ITO 18(2)(4), MUMBAI V. MATOSHREE ENGINEERS & DEVELOPERS, MUMBAI

ITA 868/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4998 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 10-09-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 31-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIVYA BAJPAI IZRFKHZ DH LS
• Keywords: Deemed dividend

Judgement Text

M/S MATOSHREE ENGINEERS & DEVELOPERS - 1 - VK;DJ VIHYH; VF/KDJ.K TH U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUM BAI JH JKTSUNZ FLAG YS[KK LNL; ,OA JH FOT; IKY JKO] YS[ KK LNL; DS LE{K BEFORE SHRI RAJENDRA SINGH ACCOUNTANT MEMBER AND SH RI VIJAY PAL RAO JUDICIAL MEMBER VK;DJ VIHY LA[;K /ITA NO. 868/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR: - 2007-08 ITO 18(2)(4) ROOM NO. 109, 1 ST FLOOR, PIRAMAL CHAMBERS PAREL, MUMABI - 400 012 CUKE@ VS. M/S MATOSHREE ENGINEERS & DEVELOPERS, 102, ADITI, SHIVSENA BHAVAN PATH DADAR (W), MUMBAI-28. PAN:- AANFM7781R VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT VIHYKFKHZ DH VKSJ LS @ APPELLANT BY MS. DIVYA BAJPAI IZR;FKHZ DH VKSJ LS @ RESPONDENT BY DR. K. SHIVARAM VKNS'K@ VKNS'K@ VKNS'K@ VKNS'K@ ORDER PER RAJENDRA SINGH, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29.11.2010 OF CIT(A) FOR THE ASSESSMENT YEARS 2007- 08. THE ONLY DISPUTE RAISED BY THE REVENUE IN THIS APPEAL IS REGARDING ADDITION MADE BY AO AS DEEMED DIVIDEND U/S 2(22)(E) WHICH HAD BEEN DELETED BY CIT (A). 2. THE FACTS IN BRIEF ARE THAT THE AO DURING THE AS SESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE FIRM HAD TAKEN UNSECURED LO AN OF RS. 52,47,711/- FROM THE SISTER CONCERN M/S MATOSHREE REALTORS PVT. LTD. AO ALSO NOTED THAT SHRI RAJAN SHIRODKAR WHO HAD 34% SHARES IN THE PARTNERSH IP FIRM WAS ALSO HAVING LQUOKBZ DH RKJH[K @ DATE OF HEARING 10-09-2013 ?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT 13-09-2013 M/S MATOSHREE ENGINEERS & DEVELOPERS - 2 - 16.67% SHARE HOLDING IN THE COMPANY. AO, THEREFORE, CONCLUDED THAT THE PROVISIONS OF SECTION2(22)(E) WERE APPLICABLE IN CA SE OF THE ASSESSEE FIRM. THERE WAS AN ACCUMULATED PROFIT OF RS. 2,19,66,546/- AND THE LOAN TAKEN BY THE FIRM WAS WITHIN THE ACCUMULATED PROFIT. AO, THEREFORE, A SSESSED THE LOAN TAKEN BY THE FIRM OF RS. 52,47,711/- AS DEEMED DIVIDEND U/S 2(22)(E). IN APPEAL CIT(A) FOLLOWING THE DECISION TAKEN BY SPECIAL BENCH OF TR IBUNAL IN CASE OF BHAUMIK COLORS PVT. LTD. (118 ITD 1) AND THE JUDGMENT OF HO NBLE HIGH COURT OF BOMBAY IN CASE OF UNIVERSAL MEDICARE PVT. LTD. ( 37 DTR 4 09) HELD THAT DEEMED DIVIDEND U/S 2(22)(E) CAN BE ADDED ONLY IN CASE OF REGISTERED SHARE HOLDER WHO IS ALSO A BENEFICIARY SHARE HOLDER OF THE COMPANY G IVING ADVANCES AND LOANS. SINCE THE FIRM WAS NOT SHARE HOLDER IN THE COMPANY, CIT(A) HELD THAT NO ADDITION COULD BE MADE U/S 2(22)(E). HE ACCORDINGLY DIRECTED THE AO TO DELETE THE ADDITION MADE, AGGRIEVED BY WHICH THE REVENUE I S IN APPEAL BEFORE TRIBUNAL. 3. WE HAVE HEARD BOTH THE PARTIES PERUSED THE RECOR DS AND CONSIDERED MATTER CAREFULLY. THE ASSESSEE HAD TAKEN LOAN OF RS . 52,47,711/- FROM M/S MATOSHREE REALTORS PVT. LTD. IN WHICH PUBLIC ARE NO T SUBSTANTIALLY INTERESTED. SHRI RAJAN SHIRODKAR WHO WAS HAVING 34% SHARE IN TH E ASSESSEE FIRM ALSO HELD 16.67% SHARE HOLDING IN THE COMPANY. THE ISSUE IS W HETHER IN SUCH A SITUATION THERE CAN BE DEEMED DIVIDEND IN CASE OF THE ASSESSE E FIRM ON ACCOUNT OF LOAN TAKEN FROM THE COMPANY. UNDER THE PROVISIONS OF SEC TION 2(22)(E), ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH PUBLIC AR E SUBSTANTIALLY INTERESTED BY WAY OF LOAN OR ADVANCE TO A SHARE HOLDER WHO IS A BENEFICIARY SHARE HOLDER OF SHARES HAVING NOT LESS THAN 10% VOTING POWER IN THE COMPANY OR TO ANY CONCERN IN WHICH SUCH SHARE HOLDER IS A MEMBER OR A PARTNER IN WHICH HE HAS SUBSTANTIAL INTEREST OR ANY PAYMENT BY ANY SUCH COM PANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHARE HOLDER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS, HAS T O BE ASSESSED AS DEEMED DIVIDEND. THE SPECIAL BENCH OF TRIBUNAL IN CASE OF BHAWMIK COLOURS PVT. LTD.(SUPRA) HAVE HELD THAT THE DIVIDEND CAN BE ASSE SSED ONLY IN CASE OF A REGISTERED SHARE HOLDER WHO IS ALSO A BENEFICIARY HOLDER OF THE COMPANY. THE VIEW TAKEN BY THE SPECIAL BENCH OF TRIBUNAL HAS BEE N UPHOLD BY THE BOMBAY HIGH COURT IN CASE OF UNIVERSAL MEDICARE PVT. LTD. (SUPRA). THERE IS NO DISPUTE IN THIS CASE THAT THE ASSESSEE FIRM IS NOT A REGIST ERED SHARE HOLDER OF THE M/S MATOSHREE ENGINEERS & DEVELOPERS - 3 - COMPANY. THEREFORE, FOLLOWING THE AFORESAID JUDGMEN TS, NO DIVIDEND CAN BE ASSESSED IN CASE OF THE ASSESSEE FIRM. THE LOAN HAD BEEN TAKEN BY THE FIRM IN WHICH SHRI R. SHIRODKAR, A SHARE HOLDER OF THE COMP ANY IS HAVING SUBSTANTIAL INTEREST AND, THEREFORE, THE ADDITION IF ANY COULD HAVE BEEN MADE ONLY IN CASE OF R. SHIRODKAR. THE ADDITION MADE IN CASE OF THE A SSESSEE FIRM CANNOT BE UPHELD. WE, THEREFORE, SEE NO INFIRMITY IN THE ORDE R OF CIT(A) IN DELETING THE ADDITION AND THE SAME IS, THEREFORE, UPHELD. 4. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED ON 13 -9-2013 SD/- SD/- (VIJAY PAL RAO) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER SKS SR. P.S, MUMBAI DATED 13.9.2013 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, G BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI