THE ACIT,- AKOLA CIRCLE, Akola V. SHRI SHANKAR BALRAM GURBANI, Akola

ITA 75/NAG/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2179 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 10-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A R NINAWE
• Keywords: Deemed dividend

Judgement Text

1 ITA NO. 75/NAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.75/NAG/2015. ASSESSMENT YEAR : 2009 - 10. ASSTT. COMMISSIONER OF INCOME - TAX, SHRI SHANKAR BALRAM GURBANI, AKOLA CIRCLE, AKOLA. VS. AKOLA. PAN AD IPG 7014R. APPELLANT. RESPONDENT. APPELLANT BY : SHRI A.R. NINAWE. RESPONDENT BY : SHRI K.P. DEWANI. DATE OF HEARING : 13 - 06 - 2016 DATE OF PRONOUNCEMENT : 17 TH JUNE, 2016 O R D E R PER SHRI SHAMIM YAHYA, A.M. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(APPEALS) - I, NAGPUR DATED 10 - 12 - 2014 AND PERTAINS TO ASSESSMENT YEAR 2009 - 10 . THE GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 1,45,84,276/ - BEING DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE INCOME TAX ACT, 1961. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN FOLLOWING THE DECISION OF HIS PREDECESSOR IN ITA NO. CIT(A) - I/236/11 - 12 DATED 08.03.2013 INASMUCH AS THERE IS NO EVIDENCE THAT MONEY LENDING WAS THE SUBSTANTIAL BUSINESS OF THE COMPANY, VIZ. M/S SPEEDEX TRADE WORLD PVT. LTD. 2 ITA NO. 75/NAG/2015 2. BRIEF FACTS OF THE CASE ARE AS UNDER. THE AO IN THE COURSE OF RE - ASSESSMENT PROCEEDINGS, OBSERVED THAT ASSESSEE IS A PARTNER IN THE FIRM M/S B.K. INDUSTRIES , IS HAVING 60% SHARE OF PROFIT. THE AO FURTHER OBSERVED THAT M/S SPEEDEX TRAD E WORLD PVT. LTD. HAS GIVEN UNSECURED LOAN OF RS.14.47 CRORES TO M/S B.K. INDUSTRIES DURING THE RELEVANT FINANCIAL YEAR 2008 - 09 AND THE ASSESSEE IS HOLDING MORE THAN 10% EQUITY SHARES OF THIS CLOSELY HELD COMPANY. THE CLOSELY HELD COMPANY WAS ALSO HAVING A CCUMULATED PROFITS OF RS.1.45 CRORES AS ON 31 - 03 - 2009. THUS, ACCORDING TO THE AO, THIS SUM OF RS.1.45 CRORES IS CHARGEABLE TO TAX AS DEEMED DIVIDEND AS PER THE PROVISIONS OF SECTION 2(22)(E) OF THE I.T. ACT, 1961, IN VIEW OF THE DECISION OF THE ITAT, H - BEN CH, MUMBAI IN THE CASE OF M/S HITEN TECHNO PRODUCTS CORPORATION IN ITA NO. 2678/M/2010. THEREFORE, THE ASSESSEE WAS ALLOWED AN OPPORTUNITY TO EXPLAIN AS TO WHY THE DEEMED DIVIDEND OF RS.1.45 CRORES SHOULD NOT BE ADDED IN HIS HANDS. IN THIS REGARD THE ASSES SEE HAS FILED THE WRITTEN SUBMISSION VIDE LETTER DATED 27 - 08 - 2012, WHICH IS REPRODUCED IN PARA 4.1 OF THE ASSESSMENT ORDER. THE AO, HOWEVER, DECLINED TO AGREE WITH THE CONTENTIONS OF THE COUNSEL OF THE ASSESSEE AND MADE THE ADDITION OF RS.1,45,84,276/ - ON PROTECTIVE BASIS IN THE CASE OF THE PRESENT ASSESSEE AND ON SUBSTANTIVE BASIS IN THE CASE OF THE FIRM, M/S B.K. INDUSTRIES. 3. UPON ASSESSEES APPEAL LEARNED CIT(APPEALS) NOTED THAT THE LEARNED CIT(APPEALS) HAS ALREADY DELETED THE SUBSTANTIVE ADDITION MADE IN THE HANDS OF M/S B.K. INDUSTRIES ON FINDING THAT M/S SPEEDEX TRADE WORLD PVT. LTD. HAD FINANCE AS SUBSTANTIAL BUSINESS OF THE COMPANY. HENCE LEARNED CIT(APPEALS) DIRECTED THAT THIS PROTECTIVE ADDITION ALSO DOES NOT SURVIVE. LEARNED CIT(APPEALS) HAS CONCLUDED IN HIS ORDER AS UNDER : IT IS THUS SEEN FROM THE ABOVE THAT MY LEARNED PREDE CESSOR HAS HELD THAT THERE IS NO CASE OF DEEMED DIVIDEND U/S 2(22)(E) OF THE I.T. ACT, 1961 AND, ACCORDINGLY, DELETED THE ADDITION MADE ON SUBSTANTIVE BASIS IN THE CASE OF THE FIRM. I AM INCLINED TO AGREE WITH THE DECISION OF MY 3 ITA NO. 75/NAG/2015 PREDECESSOR THAT THE SUBS TANTIAL BUSINESS OF THE COMPANY, BEING FINANCE, IN THE ROUTINE COURSE OF BUSINESS, THE ACCUMULATED PROFIT IS NOT LIABLE TO DEEMED DIVIDEND IN THE HANDS OF THE FIRM. THEREFORE, THE CHARGEABILITY OF DEEMED DIVIDEND IN THE HANDS OF THE SHAREHOLDER DOES NOT AR ISE AND, ACCORDINGLY, THE PROTECTIVE ADDITION MADE IN THE CASE OF THE APPELLANT IS DIRECTED TO BE DELETED. 4. AGAINST THE ABOVE ORDER, REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL OF THE ASSE SSEE SUBMITTED THAT THIS ITAT IN THE CASE OF M/S B.K. INDUSTRIES IN ITA NO. 234/NAG/2013 VIDE ORDER DATED 31 - 08 - 2015 HAS ALREADY AFFIRMED THE CIT(APPEALS) VIEW THAT M/S SPEEDEX TRADE WORLD PVT. LTD. WAS H AV ING SUBSTANTIVE BUSINESS OF LENDING OF MONEY ON I NTEREST. ACCORDINGLY LEARNED COUNSEL SUBMITTED T HAT IN VIEW OF THE ABOVE ITATS ORDER WHEREIN A SUBSTANTIVE ADDITION IN THE HANDS OF B.K. INDUSTRIES HAVE BEEN DELETED, THIS PROTECTIVE ADDITION IN THE HANDS OF THE ASSESSEE ALSO DOES NOT SURVIVE. HE PLEADED T HAT THE LEARNED CIT(APPEALS) IN THIS CASE ALSO HAS RIGHTLY DELETED THE PROTECTIVE ADDITION OF DEEMED DIVIDEND. 6. PER CONTRA, LEARNED D.R. RELIED UPON THE ORDER OF TH E AO B UT HE DID NOT DISPUTE THE PROPOSITION THAT THIS ITAT HAS PASSED AN ORDER IN THE CAS E OF M/S B.K. INDUSTRIES WHEREIN ADDITION ON SUBSTANTIVE BASIS HAS BEEN DELETED ON THE FINDING THAT M/S SPEEDEX TRADE WORLD PVT. LTD. WAS ALSO HAVING BUSINESS OF MONEY LENDING ON INTEREST. 7. UPON CAREFUL CONSIDERATION WE FIND THAT THE LEARNED COUNSEL OF T HE ASSESSEES SUBMISSION IS QUITE COGENT. IN VIEW OF THE ITATS DECISION IN THE CASE OF B.K. INDUSTRIES CITED ABOVE THE PRESENT ADDITION ON PROTECTIVE BASIS ALSO DOES NOT SURVIVE. 8. FURTHER MORE WE FIND THAT IN THIS CASE NO CASE HAS BEEN MADE OUT THAT THE ASSESSEE HAS RECEIVED ANY LOAN FROM M/S SPEEDEX TRADE WORLD PVT. LTD. THE LOAN WAS RECEIVED BY M/S B.K. INDUSTRIES WHERE THE ASSESSEE WAS A PARTNER. 4 ITA NO. 75/NAG/2015 SINCE WHEN THE DEEMED DIVIDEND HAS NOT BEEN CONSIDERED IN THE HANDS OF B.K. INDUSTRIES, THERE IS NO REASON WHY THE ADDITION SHOULD BE MADE IN THE HANDS OF THE ASSESSEE WHO IN HIS PERSONAL CAPACITY HAS NOT RECEIVED ANY LOAN FROM M/S SPEEDEX TRADE WORLD PVT. LTD. 9. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENT, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF LEARNED CIT(APPEALS). ACCORDINGLY WE UPHOLD THE SAME. 10. IN THE RESULT THIS APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JUNE, 2016. SD/ - SD/ - (MUKUL K. SHRAWAT) ( SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER. NAGPUR, DATED: 17 TH JUNE, 2016. COPY FORWARDED TO : SHRI SHANKAR BALIRAM GUR BANI, PROP. OF B.K. FINANCERS, KIRANA BAZAR, AKOLA - 444 001. A .C.I.T., A KOLA CIRCLE, A KOLA . C.I.T. I, NAGPUR. CIT(APPEALS), - I, NAGPUR. D.R., ITAT, NAGPUR. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. WAKODE.