 0629 L (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : DR. U. ANJANEYALU, CIT -.+, / 0 / RESPONDENT BY : DR. ANITA SUMANTH, ADVOCATE 1 / 2% / DATE OF HEARING : 02.06.2016 3') / 2% / DATE OF PRONOUNCEMENT : 11.08.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 3, COIMB ATORE, DATED 27.10.2015 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. DR. U. ANJANEYALU, THE LD. DEPARTMENTAL REPRESEN TATIVE, SUBMITTED THAT THE ASSESSEE IS A SHAREHOLDER AND DI RECTOR IN M/S 2 I.T.A. NO.73/MDS/16 SKM ANIMAL FEEDS AND FOODS (INDIA) LTD. AND M/S SKM SIDDHA AND AYURVEDIC MEDICINES INDIA PVT. LTD. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAS RECEIVED CASH OF ` 3,50,00,000/- AND ASSETS WORTH OF ` 21,85,15,750/- FROM SKM ANIMAL FOODS AND FEEDS (INDIA) LTD. THE CIT(APPEALS) BY FOLLOWING T HE ORDER OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR EARLIER ASS ESSMENT YEAR, FOUND THAT THE ASSESSEE RECEIVED CASH AND ASSETS BY WAY OF FAMILY SETTLEMENT, THEREFORE, THE PROVISIONS OF SECTION 2( 22)(E) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') IS NOT AP PLICABLE AT ALL. ACCORDING TO THE LD. D.R., THE COMPANY IS A SEPARAT E AND INDEPENDENT LEGAL ENTITY. THEREFORE, THE ASSETS OF THE COMPANY CANNOT BE DISTRIBUTED IN THE SO-CALLED FAMILY AGREE MENT / SETTLEMENT. A COMPANY CANNOT BE A MEMBER OF THE FAMILY, THEREFO RE, THE TRANSFER OF COMPANYS PROPERTY IN THE GUISE OF FAMI LY ARRANGEMENT WOULD AMOUNT TO TRANSFER OF CAPITAL ASSET. THEREFO RE, ACCORDING TO THE LD. D.R., THE ASSESSEE RECEIVED CASH AND ASSETS IN VIOLATION OF SECTION 2(22)(E) OF THE ACT. THEREFORE, FOR ALL PR ACTICAL PURPOSES, ACCORDING TO THE LD. D.R., THE PAYMENT OF CASH AND ASSETS FROM THE COMPANY HAS TO BE TREATED AS DEEMED DIVIDEND, HENCE , THE CIT(APPEALS) IS NOT RIGHT IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER. 3 I.T.A. NO.73/MDS/16 3. ON THE CONTRARY, DR. ANITA SUMANTH, THE LD.COUNS EL FOR THE ASSESSEE, SUBMITTED THAT THE FAMILY ARRANGEMENT WAS SUBJECT MATTER OF DISCUSSION BEFORE THIS TRIBUNAL FOR ASSESSMENT Y EAR 2008-09 IN I.T.A. NO.2278/MDS/2012 AND 1965/MDS/2011 DATED 17. 07.2014. THIS TRIBUNAL AFTER CONSIDERING THE FAMILY ARRANGEM ENT BETWEEN THE FAMILIES FOUND THAT THE FAMILY OF SHRI SKM MAEILANA NDAN ACQUIRED THE MOVABLE AND IMMOVABLE PROPERTIES COLLECTIVELY. THE SEVERAL COMPANIES FORMED BY THE FAMILY MEMBERS ARE BY THE P ERSONAL EFFORT OF SHRI SKM MAEILANANDAN. THE SOURCE FOR BUSINESS IN THE COMPANY HAS COME FROM SHRI SKM MAEILANANDAN. THIS TRIBUNAL FURTHER FOUND THAT THOUGH THE INVESTMENTS WERE HELD IN THE INDIVIDUAL NAMES OF THE MEMBERS OF THE FAMILY, IT WAS A COMBIN ED EFFORT OF MEMBERS OF THE FAMILY, THEREFORE, IT WAS TO BE CONS IDERED AS JOINT FAMILY PROPERTY. ACCORDINGLY, THIS TRIBUNAL FOUND THAT THE FAMILY ARRANGEMENT WAS TO SETTLE THE DISPUTE AMONG MEMBERS OF THE FAMILY. IN FACT, THE FAMILY ARRANGEMENT WAS MADE B Y ARBITRATION AWARD. ACCORDINGLY, THIS TRIBUNAL FOUND THAT THE P ROVISIONS OF SECTION 2(22)(E), 2(24(IV) AND 56(2)(VI) OF THE ACT CANNOT BE INVOKED. 4 I.T.A. NO.73/MDS/16 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN THE EARLIER YEAR ALSO, THE ASSETS AND CASH WERE PAID CONSEQUENT TO THE FAMILY ARRANGEMENT, WHICH WAS SUBJECT MATTER OF ADJUDICATI ON BY THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2008-09. THIS TRI BUNAL FOR THE ASSESSMENT YEAR 2008-09 FOUND THAT THE SOURCE FOR T HE INVESTMENT IN THE COMPANY IS NUCLEUS OF HINDU JOINT FAMILY. HE NCE, THE NUCLEUS OF HINDU JOINT FAMILY WAS USED FOR INVESTMENT IN CO MPANIES IN WHICH THE MEMBERS OF THE FAMILY ARE SHAREHOLDERS. THIS T RIBUNAL IS OF THE CONSIDERED OPINION THAT THE PROPERTY / ASSETS OF TH E COMPANY INCLUDING THE SHAREHOLDING HAS TO BE NECESSARILY TR EATED AS JOINT FAMILY PROPERTY. MERELY BECAUSE SOME INDIVIDUAL ME MBERS WERE HOLDING SHARES OF THE COMPANY THAT WILL NOT GIVE AN Y RIGHT TO THEM TO HOLD THE SAME AS THEIR OWN PROPERTY. THE FAMILY ME MBERS, WHO ARE THE SHAREHOLDERS IN THE RESPECTIVE COMPANIES ARE HO LDING THE SHARE ON BEHALF OF HINDU UNDIVIDED FAMILY. THEREFORE, AL L THE MEMBERS OF THE FAMILY HAVE THEIR OWN SHARES IN THE ASSETS OF T H COMPANY, FAMILY PROPERTIES, SHARES OF THE COMPANY, ETC. THEREFORE, WHEN THERE WAS DISPUTE IN THE FAMILY, THAT WAS REFERRED TO ARBITRA TION AND THE ARBITRATOR DIVIDED THE PROPERTIES BY WAY OF ARBITRA TION AWARD. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE DIVISION 5 I.T.A. NO.73/MDS/16 EFFECTED BY MEANS OF ARBITRATION AWARD IN THE PROPE RTY WHICH STANDS IN THE NAMES OF INDIVIDUAL FAMILY MEMBERS, IN THE N AMES OF THE COMPANY, IN THE NAMES OF PARTNERSHIP FIRM, ETC. HAS TO BE NECESSARILY CONSTRUED AS JOINT FAMILY PROPERTY. TH EREFORE, WHEN THE PROPERTY WAS ALLOTTED IN THE SHARES OF THE ASSESSEE , THE SAME CANNOT BE TREATED AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT. AS RIGHTLY FOUND BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL TO WHICH ONE OF US IS A PARTY, THE PROVISIONS OF SECTI ON 2(22)(E), 2(24(IV) AND 56(2)(VI) OF THE ACT CANNOT BE INVOKED AT ALL. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED ON 11 TH AUGUST, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 11 TH AUGUST, 2016. KRI. 6 I.T.A. NO.73/MDS/16 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-3, COIMBATORE 4. PRINCIPAL CIT-2, COIMBATORE 5. 7: -2 /DR 6. ;( < /GF.