Finco Holdings Pvt. Ltd., CHENNAI V. DCIT, CHENNAI

ITA 890/CHNY/2014

• Counselvise Citation: 89021714 RSA 2014
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-02-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN IRS
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . . , ! BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A. NO.890/MDS/2014 ( / ASSESSMENT YEAR : 2008-2009) M/S. FINCO HOLDINGS (P) LIMITED, NO.31, MOORE STREET, CHENNAI 600 001. [PAN: AAACF 1144K] ( '# /APPELLANT) VS THE DCIT, COMPANY CIRCLE II (1), CHENNAI ( $%'# /RESPONDENT) / APPELLANT BY : SHRI. G. SEETHARAMAN, C.A., / RESPONDENT BY : SHRI. P. RADHAKRISHNAN, IRS, JCIT. /DATE OF HEARING : 24.02.2015 !' /DATE OF PRONOUNCEMENT : 27.02.2015 & / O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSME NT YEAR 2008-09; EMANATES FROM ORDER DATED 17.12.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNAI IN ITA NO.433/13-1 4 SUSTAINING I.T.A.NO890/MDS/2014. :- 2 -: DEEMED DIVIDENDS ADDITION OF D 32,14,906 U/S. 2(2 2)(E), IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 [IN SHORT THE ACT]. 2. THE ASSESSEE IS AN ASSOCIATE CONCERN OF M/S. FAIRMA CS GROUP OF COMPANIES ENGAGED IN THE BUSINESSES OF LOGISTICS, S HIP HANDLING, IMPORTS AND EXPORTS. IT HAD FILED ITS RETURN ON 25.12.2008 STATING INCOME OF D82,037/--. THE SAME WAS SUMMARILY PROC ESSED. 3. THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTIC ED FROM THE ASSESSEES BOOKS, BALANCE SHEETS AND OTHER DETAILS THAT UNSECURED LOANS HAD BEEN OBTAINED FROM ITS GROUP ENTITY FAIR MACS SHIPPING & TRANSPORT SERVICES PVT. LTD. S/SH. D.R. SHETE AND SUNIL R. SHETE HOLD 50% EACH OF THE ASSESSEES SHAREHOLDINGS AND 75% : 25% IN CASE OF THE LENDER ENTITY. THE LATTER ENTITY HAD ACCUMU LATED PROFITS OF D3,76,48,555/- AS ON 31.03.2008. THE ASSESSING OFF ICER INVOKED SECTION 2(22)(E) AND VIEWED THE IMPUGNED LOANS AS DEEMED DIVIDENDS U/S. 2(22)(E) OF THE ACT RESULTING IN THE ADDITION IN QUESTION. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO AFFI RMED THE ASSESSING OFFICERS FINDINGS. THE ASSESSEE ARGUED IN THE LOWER APPELLATE PROCEEDINGS THAT IT ITSELF IS NOT A SHARE HOLDER IN THE LENDER I.T.A.NO890/MDS/2014. :- 3 -: ENTITY TO INVOKE SECTION 2(22) (E). THE LOWER APPEL LATE AUTHORITY HELD THE ASSESSEE TO BE A CONCERN IN WHICH THE SHAREH OLDERS OF THE LENDER ENTITY ARE INTERESTED. THIS LEAVES THE ASSESSEE A GGRIEVED. 5. WE HAVE HEARD BOTH SIDES AND GONE THOUGH THE CASE FILE. FACTUAL BACKDROP OF THE CASE ALREADY STANDS NARRA TED. THE ASSESSEE REITERATES ITS ARGUMENT RAISED IN THE LOWER APPELLA TE PROCEEDINGS THAT IT IS NOT A SHAREHOLDER IN THE LENDER COMPANY. THE RE VENUE FAILS TO CONVERT THIS FACTUAL POSITION. WE FIND THAT A SPECI AL BENCH OF THE TRIBUNAL IN BHAUMIK COLOUR [2009] 313 ITR 146 MUMBAI HAS HELD IN THE VERY CIRCUMSTANCES THAT SECTION 2(22) (E) DOES NOT APPLY IN CASE OF COMMON SHAREHOLDERS AND THE DEBTOR ENTITY ITSELF SH OULD BE A SHAREHOLDER IN THE CREDITOR ENTITY. THE PARTIES IN FORM US THAT HONBLE BOMBAY HIGH COURT HAS AFFIRMED THIS DECISION. THE HONBLE DELHI HIGH COURT IN ITA NO.462/2009 CIT VS ANKITECH PRIVATE LIMITED DECIDED ON 11.05.2011 HAS ALSO TAKEN A SIMILAR VIEW. WE DRA W SUPPORT THEREFROM AND HOLD THAT THE AUTHORITIES BELOW HAVE ERRED IN ADDING IMPUGNED UNSECURED LOANS OF D32,14,906/- AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT DESPITE THE FACT THAT THE ASSESSEE IS NOT A SHAREHOLDER IN THE LENDER COMPANY. IT IS MADE CLEAR THAT THE ASSESSING OFFICER SHALL BE AT LIBERTY TO ADD THE AFORESAID LO ANS AS I.T.A.NO890/MDS/2014. :- 4 -: DEEMED DIVIDENDS IN THE HANDS OF THE ABOVE SAID SHA REHOLDERS AS PER LAW. THE ASSESSEES GROUND SUCCEEDS. 6. THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 27TH OF FEBRUARY, 2015, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( . . ) (S.S. GODARA) / JUDICIAL MEMBER #$ /CHENNAI. %& /DATED:27.02.2015. KV &' () *) /COPY TO: 1. + APPELLANT 2. / RESPONDENT 3. , ( )/CIT(A) 4. , /CIT 5. )-. / /DR 6. .0 1 /GF.