LAKSHMIWADI MINES & MINERALS PVT. LTD., MUMBAI V. D.C.I.T. (OSD) CIRCLE 2(2), MUMBAI

ITA 7542/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0637 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 17-02-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DESH
• Keywords: Deemed dividend

Judgement Text

PAGE 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI R.C. SHARMA , AM AND SHRI RAVISH SOOD, JM ./ I.T.A. NO.7542/MUM/2011 ( / ASSESSMENT YEAR: 2008 - 09) LAKSHMIWADI MINES & MINERALS PVT. LTD. SOMAIYABHAVAN, 45 - 47, M.G. ROAD, FORT, MUMBAI - 400 001. DCIT (OSD), CIRCLE - 2(2) , 5 TH FLOOR, AAYAKARBHAVAN, M.K. ROAD, MUMBAI - 400 020. ./ ./ PAN/GIR NO. AA ACL1756F (ASSESSEE ) : ( R EVENUE ) / ASSESSEE BY : MS . DINKLEHARIYA / REVENUE BY : SHRI. S. DESHPANDE, SR. A.R / DATE OF HEARING : 17/03 /2017 / DATE OF PRONOUNCEMENT : 12 /0 5 /2017 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER THAT THE PR ESENT APPEAL WHICH HAD EARLIER BEEN DISPOSED OF BY THE TRIBUNAL VIDE ITS ORDER DATED. 25.02.2015 HAD BEEN RECALLED PURSUANT TO THE ORDER DATED. 06.05.2016 PASSED BY THE TRIBUNAL WHILE DISPOSING OF THE MISCELLANEOUS APPLICATION NO. 261/ MUM/2015 FILED BY THE ASSESSEE APPLICANT ON 06.11.2015. TH E TRIBUNAL OBSERVING THAT THE GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE IN CONTEXT OF THE ADDITION OF RS. 11,50,000/ - MADE ON PAGE 2 ACCOUNT OF DEEMED DIVIDEND HAD INADVERTENTLY REMAINED OMITTED TO BE DISPOSED OF, THUS FOR THE LIMITED EXTENT OF RECTIFYING THE SAID MISTAKE AND DISPOSING OF THE SAID GROUND OF APPEAL NO. 2 HAD RECALLED ITS EARLIER ORDER SO PASSED IN ITA NO 7542/MUM/20111, DATED. 25.02.2015 . WE THUS IN THE BACKDROP OF THE RECALLING OF THE AFORESAID ORDER OF THE TRIBUNAL , THEREIN RESTRICTING OURSELVES TO THE AFORE SAID LIMITED EXTENT ,HEREIN ADVERT TO AND DISPOSE OF THE GROUND OF APPEAL NO. 2 RAISED BY THE ASSESSEE BEFORE US, WHICH READS AS UNDER: - (2) THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN CONFIRMING THE ADDITION OF FOLLOWING AMOUNTS AS DEEMED DIVIDEND U/S. 2(22)(E): (1) K.J. SOMAIYA& SONS PVT. LTD. RS.9,00,000 (2) FILM MEDIA COMMUNICATION SYSTEMS PVT. LTD. RS.2,50,000 RS.11,50,000 YOUR APPELLANTS SUBMIT THAT EACH OF THE ABOVE IS NOT LIABLE TO BE TAXED AS DEEMED DIVIDEND AND EACH OF THEM OUGHT TO BE DELETED. 2. BRIEF FACTS OF THE CASE , TO THE EXTENT RELEVANT TO THE ISSUE BEFORE US ARE T HAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE COMPANY HAD RECEIVED LOANS FROM ITS GROUP COMPANIES, VIZ. M/S. K.J. SOMAIYA AND SONS PVT. LTD. AND M/S. FILM MEDIA COMMUNICATION SYSTEMS PVT. LTD. OF RS.9,00,000/ - AND RS.2,50,000/ - , RESPECTIVELY. THE A.O. DURING THE COURSE OF THE PAGE 3 ASSESSMENT PROCEEDINGS OBSERVING THAT THE SHAR E HOLDING PATTERN OF THE ASSESSEE COMPANY AND THE ABOVE MENTIONED GROUP COMPANIES, WAS AS UNDER: - 1. LAKSHMIWADI MINES & MINERALS SOMAIYA AGENCIES PVT. LTD. 27.72% SHANTILAL K. SOMAIYA 37.31% 2. K.J. SOMAIYA& SONS PVT. LTD. SHANTILAL K. SOMAIYA 55% LAKSHMIWADI MINES & MINERAL LTD. 10% 3. FILM MEDIA COMMUNICATION SYSTEMS PVT. LTD. SOMAIYA AGENCIES PVT. LTD. 20% , THUS BEING OF THE VIEW THAT THE AFORESAID AMOUNTS AGGREGATING TO RS.11,50,000/ - (I.E. RS.9,00,000/ - + RS.2,50,000/ - ) RECEIVED BY THE ASSESSEE FROM THE AFORESAID GROUP COMPANIES WERE IN THE NATURE OF DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT, THEREIN BROUGHT THE SAME TO TAX UNDER SECTION 56. THE A.O THEREAFTER DELIBERATING ON CERTAIN OTHER ISSUES FRAMED ASSESS MENT AT RS.1,16,51,079/. 4. THE ASSESSEE BEING AGGRIEVED WITH THE AFORESAID ADDITION OF RS. 11,50,000/ - (SUPRA) THEREIN ASSAILED THE SAME BEFORE THE CIT(A) - 5, MUMBAI. THE CIT(A) HOWEVER NOT BEING PERSUADED TO SUBSCRIBE TO THE CONTENTIONS OF THE ASSESSEE AN D HOLDING A CONVICTION THAT THE PROVISIONS OF SECTION 2(22)(E) WERE APPLICABLE TO THE FACTS OF THE PAGE 4 CASE, THEREIN UPHELD THE ADDITION OF RS.11,50,000/ - MADE BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 2(22)(E). 5 . THE ASSESSEE BEING AGGRIEVED WITH THE SUSTAINING OF THE ADDITION OF RS.11,50,000/ - (SUPRA) BY THE CIT(A) UNDER SECTION 2(22)(E) HAD CARRIED THE MATTER IN APPEAL BEFORE US. THAT DURING THE COURSE OF THE HEARING OF THE APPEAL IT WAS AVERRED BY THE LD. A.R. THAT THE CIT(A) HAD ERRED IN SUSTAI NING THE ADDITION MADE BY THE A.O. UNDER SECTION 2(22)(E)OF THE ACT. IT WAS SUBMITTED BY THE LD. A.R. THAT AS THE REQUISITE CONDITIONS FOR INVOKING THE DEEMING PROVISIONS CONTEMPLATED UNDER SECTION 2(22)(E) WERE NOT SATISFIED, THEREFORE NO ADDITION ON TH E SAID COUNT WAS CALLED FOR IN THE HANDS OF THE ASSESSEE. PER CONTRA, IT WAS SUBMITTED BY THE LD. D.R. THAT THE CIT(A) HAD RIGHTLY UPHELD THE ADDITION OF RS.11,50,000/ - MADE BY THE A.O. UNDER SECTION 2(22)(E), AND AS SUCH SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6 . WE HAVE HEARD THE AUTHORIZED REPRESENTATIVE S FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL PLACED ON RECORD BEFORE US. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND THEREIN FIND THAT AS PER THE FACTS AS THEY SO EMERGE FROM THE ASSESSMENT ORDER , AS THE ASSESSEE COMPANY IS FOUND TO BE THE BENEFICIAL OWNER OF 10% OF SHARES OF M/S K.J. SOMAIYA AND SONS PVT. LTD. , THE SAME THUS ON THE SAID COUNT ITSELF WOULD BRING THE AMOUNT OF RS.9,00, 000/ - (SUPRA) RECEIVED BY IT FROM THE AFORESAID COMPANY, VIZ. M/S K.J. SOMAIYA AND SONS PVT. LTD. WITHI N THE SWEEP OF SECTION 2(22)(E) , AND PAGE 5 CONSEQUENT THERETO COULD SAFELY BE CHARACTERIZED AS DEEMED DIVIDEND UNDER THE FIRST LIMB OF SEC. 2(22)(E) . THAT AS RE GARDS THE PAYMENT OF RS. 2,50,000/ - MADE BY M/S FILM MEDIA COMMUNICATION SYSTEMS PVT. LTD. TO THE ASSESSEE COMPANY, THOUGH IT IS A MATTER OF RECORD THAT THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN THE SAID COMPANY, WHICH THEREIN TAKES IT BEYOND THE SCOPE AND GAMUT OF THE FIRST LIMB OF SEC. 2(22)(E), BUT THEN WE FIND THAT AS M/S SOMAIYA AGENCIES PVT. LTD. WHICH IS A SHAREHOLDER HAVING SUBSTANTIAL INTEREST (20%) IN THE AFORESAID COMPANY, VIZ. M/S FILM MEDIA COMMUNICATIONS SYSTEMS PVT. LTD , IS ALSO A SHAREHOL DER HAVING SUBSTANTIAL INTEREST (27.72%) WITH THE ASSESSEE COMPANY , THEREFORE ON THE SAID COUNT THE PAYMENT OF RS. 2,50,000/ - RECEIVED BY THE ASSESSEE FROM THE AFORESAID COMPANY, VIZ. M/S FILM MEDIA COMMUNICATIONS SYSTEMS PVT. LTD WOULD THEREIN TAKE THE C OLOR AND CHARACTER AS THAT OF DEEMED DIVIDEND. 7. WE THOUGH AS OBSERVED HEREINABOVE ARE OF THE CONSIDERED VIEW THAT THE AMOUNT OF RS. 9,00,000/ - AND RS. 2,50,000/ - RECEIVED BY THE ASSESSEE COMPANY FROM M/S K.J SOMAIYA AND SONS PVT. LTD. (SUPRA) AND M/S FILM MEDIA COMMUNICATIONS SYSTEMS PVT. LTD. (SUPRA), RESPECTIVELY, ARE IN THE NATURE OF DEEMED DIVIDEND, BUT THEN AS THE DEEMED DIVIDEND CAN ONLY BE ASSESSED, AS SUCH, IN THE HANDS OF A SHAREHOLDER, THEREFORE AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THOUGH THE AMOUNT OF RS. 9,00,000/ - RECEIVED BY THE ASSESSEE FROM M/S K.J SOMAIYA AND SONS PVT. LTD. (SUPRA) PAGE 6 WOULD BE LIABLE TO BE ASSESSED AS DEEMED DIV IDEND IN THE HANDS OF THE ASSESSEE COMPANY , AS THE LATTER AS PER THE FACTS BORNE FROM THE ASSESSMENT ORDER IS A SHAREHOLDER HAVING SUBSTANTIAL INTEREST (10%) IN THE AFORESAID COMPANY, VIZ. M/S K.J SOMAIYA AND SONS PVT. LTD. (SUPRA), BUT AS REGARDS THE AMO UNT OF RS. 2,50,000/ - (SUPRA) RECEIVED BY THE ASSESSEE COMPANY FROM M/S FILM MEDIA COMMUNICATIONS SYSTEMS PVT. LTD. (SUPRA), WE ARE OF THE VIEW THAT AS THE ASSESSEE COMPANY IS NOT A SHAREHOLDER IN THE SAID COMPANY, VIZ.M/S FILM MEDIA COMMUNICATIONS SYSTEMS PVT. LTD. (SUPRA), AND THE SAID AMOUNT HAD BEEN CHARACTERIZED AS DEEMED DIVIDEND AND FALLS WITHIN THE SCOPE AND GAMUT OF SEC. 2(22)(E) ONLY FOR THE REASON THAT A SHAREHOLDER, VIZ. M/S SOMAIYA AGENCIES PVT. LTD. (SUPRA) OF THE AFORESAID COMPANY HAVING S UBSTANTIAL INTEREST (20%) WAS ALSO A SHAREHOLDER HAVING SUBSTANTIAL INTEREST (27.72%) IN THE ASSESSEE COMPANY , THEREFORE IN THE BACKDROP OF THE AFORESAID FACT UAL MATRIX THOUGH THE AMOUNT OF RS. 2,50,000/ - (SUPRA) TAKES THE COLOR AND CHARACTER AS THAT OF DE EMED DIVIDEND, HOWEVER AS THE SAME CAN ONLY BE ASSESSED AS SUCH IN THE HANDS OF THE SHAREHOLDER, THEREFORE THE AFORESAID AMOUNT AFTER BEING CHARACTERIZED AS DEEMED DIVIDEND COULD ONLY HAVE BEEN ASSESSED , AS SUCH , IN THE HANDS OF THE AFORESAID SHAREHOLD ER, VIZ. M/S SOMAIYA AGENCIES PVT. LTD. (SUPRA) AND NOT IN THE HANDS OF THE ASSESSEE COMPANY. WE HOWEVER FIND THAT THE ASSESSEE HAD CLAIMED BEFORE THE LOWER AUTHORITIES THAT THE SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY IN BOTH OF THE AFORESAID COMPANI ES VIZ. M/S K.J. SOMAIYA AND SONS PVT. LTD. AND M/S FILM MEDIA COMMUNICATION PAGE 7 PVT. LTD., WAS 1.53% AND 9.20%, RESPECTIVELY. WE ARE OF THE CONSIDERED VIEW THAT AS THE AFORESAID CLAIM OF THE ASSESSEE IN RESPECT OF ITS SHARE HOLDING PATTERN IN THE COMPANIES UN DER CONSIDERATION MILITATES AS AGAINST THE FINDINGS RECORDED BY THE A.O IN THE SAID CONTEXT , WE THEREFORE ARE OF THE CONSIDERED VIEW THAT IT WOULD BE FAIR TO RESTORE TH E MATTER TO THE FILE OF THE A.O WITH A DIRECTION THAT THE SHARE HOLDING PATTERN OF THE ASSESSEE IN THE ABOVEMENTIONED COMPANIES DURI NG THE YEAR UNDER CONSIDERATION MAY BE VERIFIED . THAT IF DURING THE COURSE OF THE SET ASIDE PROCEEDINGS IT EMERGES ON THE BASIS OF MATERIAL MADE AVAILABLE ON RECORD THAT THE SHA RE HOLDING PATTERN OF THE ASSESSEE IN M/S K.J SOMAIYA AND SONS PVT. LTD. WAS LESS THAN 10% AS CONTEMPLATED IN SEC. 2(22)(E) , THEN NO ADDITION OF RS. 9,00,000/ - TOWARDS DEEMED DIVIDEND WOULD BE CALLED FOR IN THE HANDS OF THE ASSESSEE. IT IS HOWEVER MADE C LEAR THAT IN CASE IF THE SHARE HOLDING PATTERN OF THE ASSESSEE IN M/S K.J SOMAIYA AND SONS PVT. LTD.(SUPRA) IS FOUND TO BE 10% OR MORE, THEN THE ADDITION MADE BY THE A.O. AND UPHELD BY THE CIT(A ) WOULD BE LIABLE TO BE SUSTAINED. THAT AS REGARDS THE AMOUNT O F RS. 2,50,000/ - (SUPRA) RECEIVED BY THE ASSESSEE FROM M/S FILM MEDIA COMMUNICATION PVT. LTD. (SUPRA), AS WE HAVE OBSERVED HEREINABOVE THAT THE ASSESSEE IS NOT A SHAREHOLDER HAVING SUBSTANTIAL INTEREST IN THE AFORESAID COMPANY, THEREFORE THE AMOUNT OF RS. 2,50,000/ - (SUPRA) SO RECEIVED BY THE ASSESSEE FROM THE SAID COMPANY IS NOT LIABLE TO BE ASSESSED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE COMPANY. HOWEVER, AS WE ARE RESTORING THE MATTER FOR VE RIFICATION OF THE SHAREHOLDING PATTERN IN PAGE 8 RESPECT OF M/S K.J SOMAIYA AND SONS PVT. LTD.(SUPRA) TO THE FILE OF THE A.O, WE THEREFORE IN THE BACKDROP OF THE CONFLICTING CLAIM RAISED BY THE ASSESSEE ALSO AS REGARDS THE SHAREHOLDING PATTERN OF M/S FILM MEDIA C OMMUNICATION PVT. LTD. (SUPRA), THEREFORE IN ORDER TO RULE OUT ANY DISTORTION OF THE FACTUAL POSITION, THUS DIRECT THE A.O TO ALSO VERIFY THE SHAREHOLDING PATTERN OF THE AFORESAID COMPANY, VIZ. M/S FILM MEDIA COMMUNICATION PVT. LTD. (SUPRA) .THAT IF IT EMERG ES THAT THE ASSESSEE IS A SHAREHOLDER WITH A SHAREHOLDING OF 10% OR MORE IN THE SAID COMPANY, VIZ. M/S FILM MEDIA COMMUNICATIONS PVT. LTD. (SUPRA), THEN THE AMOUNT OF RS. 2,50,000/ - (SUPRA) WOULD ALSO BE LIABLE TO BE ASSESSED AS DEEMED DIVIDEND IN THE HAN DS OF THE ASSESSEE. WE THUS RESTORE THE AFORESAID ISSUE TO THE FILE OF THE A.O WHO AFTER MAKING THE NECESSARY VERIFICATIONS SHALL RE - ADJUDICATE THE SAME IN LIGHT OF OUR AFORESAID OBSERVATIONS . GROUND OF A PPEAL NO. 2 RAISED BY THE ASSESSEE BEFORE US IS THUS ALLOWED FOR STATISTICAL PURPOSE S . 7 . THE APPEAL OF THE ASSESSEE TO THE EXTENT THE SAME HAD BEEN RECALLED IS ALLOWED FOR STATISTICAL PURPOSE S IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PRON OUNCED IN THE OPEN COURT ON 12 / 0 5 /20 17 SD / - SD/ - ( R.C. SHARMA ) (RAVISH SOOD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED :12 . 0 5 .2017 PS ROHIT KUMAR / COPY OF THE ORDER FORWARDED TO : PAGE 9 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / D.R, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI