Modern Impex , Kolkata V. ACIT, Circle - 32, Kolkata , Kolkata

ITA 755/KOL/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0873 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 20-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANKAR HALDER
• Keywords: Deemed dividend; TDS; Set aside
• Section: 2(22)(e); 40(a)(ia); 194C

Judgement Text

1 ITA NO. 755/KOL/2019 MODERN IMPEX, AY- 2012-13 , D , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: KOL KATA ( ) . . , . . ! , ' #$ ) [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT & SHRI A. T. VARKEY, JM] I.T.A. NO. 755/KOL/2018 ASSESSMENT YEAR: 2012-13 MODERN IMPEX (PAN: AAFFM0833Q) VS. ASSISTANT COMMISSIONER OF INCOME-TAX, CITRCLE-32, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 09.01.2019 DATE OF PRONOUNCEMENT 27.03.2019 FOR THE APPELLANT SHRI ANIL KOCHAR, AR FOR THE RESPONDENT SHRI SANKAR HALDER, JCIT, SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-9, KOLKATA DATED 23.03.2018 FOR AY 2012-13. 2. GROUND NOS. 1 AND 6 ARE GENERAL IN NATURE, THERE FORE, DOES NOT REQUIRE ANY ADJUDICATION AND HENCE, THE SAME ARE DISMISSED. 3. GROUND NOS. 2 AND 3 OF ASSESSEES APPEAL ARE AS UNDER: 2. FOR THAT THE LD. CIT(A) ERRED IN APPRECIATING THE FACTUAL ASPECT OF THE MATTER WITH REGARD TO THE PAYMENTS MADE RELATING TO FREIGHT CHARGES AN D ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO BY INVOKING PROVISIONS OF SEC. 40(A) (IA) OF THE INCOME TAX ACT, 1961. 3. FOR THAT THE LD. CIT(A) OUGHT TO HAVE PROPERLY C ONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT IN REGARD TO PAYMENT OF FREIGHT CHARGES T O M/S. AIR INDIA AND ON THE BASIS OF THE EVIDENCES ADDUCED OUGHT TO HAVE HELD THAT NON-DEDUC TION OF TAX U/S. 194C OF THE ACT DID NOT ENTAIL ANY LIABILITY FOR DISALLOWANCE U/S. 40(A)(IA ) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT DURING THE ASSESSM ENT PROCEEDINGS THE AO NOTICED THAT THE ASSESSEE HAD PAID FREIGHT CHARGES OF RS.1,66,36 7/- AND RS.7,73,864/- TO M/S. JET AIRWAYS AND M/S. AIR INDIA RESPECTIVELY WITHOUT DEDUCTION O F TAX. THE AO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY PAYMENTS HAVE BEEN MADE WITHOUT T DS. IN REPLY, THE ASSESSEE STATED THAT 2 ITA NO. 755/KOL/2019 MODERN IMPEX, AY- 2012-13 TDS HAS NOT BEEN DEDUCTED ON AIR FREIGHT CHARGES PA ID IN MUMBAI SINCE THE PROVIDER HAS MADE AVAILABLE THE PAN TO THE ASSESSEE AND ACCORDIN G TO ASSESSEE SINCE THE PAN HAVING BEEN MADE AVAILABLE THERE WAS NO LIABILITY TO DEDUC T TAX UNDER THE PROVISION OF SEC. 194C OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT). THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE SAME U/S. 40(A)(IA) OF THE ACT. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY GON E THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT ASSESSEE H AD PAID FREIGHT CHARGES TO JET AIRWAYS TO THE TUNE OF RS.1,66,367/- AND AIR INDIA TO THE TUNE OF RS.7,73,864/- TOTALING TO RS.9,40,231/- WITHOUT DEDUCTING TDS. SO, AO INVOKED SEC. 40(A)(I A) OF THE ACT AND DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE. THE ONLY LIMI TED PRAYER OF THE ASSESSEE BEFORE US IS THAT AFTER THE AMENDMENT IN SEC. 200/201 OF THE ACT , WHEN THE RECIPIENT OF THE AMOUNTS HAVE SHOWN IN THEIR RETURN OF INCOME, THE AMOUNT IN QUE STION AND HAS BEEN ASSESSED TO TAX, THEN DISALLOWANCE IS NOT WARRANTED. WE FIND FORCE IN TH E CONTENTION OF THE ASSESSEE AND DIRECT THE AO TO ADJUDICATE THE ISSUE AFRESH. AND DIRECT THAT IF THE PAYEES HAVE REFLECTED THIS PAYMENT IN QUESTION TOWARDS THEM IN THEIR RESPECTIVE RETURN OF INCOME AND HAVE TAKEN INTO ACCOUNT THIS SUM OF AMOUNT IN THEIR RETURN OF INCOME AND HA S PAID TAX DUE ON THE INCOME DECLARED IN THE RETURN OF INCOME, AND FULFILS THE CONDITIONS STIPULATED U/S. 200 OF THE ACT, THEN NO DISALLOWANCE U/S. 40(A)(IA) OF THE ACT IS WARRANTE D. NEEDLESS TO SAY, THE AO MAY CALL FOR THE AFORESAID DETAILS FROM THE PAYEES IN CASE IT IS FOUND NECESSARY. SO, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMAND THE MATTER BACK TO AO FOR FRESH ADJUDICATION AS DIRECTED ABOVE. BOTH THESE GROUNDS OF APPEAL OF ASSESSEE ARE ALLOWE D FOR STATISTICAL PURPOSES. 6. GROUND NO. 4 OF ASSESSEES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING RS.89,930/- MADE BY AO APPLYING SECTION 2(22)(3) OF THE ACT. 7. THE FACTS OF THE CASE AS NOTED BY THE AO IN THE ASSESSMENT ORDER ARE THAT - IN THE INSTANT CASE, RIPPLE P DOSHI HAD 33.2% HOL DING IN M/S. MODERN SOLARUM PVT. LTD. AND HAD 25% SHARE OF PROFIT IN M/S. MODERN IMPEX. THUS , THE ASSESSEE SATISFIES THE CONDITIONS OF ANY CONCERN IN WHICH SUCH SHAREHOLDER IS A MEMBER AND IN WHICH HE HAS A SUBSTANTIAL INTERESTMENTIONED IN SECTION 2(22)(E) OF INCOME TA X ACT. THE ASSESSEE COMPANY, DURING THE 3 ITA NO. 755/KOL/2019 MODERN IMPEX, AY- 2012-13 YEAR, RECEIVED AN AMOUNT OF RS.55,00,000 FROM M/S. MODERN SOLAURUM PVT. LTD., A COMPANY IN WHICH PUBLIC WERE NOT SUBSTANTIALLY INTERESTED. A PERUSAL OF THE DETAILS FILED BY THE ASSESSEE COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDING S REVEALED THAT M/S. MODERN SOLAURUM PVT. LTD. HAD ACCUMULATED PROFITS OF RS.89,930 AS O N 31.03.2012, THEREBY SIGNIFYING THAT THE SAID COMPANY WAS IN POSSESSION OF ACCUMULATED PROFI TS. SINCE THE CONDITIONS ATTRACTING PROVISIONS OF SECTION 2(22)(E) OF INCOME TAX ACT A RE FULLY SATISFIED IN RESPECT OF THE LOAN RECEIVED BY THE ASSESSEE COMPANY FROM M/S. MODERN S OLAURUM PVT. LTD. IT IS HELD THAT THE SAID AMOUNT OF RS.89,930 SHALL BE DEEMED TO BE INCOME OF THE ASSESSEE COMPANY U/S. 2(22)(E) OF THE INCOME TAX ACT. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS BEFORE US. 8. WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH FA CTS AND CIRCUMSTANCES OF THE CASE. WE NOTE THAT ONE OF THE PARTNERS OF ASSESSEE FIRM SHRI RIPPLE P. DOSHI HOLDS 33.20% IN THE ASSESSEE FIRM. AND THE FIRM HAD RECEIVED ADVANCE/L OAN FROM A COMPANY CALLED M/S. MODERN SOLAURUM PVT. LTD. WHEREIN SHRI RIPPLE P. DO SHI WAS HAVING A SHAREHOLDING OF 25%. SO, AO ADDED THE ACCUMULATED PROFIT OF M/S. M ODERN SOLAURUM PVT. LTD. OF RS.89,930/- AS DEEMED DIVIDEND U/S. 2(22)(E) OF TH E ACT IN THE HANDS OF THE ASSESSEE FIRM . WE NOTE THAT ASSESSEE FIRM IS NOT A SHAREHOLDER OF M/S. MODERN SOLAURUM PVT. LTD. SO, SEC. 2(22)(E) OF THE ACT IS NOT ATTRACTED AGAINST THE AS SESSEE FIRM AND SO THE IMPUGNED ADDITION INVOKING SEC. 2(22)(E) OF THE ACT CANNOT BE SUSTAIN ED AS HELD BY THE HONBLE DELHI HIGH COURT IN ANKITECH PVT LTD 2011[5] TMI 325, WHEREIN THIS PRINCIPAL/RATIO HAS BEEN HELD. SO SINCE THE FIRM BEING NOT A SHAREHOLDER OF THE PVT. LTD. COMPANY WHICH LENT THE MONEY CANNOT BE TAXED BY APPLYING SEC. 2(22)(E) OF THE AC T. SO, THE ADDITION IS DELETED. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. ORDER IS PRONOUNCED IN THE OPEN COURT ON 27TH MARC H, 2019 SD/- SD/- (P. M. JAGTAP) (ABY. T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED : 27TH MARCH, 2019 JD.(SR.P.S.) 4 ITA NO. 755/KOL/2019 MODERN IMPEX, AY- 2012-13 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. MODERN IMPEX, C/O S. L. KOCHAR, ADVOCATE, 5, ASHUTOSH CHOUDHURY AVENUE, KOLKATA-700 019. . 2 RESPONDENT ACIT, CIRCLE-32, KOLKATA 3. 4. CIT(A)-9, KOLKATA (SENT THROUGH E-MAIL) CIT- , KOLKATA. 5. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR