Sai Jyoti Dyeing & Printing Mills Pvt.Ltd., Surat V. The ACIT.,Range-4, Surat

ITA 813/AHD/2010

• Counselvise Citation: 81320514 RSA 2010
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 26-06-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 17-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAHUL KUMAR
• Assessee Lawyers: S N SOPARKAR
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, A BENCH, AHMEDABAD BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI A. K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.813 / AHD/2010 (ASSESSMENT YEAR 2006-07) SAI JYOTI DYEING & PRINTING MILLS PVT. LTD., 102, SURANA INTERNATIONAL, SAHRA DARWAJA, RING ROAD, SURAT-395002 VS. ACIT, RANGE 4, SURAT PAN/GIR NO. : AADCS3569E (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N SOPARKAR, AR RESPONDENT BY: SHRI RAHUL KUMAR, SR. DR DATE OF HEARING: 26.06.2012 DATE OF PRONOUNCEMENT: 06.07.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) IV, SURAT DATED 05.11.2009 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE ONLY EFFECTIVE GROUND OF THE ASSESSEE IS REGARDING ADDITION CONFIR MED BY LD. CIT(A) OF RS.83,29,438/- AS DEEMED DIVIDEND U/S 2(22)(E) OF T HE INCOME TAX ACT, 1961. 3. THE BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NO TED BY LD. CIT(A) ON PAGES 1 & 2 OF HIS ORDER AND THE RELEVANT PARAS ARE REPRODUCED BELOW: THE APPELLANT COMPANY IS A CLOSELY HELD COMPANY WI TH SHRI HARIPRASAD YADAV AND SHRI ANIL H, YADAV HOLDING 22, 09% & I.T.A.NO.813 /AHD/2010 2 51,14% OF SHARES RESPECTIVELY. THESE TWO PEOPLE ARC ALSO HOLDING 12.8% AND 24.60% SHARES IN THE SISTER COMPANY SAI J YOTI FASHIONS PVT. LTD,, -MAKING IT AMPLY CLEAR THAT THE TWO PEOP LE ARE HAVING SUBSTANTIAL INTEREST IN THE CASE OF THE APPELLANT C OMPANY AND THE A.O, INVOKED PROVISIONS OF 2 (22)(E) I. T. ACT. THE A.O. MENTIONED THAT SINCE THE ACCUMULATED PROFITS IN THE CASE OF S AI JYOTI FASHIONS PVT. LTD., STOOD AT RS.83,29,4387- THE DEEMED DIVID END WAS TO BE RESTRICTED TO THIS SUM. ACCORDINGLY THE APPELLANT W AS SHOW CAUSED DURING THE ASSESSMENT PROCEEDING AS TO WHY THE AMOU NT BE NOT TREATED AS DEEMED DIVIDEND. THE REPLY WAS GIVEN VIDE SUBMISSIONS DATED 18.11.2 008 WHICH HAS BEEN REPRODUCED BY THE A.O. IN SUB PARA 5 .5. ON PAGE 4 ONWARDS IN THE ASSESSMENT ORDER. THE BASIC THRUST O F THE ARGUMENT OF THE APPELLANT IS THAT THE BALANCE AMOUNT OF RS.1 ,3771,6487- WAS PURELY A DEPOSIT ACCOUNT AND NOT IN NATURE OF LOANS & ADVANCES. IT WAS ARGUED THAT LOANS & ADVANCES ARE DIFFERENT THAN DEPOSIT AS PER RATIO OF MADRAS HIGH COURT IN CASE OF A.M. SHAMSSUD DIN AND DELHI HIGH COURT IN EASE OF BAIDYANATH PLASTIC INDU STRIES PVT. LTD. HOWEVER ADMITTEDLY THE DELHI HIGH COURT JUDGMENT WA S IN RESPECT OF 276E AND 269T. THE APPELLANT HAS ALSO REFERRED T O AN INTEREST TAX ACT CASE OF UTKARSH FINCAP PVT. LTD. VS. I TO ( 2006) 101 TTJ (AHD) 0210 - ITAT WHERE IT WAS HELD THAT INTEREST O N INTER CORPORATE DEPOSITS UNLESS THEY CLEARLY FELL WITHIN THE MEANING OF 'INTEREST ON' LOANS AND ADVANCES'' WOULD NOT BE TAX ABLE. IT WAS ACCORDINGLY HELD THAT 'INTER CORPORATE DEPOSITS CAN NEITHER BE A LOAN NOR AN ADVANCE.' FURTHER IN MADRAS HIGH COURT CASE IN ABDUL HAMID SAHIB V/S. RAHMATBIBI., IT WAS ARGUED THAT LO AN IS REPAYABLE THE MINUTE IT IS INCURRED. WHILE DEPOSIT BECOMES RE PAYABLE ON THE DALE OF MATURITY OR AS PER THE TERM OF AGREEMENT. T HUS IT WAS ASSERTED THAT A.O.'S PROPOSED ACTION ABOUT 'DEEMED INCOME' WAS NOT AS PER LAW. THE A.O. DID NOT SET MUCH MERIT IN THE ARGUMENT OF 3 DIFFERENT ACCOUNTS - FIRST BEING A PURELY DEPOSIT ACCOUNT, SE COND BEING A CURRENT ACCOUNT IN WHICH ADVANCES APPEARED AND THIR D ACCOUNT HAVING DEBIT BALANCES - IN THE NATURE OF LOANS IN W HICH INTEREST WAS CHANGED. BUT A.O. HAS POINTED OUT THAT THE ANNEXURE ENCLOSED WITH THE RETURN OF INCOME AND FORMING PART OF AUDITED AC COUNT GIVES A TOTAL FIGURE OF RS.2,13,02,079/- AS LOAN IN THE BAL ANCE SHEET. THIS INCLUDES RS.L,37,71,648/- OF LOAN FROM SAI JYOTI FA SHIONS PVT. LTD., ANNEXURE 4 TO RETURN CONTAINS THE LIST OF SUCH LOAN - PARTIES. ONE OF THEM IS SAI JYOTI FASHIONS PVT. LTD., THIS ANNEXURE IS ALSO CERTIFIED I.T.A.NO.813 /AHD/2010 3 AND INITIATED BY THE AUDITOR. THE A.O. IN SUB PARA 5.8 HAS QUANTIFIED THE AMOUNT AFTER OBSERVING THAT ASSESSEE HAS RECEIVED LOANS BY WAY OF CHEQUES ON VARIOUS DATES. ONLY A SM ALL AMOUNT OF RS.54,200 HAS BEEN REPAID DURING THE YEAR. THERE IS NO NARRATION ON THE ACCOUNT BEING INTER CORPORATE DEPOSITS. IT SEEM S THAT AS AND WHEN THE APPELLANT HAD REQUIRED THE MONEY, THE FLUI DS WERE TRANSFERRED FROM THE ACCOUNT OF SISTER COMPANY, THU S THE AMOUNT BEING IN NATURE OF LOAN WERE TREATED AS DEEMED DIVI DEND. BUT SINCE THE ACCUMULATED PROFIT AVAILABLE WERE ONLY TO THE L IMIT OF RS.83,29,438/- OF THE SISTER COMPANY I.E. SAI JYOTI FASHIONS PVT. LTD., THE A.O. MADE THE ADDITION ONLY TO THAT EXTEN T WHICH IS UNDER DISPUTE. 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESS EE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS SUBMITTED BY THE LD. A.R. HAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF SPECIAL B ENCH OF THE TRIBUNAL RENDERED IN THE CASE OF ACIT VS BHOMIK COLOUR PVT. LTD. AS REPORTED IN 118 ITD 01 (SB) (MUM.). HE ALSO SUBMITTED COPY OF THE TRIBUNAL DECISION RENDERED IN THE CASE OF ITO V ZEN INDUSTRI ES PVT. LTD. IN I.T.A.NO. 26/AHD/2012 AS PER WHICH, SIMILAR ISSUE W AS DECIDED IN FAVOUR OF THE ASSESSEE BY FOLLOWING THIS VERY JUDGEMENT OF SPECIAL BENCH OF THE TRIBUNAL. HE FURTHER SUBMITTED THAT NOW, THERE ARE VARIOUS JUDGMENTS AVAILABLE OF VARIOUS HIGH COURTS ALSO IN FAVOUR OF THE ASSESSEE AS UNDER: I) 340 ITR 14 (DEL.) CITY VS ANKITECH P. LTD. II) 324 ITR 263 (BOM.) CIT VS. UNIVERSAL MEDICARE P . LTD. III) 313 ITR 116 (RAJ.) CIT VS HOTEL HILLTOP 6. AS AGAINST THIS, LD. D.R. SUPPORTED THE ORDERS O F AUTHORITIES BELOW. HE FURTHER SUBMITTED THAT THE DECISION OF SPECIAL B ENCH OF THE TRIBUNAL IS DISTINGUISHABLE. HE PLACED RELIANCE ON THE JUDGEME NT OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS MUKUNDRAY K SH AH AS REPORTED IN I.T.A.NO.813 /AHD/2010 4 290 ITR 433 (S.C.). HE ALSO SUBMITTED THAT AS PER THE BOARDS CIRCULAR NO.495 DATED 22.05.1997, THIS ISSUE SHOULD BE DECID ED AGAINST THE ASSESSEE. 7. IN THE REJOINDER, IT IS SUBMITTED BY THE LD. A.R . THAT THIS JUDGMENT OF HONBLE APEX COURT CITED BY THE LD. D.R. IS DIST INGUISHABLE ON FACTS AND BOARDS CIRCULAR IS NOT BINDING ON THE TRIBUNAL . 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSE D THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENTS CITED BY THE SIDES. FIRST, WE DISCUSS T HE APPLICABILITY OF THE JUDGEMENT OF HONBLE APEX COURT CITED BY THE LD. D. R. IN THAT CASE, THE COMPANY MKSEPL HAS MADE PAYMENT TO MKF AND MKI FOR THE BENEFIT OF THE ASSESSEE WHICH ENABLED THE ASSESSEE TO BUY 9% OF RBI BONDS IN FINANCIAL YEAR 1999-2000. IT WAS HELD BY HONBLE APEX COURT THAT THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE TWO FIRMS WERE USED AS CONDUITS BY THE ASSESSEE. IT IS ALSO OBSERVED BY T HE HONBLE APEX COURT THAT IT IS NOT IN DISPUTE THAT ASSESSEE HAS MORE TH AN 10% OF VOTING POWER IN MKS DURING THE BLOCK PERIOD. IT IS FURTHER NOTE D BY THE HONBLE APEX COURT THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE H AD SUBSTANTIAL INTEREST OF ABOVE 16% IN MKF. IN THAT CASE, LOAN WAS GIVEN BY MKS AND IN THAT CASE, ASSESSEE WAS HAVING MORE THAN 10% OF VOTING P OWER IN MKS WHEREAS IN THE PRESENT CASE, THE LOAN WAS GIVEN BY SAI JYOTI FASHION PVT. LTD AND THE ASSESSEE COMPANY IS NOT HAVING ANY SHAR EHOLDING AND VOTING POWER IN THAT COMPANY AND THEREFORE, THIS JUDGMENT OF HONBLE APEX COURT IS NOT APPLICABLE IN THE PRESENT CASE. 9. AS PER THE DECISION OF SPECIAL BENCH OF THE TRIB UNAL RENDERED IN THE CASE OF BHOMIK COLOUR (SUPRA), SECTION 2(22)(E) CAN BE INVOKED ONLY IN SUCH A CASE WHERE THE PERSON WHO HAS RECEIVED THE L OAN IS HAVING I.T.A.NO.813 /AHD/2010 5 SHAREHOLDING IN THE COMPANY WHO HAS GIVEN THE LOAN AND SUCH PERSON SHOULD BE A REGISTERED AS WELL AS BENEFICIAL SHAREH OLDER OF THAT COMPANY WHICH HAS GIVEN THE LOAN. IN THE PRESENT CASE, THIS IS NOTED BY LD. CIT(A) ON PAGE 1 OF HIS ORDER THAT THE ASSESSEE COMPANY IS A CLOSELY HELD COMPANY WITH SHRI HARIPRASAD YADAV AND SHRI ANIL H. YADAV HOLDING 22.09% & 51.14% OF SHARES RESPECTIVELY AND THESE TW O PEOPLE ARE HOLDING 12.8% AND 24.60% SHARES IN THE SISTER COMPA NY SAI JYOTI FASHIONS PVT. LTD. THIS GOES TO SHOW THAT THE LOAN TAKER COMPANY I.E. THE ASSESSEE COMPANY IS NEITHER A REGISTERED SHAREHOLDE R NOR THE BENEFICIARY SHAREHOLDER OF LOAN GIVING COMPANY AND, THEREFORE, AS PER THIS DECISION OF SPECIAL BENCH OF THE TRIBUNAL, THE AMOUNT RECEIVED BY THE ASSESSEE COMPANY AS LOAN FROM SAI JYOTI FASHIONS PVT. LTD. C ANNOT BE ASSESSED AS DEEMED DIVIDEND IN THE HANDS OF THIS ASSESSEE COMPA NY BY INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX AC T, 1961. OTHER JUDGMENTS CITED BY THE LD. A.R. ARE ALSO SUPPORTING THE CASE OF THE ASSESSEE AND HENCE, IN OUR CONSIDERED OPINION, THE ORDERS OF AUTHORITIES BELOW CANNOT BE SUSTAINED. WE, THEREFORE REVERSE T HE DECISION OF LD. CIT(A) AND DELETE THE ADDITION MADE BY THE A.O. AND CONFIRMED BY LD. CIT(A). 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. 11. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD./- SD./- (G. C. GUPTA) (A. K. GARODIA) VICE PRESIDENT ACCOUNTANT MEMBER SP I.T.A.NO.813 /AHD/2010 6 COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD 1. DATE OF DICTATION 27/6 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 28/6.OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S.5/7 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6/7 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.6/7 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 06/0 7/2012 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .