ACIT CENTRAL CIRCLE 2, COIMBATORE V. SHRI. M RAMASAMI, ATTUR

ITA 747/CHNY/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5778 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 28-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Difference of opinion; Deemed dividend; Change of opinion; Reassessment proceedings; Set aside
• Section: 147; 148; 143(3); 153A; 2(22)(e)

Judgement Text

आयकर अपीलीय अिधकरण ‘बी’ ायपीठ चे ई म । IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI माननीय +ी महावीर िसंह, उपा12 एवं माननीय +ी मनोज कु मार अ7वाल ,लेखा सद: के सम2। BEFORE HON’BLE SHRI MAHAVIR SINGH, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM 1.आयकर अपील सं./ ITA No.746/Chny/2018 (िनधाCरण वषC / Assessment Year: 2012-13) & 2.आयकर अपील सं./ ITA No.747/Chny/2018 (िनधाCरण वषC / Assessment Year: 2013-14) ACIT Central Circle-2, Coimbatore. बनाम/ V s. Shri M. Ramasami No.35A, Narayanapuram Kallanatham Post, Attur-636141 $थायी लेखा सं./जीआइ आर सं./P AN /GI R No . AC AP R -4 7 4 1 -D (अपीलाथ,/Appellant) : (/0थ, / Respondent) अपीलाथ, की ओरसे/ Assessee by : Shri B. Ramakrishnan (F.C.A)-Ld. AR /0थ, की ओरसे/Revenue by : Shri Guru Bashyam (CIT)-Ld. DR सुनवाई की तारीख/Date of Hearing : 07-06-2022 घोषणा की तारीख /Date of Pronouncement : 19-08-2022 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeals by revenue for Assessment Years (AY) 2012-13 & 2013-14 arises out of common order passed by learned Commissioner of Income Tax (Appeals)-18, Chennai [CIT(A)] dated 16.11.2017 in the matter of assessment framed by Ld. Assessing Officer u/s 143(3) r.w.s. 147 vide separate orders both dated 31.12.2016. It is admitted position that facts as well as issues are pari-materia the same in both the years - 2 - and adjudication in any one year shall have equal application in the other year also. The grounds taken by the revenue for AY 2012-13 read as under: 1. The Order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts and circumstances of the case and in law. 2. The Id. CIT(A) erred in deleting the addition u/s.2(22)(e) amounting to Rs.3,90,00,000/- made by the Assessing Officer (AO), in the order passed u/s.143(3) r. w. sec. 147 of the IT Act, 1961 for the AY 2012-13. 3. The Id. CIT(A) erred in holding that there remains nothing to be considered in the hands of appellant, in view of the entire addition u.s,2(22)(e) having been considered in the hands of the assessee's wife, when the provisions of Sec.2(22)(e) of the IT Act, 1961 contemplates that the amount of loan to the extent of accumulated profits should be treated as Deemed Dividend in the hands of "any such shareholder". Accordingly, In this case two share holder's viz., Sri. M. Ramasami and Smt. S. Chithra are to be treated as "any such share holder" for the reason that they satisfy the conditions of having more than 10% share in M/s. Rasi Seeds (P) Ltd and more than 20% in M/s. Rasi Tex India (P) Ltd. 4. The Id CIT(A) ought to have considered the fact that the writ petition filed by Smt. Chitra W/o Sri. M. Ramasami before the Hon'ble Madras High Court against the orders of the Hon'ble ITSC, Chennai has reached finality and is still pending. 5. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. RELIEF CLAIMED IN APPEAL The order of the learned CIT (Appeals) may be set aside and that of the Assessing Officer be restored. As is evident, the revenue is aggrieved by deletion of addition made by Ld. AO on account of deemed dividend u/s 2(22)(e) for Rs.390 Lacs. 2. The registry has noted a delay of 10 days in both the appeals, the condonation of which has been sought by Ld. CIT-DR. Considering the period of delay, we condone the delay and admit the appeals for adjudication on merits. 3. The assessee has filed petition u/r 27 of Income Tax (Appellate Tribunal) Rules which assails the rejection of legal grounds by Ld. CIT(A). However, Ld. AR submitted that the issue on merits stood covered in assessee’s favor by the decision of Hon’ble High Court of - 3 - Madras in the case of R. Chitra V/s ITSC (120 Taxmann.com 49; 24.09.2019). A copy of the same has been placed on record. The Ld. CIT-DR, on the other hands, referred to statutory provisions of Sec.2(22)(e) and submitted that the sum has rightly been brought to tax as deemed dividend. Having heard rival submissions and after perusal of case records, the appeal is disposed-off as under. Assessment Proceedings 4.1 The assessee was assessed u/s 153A r.w.s. 143(3) on 31.03.2015. However, the case was reopened and notice u/s 148 was issued on 14.12.2015. The reason was the finding that the assessee held more than 20% shareholding in one of the entity i.e. M/s Rasi Tex India (P) Ltd. (RTPL). The assessee was Chairman of that entity. Further, the assessee held more than 10% shareholding in another entity namely Rasi Seeds Pvt. Ltd. (RSPL). M/s RSPL granted certain loans to M/s RTPL as a result of which Ld. AO formed an opinion that the provisions of Sec. 2(22)(e) would apply to such loans and the same would be taxable in the hands of the assessee. 4.2 The assessee refuted the applicability of these provisions and submitted that no loan was availed in individual capacity and no individual benefit accrued to the assessee out of such loans. It was also submitted that RSPL and RTPL were not shareholders of each other. The assessee also assailed the validly of reassessment proceedings on mere change of opinion. 4.3 However, Ld. AO opined that the assessee became a specified shareholder and accordingly the provision of Sec. 2(22)(e) would apply since these provisions provide that any payment by a company by way of loans or advance to any concern in which a shareholder holds - 4 - substantial interest, then such payment shall be treated as dividend in the hands of such shareholder to the extent of accumulated profits. Accordingly, the amount of Rs.390 Lacs & Rs.1500 Lacs was added to the income of the assessee for AYs 2012-13 & 2013-14 respectively. Appellate Proceedings 5. The Ld. CIT(A) rejected the legal grounds since Ld. AO acted in according to law. However, the quantum additions were deleted on merits as under:- Even assuming without conceding that the provisions of Section 2(22)(e) are applicable in the case of the appellant, the quantum of income escaping assessment, in his hands, is ‘Nil’ as the income has already been taxed in the hands of Smt. S. Chitra. In other words, such income could be taxed only once. As it has already been brought to tax in the hands of Smt. S. Chitra, one of the shareholders by the revenue, it cannot be said that it had escaped assessment to be taxed in the hands of the appellant. In this regard, as per the considered view of the Income tax Settlement Commission, the monies advanced amounting to Rs.137.19 Crores are to be considered as deemed dividend in the hands of the appellant’s wife for various A.Ys. Since the entire addition u/s 2(22)(e) having been considered (as per the direction of Hon’ble Income Tax Settlement Commission) in the hands of the appellant’s wife, there remains nothing to be considered in the hands of the appellant. In the circumstances, the action of Ld. AO in making the addition u/s 2(22)(e) is considered to be unwarranted. Accordingly, the addition for both the years is deleted. Hence this ground is allowed. It is evident that Ld. CIT(A) deleted the impugned additions on the ground that the same were already taxed in the hands of other shareholder and therefore, the same could not be taxed again in the hands of the assessee. Aggrieved, as aforesaid, the revenue is in further appeal before us. Our findings and Adjudication 6. From the facts it emerges that the loan under consideration has been granted by RSPL to RTPL. Both these entities do not hold any shareholding in each other. The loan has not been granted to the assessee in individual capacity and no benefit has accrued to him out of - 5 - such loans and advances. Another undisputed fact is that the amount of deemed dividend has already been taxed in the hands of another shareholder and accordingly, Ld. CIT(A) held that the same could not be taxed again in the hands of the assessee. 7. We find that this issue, on merits, is covered in assessee’s favor by the cited decision of Hon’ble High Court of Madras in the case of R. Chitra V/s ITSC (120 Taxmann.com 49; 24.09.2019), wherein Hon’ble Court, after referring to catena of decisions, decided this issue in assessee’s favor. The head note of the decision read as under: - I. Section 2(22) of the Income-tax Act, 1961 - Deemed dividend (loans and advances to shareholders) - Assessment year 2009-10 and 2013-14 - Whether advances in nature of commercial transaction would not fall within ambit of section 2(22)(e); in other words, deemed dividend would not apply to normal commercial transactions - Held, yes - Whether merely because an amount is advanced by one company to other with shareholders having substantial shareholdings, deemed dividend is not taxable in hands of shareholders - Held, yes - In both companies RTPL and RSPL, petitioner-assessee was a substantial shareholder - RSPL advanced monies to RTPL in ordinary course of its business as inter-corporate loan - Whether deemed dividend was not taxable in hands of shareholders - Held, yes [Para33] [In favour of assessee] II. Section 10(34) of the Income-tax Act, 1961 - Dividends, exemptions to (Condition precedent) - Whether section 10 (34) does not say that dividend will be exempt in hands of shareholders only when dividend distribution tax is paid; on other hand, it only says that as long as dividend is referred to in section 115-O, it will be exempt from tax under section 10(34) - Held, yes [Para 40] [In favour of assessee] Circulars and Notifications: Circular No. 19/2017, dated 12-6-2017 After going through this decision, we find that the issue, on merits, has been decided in assessee’s favor in the case of other similarly placed shareholder. The ratio of the same would apply to the present assessee also. Therefore, we find no reason to interfere in the impugned order, in this regard, so far as the deletion of quantum addition is concerned. This being so, the legal grounds urged by the assessee has been rendered academic and therefore, not delved into. - 6 - 8. Both the appeals stand dismissed. Order pronounced on 19 th August, 2022. Sd/- (MAHAVIR SINGH) उपा12 /VICE PRESIDENT Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद: / ACCOUNTANT MEMBER चेAई / Chennai; िदनांक / Dated : 19-08-2022 EDN/- आदेश की Yितिलिप अ 7ेिषत/Copy of the Order forwarded to : 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु (अपील)/CIT(A) 4. आयकर आयु /CIT 5. िवभागीय ितिनिध/DR 6. गाड फाईल/GF