M/S TECHNITHON TECHNOLOGIES PVT LTD., MUMBAI V. ITO 9 (1)(2), MUMBAI

ITA 7784/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8862 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2010-2011
• Appeal Filed On: 17-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Deemed dividend
• Section: 2(22)(e); 14A; 251

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI PAVANKUMAR GADALE ( JM) I.T.A. NO. 7784/MUM/2019 (ASSESSMENT YEAR 2010-11) M/S. TECHNITHON TECHNOLOGIES PVT. LTD. SHIV ANAND-A, 373/374 S.V. ROAD, GOREGAON-W MUMBAI-400 104. PAN : AAACC3354J VS. ITO-9(1)(2) 5 TH FLOOR EARNEST HOUSE NARIMAN POINT MUMBAI-400 021. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI PARAS SAVLA DEPARTMENT BY SHRI SANJEEV KASHYAP DATE OF HEARING 08 .0 6 .2021 DATE OF PRONOUNCEMENT 02.08.2021 O R D E R PER SHAMIM YAHYA (AM) :- THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 30.9.2019 PERTAINS TO A.Y. 2020-11. 2. THE GROUNDS OF APPEAL READ AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN TREATING RS. 75,00,000/- AS DEEMED DIVIDEND UNDER SECTION 2(22)(E) OF THE ACT BEING UNSECURED LOAN RECEIVED BY THE APPELLANT COMPANY FROM ITS GROUP COMPANY I.E. M/S. TRIVEDI ENTERPRISE S PVT. LTD (TEPL) 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) FAILED TO APPRECIATE THE FACT THAT APPELLANT IS NOT THE SH AREHOLDER OF THE TEPL, THEREFORE, SECTION 2(22)(E) CANNOT BE INVOKED IN THE C ASE OF THE APPELLANT. 3. THE LD. CIT(A) ERRED IN DIRECTING THE ASSESSING OFFICER TO PASS TWO DIFFERENT ORDERS GIVING EFFECT TO THE CIT(A) ORDER, WHICH IS A UNIQUE METHODOLOGY UNKNOWN IN LAW. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DISALLOWING A SUM OF RS. 10,000/- UNDER SE CTION 14A OF THE INCOME TAX ACT, 1961. M/S. TECHNITHON TECHNOLOGIES PVT. LTD. 2 5. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) ERRED IN DISALLOWING A SUM OF RS. 60,310/- BEING PA YMENT MADE TOWARDS SITE EXPENSES ON AD HOC BASIS. 3. AT THE OUTSET LEARNED COUNSEL OF THE ASSESSEE SU BMITTED THAT HE SHALL NOT BE PRESSING GROUND NO. 4 AND 5. HENCE GROUND NO. 4 AND 5 ARE DISMISSED AS NOT PRESSED. 4. AS REGARDS THE GROUNDS OF APPEAL PRESSED THE SAM E RELATES TO ISSUE OF TREATMENT OF DEEMED DIVIDEND OF THE UNSECURED LOAN RECEIVED BY THE ASSESSEE FROM GROUP COMPANY M/S. TRIVEDI ENTERPRISES PVT. LT D. 6. BRIEF FACTS OF THIS ISSUE NOTED BY THE ASSESSING OFFICER ARE THAT ON PERUSAL OF THE DETAILS FILED BY THE AR IT WAS NOTICED THAT THE ASSESSEE HAS RECEIVED UNSECURED LOAN FROM ITS GROUP COMPANY M/S. TRIVEDI ENTERPRISES P. LTD. ON PERUSAL OF LEDGER ACCOUNT M/S. TEPL MAINTAINED IN T HE BOOKS OF THE ASSESSEE COMPANY, IT WAS NOTICED THAT THE ASSESSEE HAS RECEI VED DURING THE YEAR A LOAN OF RS.1,05,00,000/- FROM THE GROUP COMPANY WITH CLO SING BALANCE AT RS. 75,00,000/-. ON PERUSAL OF SHARE HOLDING PATTERN OF THE ASSESSEE COMPANY AND M/S TRIVEDI ENTERPRISES P. LTD, IT WAS NOTICED THAT MR. SANJAY N. TRIVEDI AND MRS. S. TRIVEDI (JOINT) HAVE 20% EQUITY SHARE A ND 16.67% PREFERENCE SHARE HOLDING IN M/S. TRIVEDI ENTERPRISES P. LTD. FURTHER , MR. SANJAY N. TRIVEDI AND MRS. S. TRIVEDI (JOINT) ALSO HOLD 34% EQUITY SHARE HOLDING IN THE ASSESSES COMPANY. ON ASSESSING OFFICERS INQUIRY ABOUT DEEME D DIVIDEND IN THIS REGARD, IN RESPONSE THE ASSESSEE RESPONDED THAT THE SAME WA S FOR THE PURPOSE OF THE BUSINESS. HOWEVER, THE ASSESSEE OFFICER WAS NOT SAT ISFIED. HE HELD AS UNDER :- IN THIS CASE, ALL THE CONDITIONS SPECIFIED IN SECTIO N 2(22)(E) OF THE ACT ARE SATISFIED AND THEREFORE, THE PROVISIONS OF THIS SECTION ARE SQUARELY ATTRACTED. IN VIEW OF THE CLEAR POSITION IN LAW AND THE C.B.D.T. CIRCULAR QUOTED ABOVE, THE LOANS ACCEPTED BY THE ASSESSEE COMPANY ARE TREATED AS DEEMED DIVIDEND U/S.2(22)(E) OF THE I.T. ACT. THE DEEMED DIVIDEND WOU LD BE LIMITED TO THE EXTENT OF LOAN ACCEPTED DURING THE YEAR OF ACCOUNT O R THE ACCUMULATED PROFIT AVAILABLE IN THE RESERVES & SURPLUS OF THE LENDER CO MPANY, WHICHEVER IS LESS. IN THIS CASE, THE GROSS RECEIPT OF LOAN BY THE ASSESS EE FROM M/S TRIVEDI ENTERPRISES PVT. LTD. IS RS. 1,05,00,000/- AND THE P ROFIT AND LOSS A/C M/S. TECHNITHON TECHNOLOGIES PVT. LTD. 3 APPROPRIATION REPORTED BY M/S TRIVEDI ENTERPRISES PVT . LTD IS I,26,14,450/- (OPENING BALANCE-RS. 1,19,38,845/-). 7. AGAINST THE ORDER ASSESSEE APPEAL BEFORE THE LEA RNED CIT(A). LEARNED CIT(A) ACCEPTED THE ASSESSEE'S PLEA THAT THE DISALL OWANCE IF ANY SHOULD BE RESTRICTED TO BE 75 LAKHS. HOWEVER AS REGARDS THE P LEA OF THE ASSESSEE THAT ASSESSEE IS NOT A REGISTERED SHAREHOLDER OF THE COM PANY FROM WHERE IT HAS RECEIVED THE LOAN, THE LEARNED CIT(A) REFERRED TO T HE FACT THAT ON THIS ISSUE THE MATTER HAS TRAVELLED TO THE SUPREME COURT AND THE H ON'BLE SUPREME COURT HAS REFERRED THE MATTER TO A LARGER BENCH. HE NOTED THA T ON SIMILAR FACTS ITAT HAS DIRECTED THAT THE AO SHOULD AWAIT THE ORDER OF SUPR EME COURT AND THEN DECIDE THE ISSUE. HENCE, THE LEARNED CIT(A) REMITTED THE M ATTER TO THE AO AND DIRECTED HIM DECIDE THE ISSUE AFTER THE RECEIPT OF SUPREME C OURT ORDER ON THE ABOVE. THE LEARNED CIT(A) HELD AS UNDER : 5.4.5 THE ISSUE BEFORE ME IS WHETHER A SUM TREATED AS DIVIDEND U/S. 2(22)(E) IS TAXABLE IN THE HANDS OF THE RECIPIENT OF TH E SUM OR IN THE HANDS OF THE SHAREHOLDER OF THE PAYER. THERE ARE CONFLICTING DECISIONS ON THIS ISSUE. IN THE RECENT JUDGEMENT, THE HON'BLE SUPREME COURT IN NATIO NAL TRAVEL SERVICES VS. CIT [2018] 89 TAXMANN.COM 232(SC) DEALING IN THE CASE OF ANKITECH PVT. LTD. AND SECTION 2(22)(E) HELD AS UNDER: '17. WE ARE OF THE VIEW THAT IT IS VERY DIFFICULT TO ACCEP T THE REASONING OF THE DIVISION BENCH. IT IS NOT ENOUGH TO SAY THAT ANKIT ECH'S CASE REFERS TO THE SECOND LIMB OF THE AMENDED DEFINITION, W HEREAS THE PRESENT CASE REFERS TO THE FIRST LIMB, FOR THE SIMPLE REASON THAT THE WORD 'SHAREHOLDER' IN BOTH LIMBS WOULD MEAN EXACTLY THE SAME THING. THIS IS FOR THE REASON THAT THE EXPRESSION 'SUCH SHAREH OLDER' IN THE SECOND LIMB WOULD SHOW THAT IT REFERS TO A PERSON WHO IS A 'SHAREHOLDER' IN THE FIRST LIMB. 18. THIS BEING THE CASE, WE ARE OF THE VIEW THAT THE W HOLE OBJECT OF THE AMENDED PROVISION WOULD BE STULTIFIED IF THE DIVISION BENCH JUDGMENT WERE TO BE FOLLOWED. ANKITECH'S CASE (SUPRA), IN STA TING THAT NO CHANGE WAS MADE BY INTRODUCING THE DEEMING FICTION INSOFAR AS THE EXPRESSION 'SHAREHOLDER' IS CONCERNED IS, ACCORDING TO US, WRONGL Y DECIDED. THE WHOLE OBJECT OF THE PROVISION IS CLEAR FROM THE EXPLA NATORY MEMORANDUM AND THE LITERAL LANGUAGE OF THE NEWLY INS ERTED DEFINITION CLAUSE WHICH IS TO GET OVER THE TWO JUDGMENTS OF THIS COURT REFERRED TO HEREINABOVE. THIS IS WHY 'SHAREHOLDER' NOW, POST AMEND MENT, HAS ONLY TO BE A PERSON WHO IS THE BENEFICIAL OWNER OF SH ARES. ONE CANNOT BE A REGISTERED OWNER AND BENEFICIAL OWNER IN THE S ENSE OF A BENEFICIARY OF A TRUST OR OTHERWISE AT THE SAME TIME. IT IS CLEAR M/S. TECHNITHON TECHNOLOGIES PVT. LTD. 4 THEREFORE THAT THE MOMENT THERE IS A SHAREHOLDER, WHO N EED NOT NECESSARILY BE A MEMBER OF THE COMPANY ON ITS REGIST ER, WHO IS THE BENEFICIAL OWNER OF SHARES, THE SECTION GETS ATTRACTED WITHOUT MORE. TO STATE, THEREFORE, THAT TWO CONDITIONS HAVE TO BE SATISFI ED, NAMELY, THAT THE SHAREHOLDER MUST FIRST BE A REGISTERED SHAREHOLDER AND THEREAFTER, ALSO BE A BENEFICIAL OWNER IS NOT ONLY MUTUALLY CONTR ADICTORY BUT IS PLAINLY INCORRECT. ALSO, WHAT IS IMPORTANT IS THE ADDITI ON, BY WAY OF AMENDMENT, OF SUCH BENEFICIAL OWNER HOLDING NOT LESS THAN 10% OF VOTING POWER. THIS IS ANOTHER INDICATOR THAT THE AMENDME NT SPEAKS ONLY OF A BENEFICIAL SHAREHOLDER WHO CAN COMPEL THE REGISTERED OWNER TO VOLE IN A PARTICULAR WAY, AS HAS BEEN HELD IN A C ATENA OF DECISIONS STARTING FROM MATHALONE V. BOMBAY LIFE ASSURANCE CO. L TD. [1954] SCR 111. 19. THIS BEING THE CASE, WE ARE PRIMA FACIE OF THE V IEW THAT THE ANKITECH (P.) LTD. CASE (SUPRA) ITSELF REQUIRES TO BE RECONSIDERED, AND THIS BEING SO, WITHOUT GOING INTO OTHER QUESTIONS THAT MAY ARISE, INCLUDING WHETHER THE FACTS OF THE PRESENT CASE WOULD J IT THE SECOND LIMB OF THE AMENDED DEFINITION CLAUSE, WE PLACE THESE APPEALS BEFORE THE HON'BLE CHIEF JUSTICE OF INDIA IN ORDER TO CONSTITU TE AN APPROPRIATE BENCH OF THREE LEARNED JUDGES IN ORDER TO HAVE A RELO OK AT THE ENTIRE QUESTION. 20. ORDERED ACCORDINGLY. ' 5.4.6 THE SAME ISSUE CAME UP BEFORE THE HON'BLE ITA T, ' A' BENCH, MUMBAI IN ITA NO.7765/MUM/2011 IN THE CASE OF M/S. APURVA DEVELOPERS PVT. LTD. VS. ITO FOR A.Y. 2005-06. IN THAT CASE, THE HON'BLE ITAT, 'A' BENCH, MUMBAI HAS DIRECTED THE AO TO 'WAIT AND FOLLOW THE DECISION AS PER PARA 19 OF THE ABOVE JUDGMENT OF THE HON'BLE SUPREME COURT.' TAKING A CUE FROM THE ORDER OF THE HON'BLE ITAT, I DIRECT THE AO TO FOLLOW THE DECIS ION OF THE HON'BLE SUPREME COURT AS PER PARA 19 OF ITS ORDER IN THE CASE OF NATIONAL TRAVEL SERVICES PVT. LTD. VS. CIT (SUPRA) ONCE THE HON'BLE S UPREME COURT DECIDES THE ISSUE. THE AO WILL ALLOW FURTHER RELIEF OF RS. 75 LA KHS IN CASE THE HON'BLE SUPREME COURT DECIDES THE ISSUE IN FAVOUR OF THE APPE LLANT. IT IS HOWEVER CLARIFIED THAT THE RELIEF OF RS. 30 LAKHS MENTIONED IN PARA 5.4.3 ABOVE WILL BE GIVEN TO THE APPELLANT AFTER RECEIPT OF THIS ORDER WIT HOUT WAITING FOR THE DECISION OF THE HON'BLE SUPREME COURT ON THIS ISSUE. ADDITIONAL RELIEF DUE TO THE APPELLANT, IF ANY, AFTER THE ISSUE IS DECIDED BY THE HON'BLE SUPREME COURT, WILL BE ALLOWED BY WAY OF A SUPPLEMENTARY ORD ER. 8. AGAINST ORDER ASSESSEE IS IN APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. WE NOTE THAT THE HON'BLE SUPREME COURT HAS NOT REVERSED ITS ORDE R ON THE ISSUE BUT HAS REFERRED TO A LARGER BENCH. FURTHER WE NOTE THAT AS PER SECTION 251 OF THE ACT THERE IS NO POWER OF LEARNED CIT(A) TO REMAND THE M ATTER. IN THIS VIEW OF THE M/S. TECHNITHON TECHNOLOGIES PVT. LTD. 5 MATTER THE ORDER OF LEARNED CIT(A) REMANDING THE IS SUE THE FILE OF ASSESSING OFFICER IS NOT AT ALL SUSTAINABLE. IN THIS REGARD L EARNED COUNSEL OF THE ASSESSEE HAS ALSO REFERRED TO THE DECISION OF HONOURABLE BOM BAY HIGH COURT FOR THE PROPOSITION THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE. 10. UPON CAREFUL CONSIDERATION WE FIND THAT INTERES T OF JUSTICE DEMANDS THAT ISSUE BE REMITTED TO THE FILE OF LEARNED CIT(A), AS HE HAS NO POWER TO REMAND THE ISSUE TO THE ASSESSING OFFICER. THE LEARNED CIT (A) IS DIRECTED TO CONSIDER THE ISSUE AFRESH AFTER CONSIDERING ALL FACTS. NEEDLESS TO ADD ASSESSEE SHOULD BE GRANTED ADEQUATE OPPORTUNITY OF BEING HEARD. 11. IN THE RESULT, THIS APPEAL BY THE ASSESSEE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 2.8.2021. SD/- SD/- (PAVANKUMAR GADALE) (SHAM IM YAHYA) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI; DATED : 02/08/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI