POONA GALVANIZERS P. LTD, MUMBAI V. ACIT 8(2), MUMBAI

ITA 7626/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4013 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 24-07-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 11-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JI TENDRA YADAV
• Assessee Lawyers: R S CHOKSHI
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH , MUMBAI , !!' !!' !!' !!' , , # # # # BEFORE SHRI RAJENDRA SINGH, AM, AND SHRI SAN JAY GARG, JM /. I.T.A. NO.7626/MUM/2011 ( $' $' $' $' %' %' %' %' / ASSESSMENT YEAR: 2008-09) POONA GALVANIZERS PVT. LTD., 705, MORYA LANDMARK II, OSHIWARA LINK ROAD, ANDHERI (W), MUMBAI :-400 053 $ $ $ $ / VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 8(2), MUMBAI . & /. ' /. PAN/GIR NO. : AADCP211R ( &( / APPELLANT ) : ( )*&( / RESPONDENT ) &( + / APPELLANT BY : SHRI R.S. CHOKSHI )*&( + / RESPONDENT BY : SHRI JITENDRA YADAV $ - / DATE OF HEARING : 24. 07. 2013 /0% - /DATE OF PRONOUNCEMENT : 24 .07. 2013 1 / O R D E R PER :RAJENDRA SINGH (AM) THIS APPEAL BY THE ASSESSEE IS DIREC TED AGAINST THE ORDER DATED 13.09.2011 OF CIT(A)-17 MUMBAI, FOR THE ASSESSMENT YEAR 2008-09 . THE ONLY DISPUTE RAISED BY THE ASSESSEE IN THIS APPEAL IS REGARDING ADDITION ON AC COUNT OF DIVIDEND INCOME U/S 2(22)(E). 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD TAKEN A LOAN OF RS. 1,22,80,000/- FROM ONE OF ITS SISTER CONCERNS, VIZ M/S. KARMTARA FASTENERS PVT. LTD. THE AO FURTHER NOTED THAT MR. H. M. SINGH, WHO WAS HOLDING 25% SHARES IN THE ASSESSEE COMPANY ALSO HELD 80.50 PERCENT SHARES IN KARAMTARA FASTERS PVT. 2 7626 M 2011,(AY 2008-09) POONA GALVANIZERS PVT LTD. VS. ACIT LTD. THE AO THEREFORE, CONCLUDED THAT PROVISION OF SECTION 2(22)(E) WHERE APPLICABLE IN THE CASE OF ASSESSEE. HE NOTED THAT ACCUMULATED RESULTS IN CASE OF KARAMTARA FASTERS PVT. LTD. WAS RS. 1,07,33,270/-. HE THEREFORE, ADDED A SUM OF RS. 1,07,33,270/- AS DEEMED DIVIDEND U/S 2(22)(E). 3. IN APPEAL, CIT(A) OBSERVED THAT DEEMED DIVIDEND U/S 2(22)(E) CAN BE ASSESSED ONLY IN CASE OF A SHARE HOLDER AS HELD BY SPECIAL BENCH OF TRIBUNAL IN CASE OF BHAUMIK COLOUR PVT. LTD, 313 ITR (AT) 146 AND BY THE HONBLE HIGH COURT OF BOMBAY IN CASE OF CIT VS. UNIVERSAL MEDICAL PRIVATE LTD. [(324) ITR 263]. TH E CIT(A) OBSERVED THAT THE ASSESSEE WAS NOT A SHARE HOLDER IN SISTER CONCERNED AND THEREFOR E, HELD THAT NO ADDITION COULD MADE IN CASE OF ASSESSEE U/S 2(22)(E). IT WAS ALSO OBSERVED BY H IM THAT AO COULD CONSIDER MAKING ADDITION IN CASE OF M/S. H.M. SINGH IN ASSESSMENT YEAR 2008- 09. AGGRIEVED BY THE DICISION OF CIT(A), THE ASSESSEE IS IN APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE REC ORDS CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING ADDITION ON ACCOUNT OF DE EMED DIVIDEND U/S 2(22)(E) OF THE SAID ACT. UNDER THE SAID PROVISION, ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM BY WAY OF ADVANCE OR LOAN TO SHARE HOLDER, WHO IS BENEFICIAL OWNER OF SHARES HOLDING NOT LESS THAN 10 % VOTING POWER OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS MEMBER OR PARTNER AND I N WHICH HE HAS SUBSTANTIAL INTEREST OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR THE BE NEFIT OF ANY SUCH SHARE HOLDER HAS TO ASSESSED AS DEEMED DIVIDEND TO THE EXTENT TO WHICH THE COMPANY POSSESSES ACCUMULATED PROFITS. THERE IS NO DISPUTE THAT THE ASSESSEE IS N OT SHARE HOLDER OF THE SISTER CONCERN FROM WHICH LOAN HAS BEEN TAKEN. IT HAS BEEN HELD BY THE SPECIAL BENCH OF TRIBUNAL IN CASE OF BHAUMIK COLOUR PVT. LTD. (SUPRA), WHICH HAS ALSO BE EN UPHELD THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICAL PVT. LTD.(SU PRA), THAT ADDITION ON ACCOUNT OF DEEMED DIVIDEND CAN BE MADE ONLY IN CASE OF SHARE HOLDER. THE ASSESSEE IS NOT A SHARE HOLDER AND THEREFORE, ADDITION MADE BY THE AO IS NOT JUSTIFIE D. WE THEREFORE, SEE NO INFIRMITY IN THE ORDER OF CIT(A) HOLDING THAT NO ADDITION CAN BE MA DE IN THE CASE OF ASSESSEE. THE CIT(A) HAS ALSO OBSERVED THAT THE ADDITION CAN BE MADE IN CASE OF H.M. SINGH. WE FIND THAT SHRI H.M. SINGH IS A SHARE HOLDER OF THE SISTER CONCERN WHICH ADVANCED LOAN TO THE ASSESSEE 3 7626 M 2011,(AY 2008-09) POONA GALVANIZERS PVT LTD. VS. ACIT COMPANY IN WHICH HE IS A SHARE HOLDER HAVING SUBSTA NTIAL INTEREST. THEREFORE, IN OUR VIEW, ORDER OF CIT(A) HOLDING THAT THE ADDITION HAS TO BE MADE IN CASE OF SHRI H.M SINGH IS AS PER PROVISIONS OF LAW AND HAS TO BE UPHELD. THE ASSESSE E HAS ALSO RAISED A GROUND THAT THE TRANSACTION BETWEEN THE TWO COMPANIES WAS NOT OF TH E NATURE OF THE LOAN BUT IN THE NATURE OF BUSINESS TRANSACTION BUT NOTHING HAS BEEN PRODUCED TO SUBSTANTIATE THE CLAIM. THEREFORE, THE GROUND RAISED BY THE ASSESSEE HAS NO MERIT AND IS R EJECTED. WE THEREFORE, CONFIRM THE ORDER OF CIT(A). 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS DISMISSED. -3 $'- 444 - 5 4 ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH DAY OF JULY, 2013 . 1 /0% $3 24.07.2013 0 ! SD/- SD/- ( SANJAY GARG ) ( RAJENDRA SINGH ) /JUDICIAL MEMBER 4 / ACCOUNTANT MEMBER MUMBAI: $4 DATED : 24. 07.2013 $ . /. PRAMOD KUMAR, PS 1 1 1 1 )- )- )- )- 8%- 8%- 8%- 8%- / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT 3. 9 ) ( / THE CIT(A) 4. 9 / CIT - CONCERNED 5. :! )-$ , , / DR, ITAT, MUMBAI 6. !;' < / GUARD FILE 1$ 1$ 1$ 1$ / BY ORDER, = == = / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI.