ITO 9(3)(3), MUMBAI V. TRILOKATMA TRADING & CONSULTANCY SERVICES P. LTD, MUMBAI

ITA 894/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8887 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 17-01-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Keywords: Deemed dividend

Judgement Text

1 ITA894/MUM/10, M/S TRILOKATMA TRADING & CONSULTAN CY SERVICES P. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI N.V. VASUDEV AN, JM ITA NO. 894/MUM/2010 ASSESSMENT YEAR 2006-07 INCOME TAX OFFICER 9(3)(3), ROOM NO. 227, 2 ND FLOOR, AAYAKAR BHAWAN, M.K. ROAD, MUMBAI 400 020. VS. M/S TRILOKATMA TRADING & CONSULTANCY SERVICES PVT. LTD., PLOT 60 CD, SHLOK BLDG., IST FLOOR, GOVT IND. ESTATE, CHARKOP, KANDIVILI (W), MUMBAI. PAN AAACT6527G APPELLANT RESPONDENT APPELLANT BY SHRI D. SONGATE RESPONDENT BY NONE ORDER PER P.M. JAGTAP, A.M. THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST TH E ORDER OF LD. CIT(A)- 20, MUMBAI DATED 27.11.2008 WHEREBY HE DELETED THE ADDI TION OF ` 37,50,000/- MADE BY THE A.O. ON ACCOUNT OF DEEMED DIVIDEND U/S 2(22)(E). 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF PROVIDING FINANCIAL SERVICES. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31.3.2007 DECLARING A LOSS OF ` 27,836/-. IN THE BALANCE SHEET FILED ALONG WITH THE SAID RETURN, UNSECURED LOAN OF ` 37,50,000/- TAKEN FROM M/S TRILOKESH TRADING & CONSULTANCY SERVICES PVT. LTD. WAS SHOWN. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. FROM THE RELEVANT DETAIL S FILED BY THE ASSESSEE THAT SHARE HOLDERS OF THE ASSESSEE COMPANY AND M/S TRILOKESH T RADING & CONSULTANCY SERVICES PVT. LTD. ARE COMMON. HE, THEREFORE, INVOKED THE PROVIS IONS OF SECTION 2(22)(E) AND ADDED THE 2 ITA894/MUM/10, M/S TRILOKATMA TRADING & CONSULTAN CY SERVICES P. LTD. LOAN AMOUNT OF ` 37,50,000/- RECEIVED FROM M/S TRILOKESH TRADING & CONSULTANCY SERVICES PVT. LTD. TO THE TOTAL INCOME OF THE ASSES SEE TREATING THE SAME AS DEEMED DIVIDEND. ON APPEAL, THE LD. CIT(A) DELETED THE SA ID ADDITION MADE BY THE A.O. ON THE GROUND THAT THE ASSESSEE COMPANY ADMITTEDLY WAS NOT THE SHARE HOLDER OF M/S TRILOKESH TRADING & CONSULTANCY SERVICES PVT. LTD.. FOR THIS CONCLUSION, HE RELIED ON THE DECISION OF MUMBAI SPECIAL BENCH OF ITAT IN THE CASE OF ACIT VS. BHAUMIK COLOUR (P) LIMITED 118 ITD (AT) 1 (SB)(MUM) WHEREIN IT WAS HELD THAT D EEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF A PERSONS WHO IS A SHARE HOLDE R OF THE LENDER COMPANY AND NOT IN THE HANDS OF A PERSON OTHER THAN A SHARE HOLDER. IT WA S ALSO HELD THAT THE EXPRESSION SHARE HOLDER REFERRED TO IN SECTION 2(22)(E) REFERS TO B OTH REGISTERED SHAREHOLDER AND BENEFICIAL SHAREHOLDER. AGGRIEVED BY THE ORDER OF THE LD. CIT (A), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE S IDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ISSUE I NVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE EVEN BY THE JUDGMENT OF H ONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD. 324 IT R 263 WHEREIN WHILE EXPRESSING A SIMILAR VIEW AS THAT OF THE SPECIAL BENCH OF ITAT I N THE CASE OF BHAUMIK COLOUR (P) LIMITED (SUPRA) RELIED UPON BY THE LD. CIT(A), IT W AS HELD BY THEIR LORDSHIPS THAT THE AMOUNT OF DEEMED DIVIDEND AS PER PROVISIONS OF SECT ION 2(22)(E) COULD BE TAXED ONLY IN THE HANDS OF THE ASSESSEE WHO IS A SHAREHOLDER. IT WAS HELD THAT THE EFFECT OF CLAUSE (E) OF SECTION 2(22) IS TO BROADER THE AMBIT OF THE EXPRES SION DIVIDEND BY INCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOA N OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF SHARE HOLDER. IT WAS HELD THAT THE SAID DEFINITION, HOWEVER, DOES NOT ALTER THE LEGAL POSIT ION THAT DIVIDEND HAS TO BE TAXED ONLY IN THE HANDS OF THE SHAREHOLDER. RESPECTFULLY FOLLOWI NG THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE PVT. L TD. (SUPRA) AS WELL AS THAT OF MUMBAI SPECIAL BENCH OF ITAT IN THE CASE OF BHAUMIK COLOUR (P) LIMITED (SUPRA), WE UPHOLD THE IMPUGNED ORDER OF THE LD. CIT(A) DELETING THE ADDIT ION OF ` 37,50,000/- MADE ON ACCOUNT 3 ITA894/MUM/10, M/S TRILOKATMA TRADING & CONSULTAN CY SERVICES P. LTD. OF DEEMED DIVIDEND U/S 2(22)(E) IN THE HANDS OF THE ASSESSEE WHO ADMITTEDLY WAS NOT THE SHAREHOLDER OF M/S TRILOKESH TRADING & CONSULTANCY SERVICES PVT. LTD. 4. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 21 ST JANUARY, 2011. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI, DATED 21 ST JANUARY , 2011. RK COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 20 - MUMBAI 4. THE CIT- 9 MUMBAI 5. THE DR BENCH, E 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI 4 ITA894/MUM/10, M/S TRILOKATMA TRADING & CONSULTAN CY SERVICES P. LTD. DATE INITIALS 1 DRAFT DICTATED ON 17.1.11 SR. PS 2 DRAFT PLACED BEFORE THE AUTHOR 18.1.11 SR. PS 3 DRAFT PLACED BEFORE THE SECOND MEMBER 4 APPROVED DRAFT COMES TO THE SR. PS SR. PS 5 KEPT FOR PRONOUNCEMENT ON SR. PS 6 FILE SENT TO THE BENCH CLERK SR. PS 7 DATE ON WHICH FILE GOES TO THE HEAD CLERK 8 DATE ON WHICH FILE GOES TO THE AR 9 DATE OF DISPATCH OF ORDER ` 5 ITA894/MUM/10, M/S TRILOKATMA TRADING & CONSULTAN CY SERVICES P. LTD.