Assistant Commissioner of Income-tax, Nashik V. M/s. Saptashrungi Switchgrears, Nashik

ITA 981/PUN/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9749 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-08-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 01-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Deemed dividend

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR JUDICIAL MEMBER AND SHRI G.S. PANNU ACCOUNTANT MEMBER ITA NO. 981/PN/2011 (ASSESSMENT YEAR 2008-09) ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2, 2 ND FLOOR, WANI HOUSE, MUMBAI-AGRA ROAD, NASHIK. .. APPELLANT VS. SAPTASHRUNGI SWITCHGEARS, ASMITA, OPP : JYOTI KALASH, RACCA COLONY, NASHIK- 422 002, PAN NO.ABFFS 1566B .. RESPONDENT ASSESSEE BY : NONE DEPARTMENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 01-08-2012 DATE OF PRONOUNCEMENT : 29-08-2012 ORDER PER G.S. PANNU, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26-05-2011 OF THE CIT(A)-II, NASHIK RELATING TO ASSESSMENT YEAR 2 008-09. 2. AT THE TIME OF HEARING NONE APPEARED ON BEHALF O F THE RESPONDENT ASSESSEE INSPITE OF ISSUANCE OF THE NOTICE OF HEARING WHILE LEARNED DR APPEARED ON BEHALF OF THE APPELLANT REVENUE. IN THE ABSENCE OF ANY APPEA RANCE ON BEHALF OF THE RESPONDENT ASSESSEE THE APPEAL WAS HEARD EXPARTE QU A THE RESPONDENT ASSESSEE AFTER HEARING THE APPELLANT REVENUE ON MERITS IN TERMS OF RULE 25 OF THE APPELLATE TRIBUNAL RULES, 1963. 3. IN THIS APPEAL THE FIRST ISSUE RELATES TO ADDITI ON OF RS.2,90,29,571/- MADE BY THE ASSESSING OFFICER INVOKING THE PROVISIONS OF SE CTION 2(22)(E) OF THE INCOME TAX ACT, 1971 (IN SHORT THE ACT). IN BRIEF, THE FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING ON THE BUSINESS OF MANUFA CTURING OF AB SWITCHES FOR 2 ABB LTD. IT CARRIES OUT JOB WORK ON LABOUR CHARGE B ASIS FOR A CONCERN M/S. VAIBHAV ENGINEERS PVT. LTD. ( IN SHORT VEPL). TH E ASSESSING OFFICER NOTICED THAT DURING THE YEAR UNDER CONSIDERATION ASSESSEE F IRM HAD RECEIVED ADVANCES TO THE TUNE OF RS.2,90,29,571/- FROM VEPL ON VARIOUS DATES . THE ASSESSING OFFICER NOTICED THAT TWO PARTNERS OF THE ASSESSEE FIRM ALSO HELD SUBSTANTIAL SHAREHOLDING IN VEPL AND THEREFORE ACCORDING TO HIM THE AMOUNTS REC EIVED FROM VEPL BY THE ASSESSEE WERE LIABLE TO BE TREATED AS DEEMED DIVIDE ND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY THE MAXIM UM CREDIT AMOUNT IN THE LEDGER ACCOUNT OF VEPL DURING THE YEAR AT RS.2,90,29,571/- WAS ASSESSED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) ASSAILING THE ADDITION IN LAW AND ON FACTS. THE CIT(A) HELD THAT THE TRANSACTION IN QUESTION FELL WITHIN THE PURVIEW OF SECTION 2(22)(E) OF THE ACT. HOWEVER, ACCORDING TO HIM, THE SAME WAS NOT ASSESSABLE IN THE HANDS OF THE ASSESSE E FOR THE REASON THAT THE ASSESSEE FIRM WAS NOT A SHAREHOLDER IN THE CONCERN, M/S. VEPL. THE CIT(A) THEREFORE DELETED THE ADDITION ON THE ABOVE GROUND BY FOLLOWING THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF ACIT V S. BHAUMILK COLORS (P) LTD. (HYD.) REPORTED IN 120 TTJ 865 (HYD). THE CIT(A) A LSO FOUND SUPPORT FROM THE JUDGMENTS OF THE HONBLE RAJASTHAN HIGH COURT AND H ONBLE DELHI HIGH COURT IN THE CASE OF M/S. HOTEL HILLTOP VS. ITA NO.25(RAJAST HAN) OF 2005 DATED 17-03-2008 AND CIT VS. ANKITECH (P) LTD. DATED MAY 2011 RESPEC TIVELY. AGAINST THE AFORESAID DECISION OF THE CIT(A) THE REVENUE IS IN APPEAL BEF ORE US. 4. BEFORE US, LEARNED DR REITERATED THAT HAVING REG ARD TO THE PARTNERS OF THE ASSESSEE FIRM HOLDING SUBSTANTIAL SHAREHOLDING IN V EPL, THE IMPUGNED SUM RECEIVED FROM VEPL BY THE ASSESSEE FIRM WAS LIABLE TO BE ASSESSED IN THE HANDS OF THE ASSESSEE IN TERMS OF SECTION 2(22)(E) OF THE AC T. 3 5. IN OUR CONSIDERED OPINION THE POSITION CANVASSED BY THE REVENUE IN THE PRESENT APPEAL IS UNTENABLE HAVING REGARD TO UNDISP UTED FACTUAL MATRIX TO THE EFFECT THAT THE ASSESSEE FIRM IS NOT A SHAREHOLDER IN VEPL . THE HONBLE BOMBAY HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE (P) LTD. RE PORTED IN 324 ITA 263 (BOMBAY) HAS HELD THAT ALL PAYMENTS BY WAY OF DIVID ENDS HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE S HAREHOLDER. AS PER THE HONBLE HIGH COURT, EVEN AFTER GIVING EFFECT TO CLAUSE (E) OF SECTION 2(22)(E) OF THE ACT, IT REMAINED THAT THE DIVIDEND INCOME IS TO BE TAXED ON LY IN THE HANDS OF THE SHAREHOLDER. UNDER THESE CIRCUMSTANCES, IN OUR VIE W, THE CIT(A) MADE NO MISTAKE IN DELETING THE ADDITION WHICH IS LINE WITH THE RAT IO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF UNIVERSAL MEDICARE (P) LTD. (SUPRA). THEREFORE, IN THIS VIEW OF THE MATTER, FIRST GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 6. THE LAST GROUND IN THIS APPEAL IS WITH REGARD TO A DISALLOWANCE OF RS.3,763/- REPRESENTING EMPLOYEES CONTRIBUTION TO ESI. THE AS SESSING OFFICER DISALLOWED THE AMOUNT BY INVOKING SECTION 36(1)(VA) R.W.S.2(24)(X) OF THE ACT ON THE GROUND THAT THE SAME WAS DEPOSITED LATE. THE CIT(A) HOWEVER HA S ALLOWED THE CLAIM OF THE ASSESSEE AS THE PAYMENT WAS MADE BEFORE THE DUE DAT E OF FILING OF THE RETURN AND ACCORDINGLY THE SAME WAS NOT DISALLOWABLE FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. VI NAY CEMENT LTD. REPORTED IN (2007) 213 CTR 268 (SC). THOUGH THE REVENUE HAS CO NTESTED SUCH ACTION OF THE CIT(A), HOWEVER, WE FIND NO REASONS TO INTERFERE WI TH THE CONCLUSION OF THE CIT(A) AS THE SAME IS IN LINE WITH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF VINAY CEMENT LTD. (SUPRA) AS ALSO THAT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. P.M. ELECTRONICS LTD. REPORTED IN (2008) 220 CTR 635 (DELHI). THUS, ON THIS GROUND ALSO REVENUE HAS TO FAIL. 4 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE 29 TH DAY OF AUGUST, 2012. SD/- SD/- (R.S. PADVEKAR) (G.S .PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: THE 29 TH AUGUST 2012 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT-II, NASHIK 4. JT. CIT, RANGE-2 NASHIK 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE