DCIT, Circle-3(2), Hyd, Hyderabad V. Sree Rayalaseema Green Energy Ltd., Hyd, Hyderabad

ITA 992/HYD/2015

• Counselvise Citation: 99222514 RSA 2015
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 27-07-2015
• Court: TRIBUNAL
• Department Lawyers: M SITARAM
• Assessee Lawyers: P VINOD
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 992/HYD/2015 ASSESSMENT YEAR: 2009-10 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD VS M/S. SRE E RAYALASEEMA GREEN ENERGY LTD., HYDERABAD [PAN: AAECS7075A] (APPELLANT) (RESPONDENT) FOR REVENUE : S HRI M. SITARAM , DR FOR ASSESSEE : SHRI P. VINOD , AR DATE OF HEARING : 19 - 1 0 - 201 5 DATE OF PRONOUNCEMENT : 28 - 1 0 - 2015 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD D ATED 28-05-2015. THE ONLY ISSUE IN THIS APPEAL IS WITH REFERENCE TO DELETION OF AMOUNT OF RS. 20,73,626/- WHICH WAS AN ADDITION BY AO INVOKING THE PROVISIONS OF SECTION 2(22)(E) OF T HE INCOME TAX ACT [ACT]. 2. BRIEFLY STATED, ASSESSING OFFICER (AO) NOTICED T HAT ASSESSEE- COMPANY HAD TAKEN UNSECURED LOANS OF RS. 7,67,93,43 0/- AND RS. 1,94,190/- FROM ITS SISTER CONCERNS M/S. MADHU REFI NERY PVT LTD., (MRPL) AND MADHU SOLVENT EXTRACTIONS PVT LTD., (MSE L) RESPECTIVELY AND THAT SHRI K. MADHUSUDAN RAO, DIREC TOR OF I.T.A. NO. 992/HYD/2015 M/S. SREE RAYALASEEMA GREEN ENERGY LTD., :- 2 -: ASSESSEE-COMPANY IS HAVING 20% SHARE HOLDING IN ASS ESSEE- COMPANY AS WELL AS THE OTHER TWO COMPANIES. IT WAS THE SUBMISSION OF ASSESSEE BEFORE THE AO THAT ASSESSEE WAS NOT A SHAREHOLDER OF MRPL AND MSEL, THEREFORE, PROVISIONS OF SECTION 2(22)(E) DO NOT APPLY TO ASSESSEE. IT WAS ALSO SUB MITTED THAT THESE TRANSACTIONS ARE BUSINESS TRANSACTIONS AND THEY COU LD NOT BE TREATED AS LOANS IN THE COURSE OF BUSINESS. ASSESS EE-COMPANY RELIED ON THE FOLLOWING DECISIONS: I. BHAUMIK COLOUR PVT LTD., [313 ITR (AT) 146 (MUM)]; II. CIT VS. UNIVERSAL MEDICAL PVT. LTD., [324 ITR 263 ( BOM)]; III. MTAR TECHNOLOGIES PVT LTD., VS. ACIT [39 SOT 465 (H YD)]; IV. MY TIME PHARMACY (ITA NO. 262/H/13, DT. 08-08-2013) 3. AO REJECTED THE CONTENTIONS OF ASSESSEE ON T HE GROUND THAT SECTION 2(22)(E) APPLIES IN VIEW OF THE FACT THAT S HRI K. MADHUSUDAN RAO, DIRECTOR OF ASSESSEE-COMPANY HAD MO RE THAN 20% SHARES BOTH IN ASSESSEE-COMPANY AS WELL AS MRPL AND MSEL. AO THEREFORE, BROUGHT THE ADVANCES TO TAX U/S. 2(22 )(E) RESTRICTING THE ADDITION TO THE AMOUNT OF ACCUMULATED PROFITS O F RS. 20,73,626/- IN THE CASE OF MRPL (MSEL HAVING LOSSES AS PER ITS ANNUAL REPORT). 4. LD. CIT(A) RELYING ON THE DECISION OF THE ITAT I N THE CASE OF SIDDESWARI POWER GENERATION PVT LTD., IN ITA NO. 63 5- 637/H/2013, DT. 06-12-2013 WHICH WAS UPHELD BY THE HON'BLE HIGH COURT OF TELANGANA AND ANDHRA PRADESH IN ITTA NO. 705, 400 & 541/2014 DT. 11-12-2014, ALLOWED THE CONTENTIONS OF ASSESSEE BY STATING AS UNDER: I.T.A. NO. 992/HYD/2015 M/S. SREE RAYALASEEMA GREEN ENERGY LTD., :- 3 -: 4.6 IN THE CASE OF SIDDESWARI POWER GENERATION PVT LTD., THE ASSESSEE WAS A CLOSELY HELD COMPANY WITH SRI U. KANTHA RAO AND SMT. U. RAJANI AS THE TWO SHAREHOLDERS WITH 50% SHARES EACH. SHRI U. KANTHA RAO AND SMT. U. RAJANI ALSO H ELD MORE THAN 20% OF THE SHARES OF ANOTHER CONCERN, APL. AP L HAD GIVEN ADVANCES TO THE ASSESSEE WHICH WAS BROUGHT TO TAX B Y THE ASSESSING OFFICER U/S. 2(22)(E). THE ITAT HELD THA T THE ASSESSEE WAS NOT A SHAREHOLDER OF APL, THAT THE SHAREHOLDERS WERE SRI U. KANTHA RAO AND SMT. U. RAJANI AND THAT THE ADVANCES COULD NOT BE TAKEN AS DEEMED DIVIDEND IN THE HANDS OF THE ASS ESSEE WHO WAS NOT A SHAREHOLDER OF APL. 4.7 THE DECISION OF THE ITAT WAS UPHELD BY THE HIGH COURT. 4.8 THE FACTS IN THE APPELLANTS CASE ARE IDENTICAL . SRI K. MADHUSUDAN RAO IS A SHAREHOLDER BOTH OF THE ASSESSE E AS WELL AS OF MRPL AND MSEL. HOWEVER, THE APPELLANT ITSELF IS NOT A SHAREHOLDER EITHER OF MRPL OR MSEL. FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SIDDES WARI POWER GENERATION PVT LTD., IT IS HELD THAT THE PROVISIONS OF SEC.2(22)(E) CANNOT BE APPLIED TO THE TRANSACTIONS WITH MRPL AND MSEL. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS AND PERU SING THE FACTS ON RECORD, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE ORDER OF THE CIT(A) WHICH ITSELF IS IN CONFORMITY WITH THE P ROVISIONS OF THE ACT AND ALSO WITH THE DECISION OF THE JURISDICTIONA L HIGH COURT. IN VIEW OF THIS, WE FIND NO MERIT IN REVENUES GROUNDS AND ACCORDINGLY, ARE REJECTED. 6. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2015 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBE R HYDERABAD, DATED 28 TH OCTOBER, 2015 TNMM I.T.A. NO. 992/HYD/2015 M/S. SREE RAYALASEEMA GREEN ENERGY LTD., :- 4 -: COPY TO : 1. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-3(2), 7 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD. 2. M/S. SREE RAYALASEEMA GREEN ENERGY LTD., G-1, RELIANCE KRISHNA APTS., HILL FORD ROAD, ADARSH NAGA R, HYDERABAD. 3. CIT (APPEALS)-3, HYDERABAD. 4. THE PR.CIT-3, HYDERABAD. 5 . D.R. ITAT, HYDERABAD. 6 . GUARD FILE.