Hotel Woodland Private Limited, Nashik V. ACIT, Nashik

ITA 998/PUN/2010

• Counselvise Citation: 99824514 RSA 2010
• Duration Of Justice: 1 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 09-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA
• Keywords: Depreciation; Deemed dividend
• Section: 2(22)(e)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 998,999, & 1000/PN/2010 (ASSESSMENT YEAR: 2004-05,20 05-06& 2006-07) HOTEL WOODLAND P LTD., .. APPELLANT NASHIK VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RESPONDE NT CIR. 1, NASHIK AND ITA NO.1054, 1055 & 1056/PN/2010 (ASSESSMENT YEAR: 2004-05,20 05-06& 2006-07) DY. COMMISSIONER OF INCOME-TAX .. APP ELLANT CIR. NASHIK VS. HOTEL WOODLAND P LTD., .. RESPONDENT NASHIK ASSESSEE BY : SHRI NIKHIL PATHAK DEPARTMENT BY : SH RI S K AMBASTHA DATE OF HEARING : 11.01.2012 DATE OF PRONOUNCEMENT : 31.01.2012 ORDER PER G.S. PANNU, A.M .: THE CAPTIONED APPEALS PREFERRED BY ASSESSEE AND THE REVEN UE RESPECTIVELY RELATE TO THE SAME ASSESSEE AND, THEREFORE, A COMMON ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FIRST WE SHALL TAKE UP- THE APPEALS OF THE REVENUE, WHEREIN THE SOLITARY ISSUE IN ALL THE YEARS RELATES TO THE ADDITION MADE BY THE ASSESSING OFFICER BY INVOKING SECTION 2(22)(E) OF THE LNCOME-TAX ACT, 1961 (I N SHORT THE ACT) AS DEEMED DIVIDENDS. THE RESPECTIVE ADDITIONS HAVE BEEN DE LETED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) PRIMARILY ON THE GROUND THAT THE DEEMED DIVIDEND CAN BE ASSESSED ONLY IN THE HANDS OF REG ISTERED SHAREHOLDER AND NOT IN THE HANDS OF THE RECIPIENT ASSESSEE, WHO IS NOT A SHAREHOLDER OF THE LENDING COMPANY. IN COMING TO SUCH DECISION, THE COMMISSI ONER OF INCOME- TAX (APPEALS) RELIED UPON THE ORDER OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SIVANAND ELECTRONICS V. JCIT VIDE ITA NOS 728 & 749/PN/08 DATED 31.3.2009 FOR THE ASSESSMENT YEAR 2005-06. 3. THE FACTS AND CIRCUMSTANCES IN ALL THE THREE YEARS ARE IDENTICAL. IN ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD RECEIVED A SUM OF RS 5,52,150/- AS LOAN FROM ONE M/S NAS HIK LANDED PROPERTIES & INVESTMENTS P. LTD. THE ASSESSING OFFICER NO TICED THAT THE SHAREHOLDING PATTERN OF ASSESSEE COMPANY AND THAT OF NAS HIK LANDED PROPERTIES & INVESTMENTS P LTD CONTAINED A COMMONALITY AND, THEREFORE, PROVISIONS OF SECTION 2(22)(E) OF THE ACT WERE APPLICAB LE TO SUCH AMOUNT RECEIVED BY THE ASSESSEE. ACCORDINGLY, THE SUM OF RS 5,52,150/- WAS ADDED IN THE HANDS OF THE ASSESSEE AS DEEMED DIVIDEND IN TERMS OF SECTION 2(22)(E) OF THE ACT. THE COMMISSIONER OF INCOME-TAX (APPEALS) DEL ETED THE ADDITION ON THE GROUND THAT THE RECIPIENT ASSESSEE WAS NOT A REGISTE RED SHAREHOLDER OF M/S NASHIK LANDED PROPERTIES & INVESTMENTS P. LTD AND, THERE FORE, PROVISIONS OF SECTION 2(22)(E) OF THE ACT ARE NOT APPLICABLE, FOLLOWI NG THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF SIVANAND ELE CTRONICS (SUPRA). 4. BEFORE US, IT WAS A COMMON POINT BETWEEN THE PARTIE S THAT THE PROPOSITION RELIED UPON BY THE COMMISSIONER OF INCOME- TAX (APPEALS) TO DELETE THE ADDITION HAS SINCE BEEN APPROVED BY THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT V. UNIVERSAL MEDICARE P. LTD. 324 ITR 263 (BOM). AS A RESULT THEREOF, WE HEREBY AFFIRM THE ORDER OF THE COMMISSION ER OF INCOME-TAX (APPEALS) AND THE APPEALS PREFERRED BY THE REVENUE AR E ACCORDINGLY DISMISSED. 5. NOW WE MAY TAKE UP THE THREE CAPTIONED APPEALS OF THE ASSESSEE PERTAINING TO THE ASSESSMENT YEARS 2004-05, 2005-06 AND 2006-07 IN WHICH A COMMON ISSUE IS INVOLVED RELATING TO THE DENIAL OF DEPR ECIATION. WE MAY REFER TO THE FACTS AND CIRCUMSTANCES IN THE ASSESSMENT YEAR 2004- 05 TO APPRECIATE THE CONTROVERSY, AS THE DISPUTE IN ALL THE THREE YEARS STANDS ON AN IDENTICAL FOOTING. 6. IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DE PRECIATION AMOUNTING TO RS 18,37,820/-. THE DENIAL OF DEPRECIATION WAS ON T HE GROUND THAT THE ASSESSEE HAD NOT CARRIED OUT ANY BUSINESS ACTIVITY AND, THER EFORE, ITS CLAIM OF DEPRECIATION ON BUILDING, PLANT AND MACHINERY AND COM PUTER WAS NOT JUSTIFIED. THE ASSESSING OFFICER HAS ALSO NOTED IN THE ASSESSMENT ORDER THAT THE AFORESAID POSITION WAS AGREED BY THE AUTHORIZED REPRESE NTATIVE FOR THE ASSESSEE. HOWEVER, IN APPEAL BEFORE THE COMMISSIONER OF I NCOME-TAX (APPEALS), THE ASSESSEE SUBMITTED THAT THE AGREEMENT BEF ORE THE ASSESSING OFFICER FOR DISALLOWANCE OF DEPRECIATION WAS LIMITED T O THE ASSETS WHICH WERE NOT USED FOR EARNING INCOME FROM HOUSE PROPERTY. NOTAB LY, THE ASSESSEE CONTENDED THAT IT HAD LET OUT 50% OF THE BUILDING AN D WAS EARNING RENT THEREON AND BALANCE 50% OF THE BUILDING WAS USED AS OFFICE PREM ISES FOR MAINTAINING BOOKS OF ACCOUNT, ETC. THEREFORE, IT CLAIMED THAT 50% OF DEPRECIATION RELATING TO THE BUILDING, FURNITURE, FIXTURE, COMPUTER, ETC., BE ALLOWED. THE COMMISSIONER OF INCOME-TAX (APPEALS) CALLED FOR A REMAND REPORT FROM THE ASSESSING OFFICER WITH RESPECT TO THE SUBMISSIONS PUT-FORTH BEFORE HIM. ON THE BASIS OF THE REPORT OF THE ASSESSING OFFICER, THE COMMISSIO NER OF INCOME-TAX (APPEALS) HELD THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE HAD AGREED BEFORE THE ASSESSING OFFICE FOR THE DISALLOWANCE OF DEPR ECIATION CLAIMED AND THAT NOWHERE FROM THE RECORD, IT EMERGES THAT THE AG REEMENT WAS ONLY IN RESPECT OF PART OF THE ASSETS. THE COMMISSIONER OF INCOME- TAX (APPEALS) FOUND AS A MATTER OF FACT THAT THE ASSESSEE ITSELF HAD AG REED THAT IT HAD NOT CARRIED OUT ANY BUSINESS ACTIVITIES. THEREFORE, THE COMMI SSIONER OF INCOME-TAX (APPEALS) HELD THAT THE ASSETS ON WHICH DEPRECIATION WAS CLAIMED BY THE ASSESSEE WAS NOT USED FOR THE PURPOSES OF BUSINESS AND, THERE FORE, CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, HE HAS ENDORSED THE ACTION OF THE ASSESSING OFFICER. AGAINST THE AFORESAID, THE ASSESSEE IS IN AP PEAL BEFORE US. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REIT ERATED THE PLEA SET- UP BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) TO T HE EFFECT THAT THE DISALLOWANCE OF DEPRECIATION BE SUSTAINED ONLY WITH RESPE CT TO 50% OF THE ASSETS AS ONLY 50% OF THE BUILDING WAS LET OUT. 8. WE HAVE CAREFULLY CONSIDERED THE OBJECTIONS TAKEN BY T HE ASSESSEE AND FIND THAT THE SAME ARE NOT COGENT ENOUGH TO DISLODGE T HE ORDERS OF THE AUTHORITIES BELOW. IT IS EXPRESSLY EMERGING FROM THE O RDERS OF THE AUTHORITIES BELOW THAT THE AUTHORIZED REPRESENTATIVE OF THE ASSESSE E HAD ADMITTED AND CONSENTED FOR THE DISALLOWANCE OF DEPRECIATION IN THE F ACE OF THE FACTUAL POSITION THAT NO BUSINESS ACTIVITY WAS CARRIED OUT DURING THE YEAR UNDER CONSIDERATION. THERE IS NO MATERIAL FOR US TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW AND ACCORDINGLY, WE FIND NO FORCE IN THE PLEA SET-UP BY THE ASSESSEE. THE SAME IS ACCORDINGLY REJECTED. 9. IN THE RESULT, THE APPEALS OF THE REVENUE AS WELL AS OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 31ST DAY OF JANUARY, 2012. SD/- SD/- (I C SUDHIR) (G.S . PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE, DATED: 31 ST JANUARY, 2012 B COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT I NASHIK 4 THE CIT NASHIK 5) DR, A BENCH, I.T.A.T.,PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT PUNE