Assistant Commissioner of Income tax, Mangalore V. Sri A Mohiuddin, Mangalore

MA 108/BANG/2017

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5651 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 19-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNA DAS JT BENGALURU
• Assessee Lawyers: V SRINIVASAN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER M.P. NO.108/BANG/2017 [IN ITA NO.167/BANG/2011] ASSESSMENT YEAR : 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1), MANGALORE. VS. SHRI A. MOHIUDDIN, # 202, VEEKAY CHAMBERS, KULUR BANGRA ROAD, KULUR, MANGALORE 575 013. PAN: AEBPM 6716Q APPLICANT RESPONDENT APPELLANT BY : SMT. SWAPNA DAS, JT.CIT(DR)(ITAT), BENGALURU RESPONDENT BY : SHRI V. SRINIVASAN, ADVOCATE DATE OF HEARING : 16.06.2017 DATE OF PRONOUNCEMENT : 23.06.2017 O R D E R PER SUNIL KUMAR YADAV, JUDICIAL MEMBER THIS MISCELLANEOUS PETITION IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF TRIBUNAL DATED 25.01.2017 WITH THE SUBMISS ION THAT THE TRIBUNAL HAS NOT TAKEN THE CORRECT FACTS WHILE DELETING THE ADDITION MADE U/S. 2(22)(E) OF THE INCOME-TAX ACT, 1961 [THE ACT]. 2. THE LD. DR HAS FURTHER CONTENDED THAT SINCE THE TRIBUNAL HAS NOT APPRECIATED THE FACTS AVAILABLE ON RECORD AND HAS ARRIVED AT A WRONG MP NO.108/BANG/2017 PAGE 2 OF 5 CONCLUSION, THE ORDER OF TRIBUNAL MAY BE RECALLED O N THIS ISSUE IN THE INTEREST OF JUSTICE. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED HEAV Y RELIANCE ON THE ORDER OF TRIBUNAL WITH THE SUBMISSION THAT THE TRIB UNAL HAS ADJUDICATED THE ISSUE IN THE LIGHT OF MATERIAL AVAILABLE BEFORE IT DURING THE COURSE OF HEARING. THEREFORE, THERE IS NO ERROR APPARENT IN THE ORDER OF TRIBUNAL. 4. HAVING CAREFULLY EXAMINED THE MISCELLANEOUS PETI TION VIS--VIS THE ORDER OF TRIBUNAL, WE FIND THAT WHILE ADJUDICATING THE ISSUE OF DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT, THE TRIBUNAL HAS CONSIDERED ALL ASPECTS, VARIOUS ADVANCES AND RUNNING ACCOUNT WITH THE COMPA NY. HAVING THOROUGHLY EXAMINED THE DETAILS FURNISHED BEFORE IT , THE TRIBUNAL HAS DELETED THE ADDITION. THE RELEVANT OBSERVATIONS OF THE TRIBUNAL IS EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE:- 14. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM C AREFUL PERUSAL OF THE RECORD, IN THE LIGHT OF THE JUDGMENT S REFERRED TO THE PARTIES, WE FIND THAT UNDISPUTEDLY THE ASSESSEE WAS HAVING A RUNNING ACCOUNT WITH THE COMPANY IN WHICH THERE ARE SO MANY DEBIT AND CREDIT ENTRIES THROUGHOUT THE YEAR. THE COPY OF THE CURRENT ACCOUNT STATEMENT IS AVAILABLE AT PAGE NOS. 147 TO 164 IN WHICH THERE ARE VARIOUS DEBIT AND CREDIT ENTRIES IN DIFFERENT FINANCIAL YEARS. DURING THE IMPUGNED ASSESSMENT YE AR, THE REMUNERATIONS PAYABLE TO THE ASSESSEE WAS CREDITED IN ITS CURRENT ACCOUNT BESIDES A SUM OF RS.4,67,300/-, RS.5,00,000 /-, RS.10,00,000/- AND RS.16,00,000/- WAS CREDITED TO I TS ACCOUNTS FOR DIFFERENT PURPOSES. IT IS ALSO AN UNDISPUTED FA CT THAT AMOUNT WAS CREDITED IN ORDER TO PURCHASE THE HOUSE TO BE G IVEN TO THE ASSESSEE (MANAGING DIRECTOR) OF THE COMPANY. LATER ON THE BANK LOAN WAS SANCTIONED AND ACCORDINGLY THE DEBIT ENTRI ES WERE MADE AND AT THE END OF THE FINANCIAL YEAR THERE WAS NIL BALANCE AGAINST MP NO.108/BANG/2017 PAGE 3 OF 5 THE ASSESSEE. SINCE THE ASSESSEE IS THE MANAGING DI RECTOR AND HAS BEEN MAINTAINING CURRENT ACCOUNT WITH THE COMPANY I N WHICH DEBIT AND CREDIT ENTRIES ARE FOUND, IT CANNOT BE PR ESUMED THAT WHATEVER CREDIT ENTRIES ARE FOUND IN THE CURRENT AC COUNT AMOUNTS TO BE DEEMED DIVIDEND. WE HAVE ALSO CAREFULLY PERU SED THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF BHAGMANE CONSTRUCTION PVT. LTD., VS. CIT (SUPRA). WE FIND THAT IN THIS JUDGMENT THEIR LORDSHIPS HAD CATEGORICALLY HELD THAT IF ANY LOAN OR ADVANCE GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE TO ANY FURTHER CONSIDERATION WHICH IS BENEFICIAL TO THE COMPANY RECEIVED FROM SUCH SHAREHOLDER, ANY SUCH LOAN OR AD VANCE CANNOT BE DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THE RELEVANT OBSERVATIONS OF JURISDICTIONAL HIGH COURT IS REPROD UCED HEREUNDER FOR THE SAKE OF REFERENCE: THE PURPOSE OF THE INSERTION OF SUB-CL. (E) OF S. 2(22) WAS TO BRING WITHIN THE TAX NET ACCUMULATED PROFITS WHI CH ARE DISTRIBUTED BY CLOSELY HELD COMPANIES TO HIS SHAREH OLDERS IN THE FORM OF LOANS TO AVOID PAYMENT OF DIVIDEND DISTRIBUTION TAX UNDER S. 115-O. THE PURPOSE BEING THAT PERSONS WHO MANAGE SUCH CLOSELY HELD COMPANIES SHOU LD NOT ARRANGE THEIR AFFAIRS IN A MANNER THAT THEY ASS IST THE SHAREHOLDERS IN AVOIDING PAYMENT OF TAX BY HAVING T HESE COMPANIES PAY OR DISTRIBUTE MONEY IN THE FORM OF AD VANCE OR LOAN. LOAN OR ADVANCE GIVEN TO THE SHAREHOLDERS OR TO A CONCERN, UNDER NORMAL CIRCUMSTANCES WOULD NOT QUALI FY AS DIVIDEND. IF SUCH LOAN OR ADVANCE IS GIVEN TO SUCH SHAREHOLDER AS A CONSEQUENCE OF ANY FURTHER CONSIDERATION, WHICH IS BENEFICIAL TO THE COMPANY R ECEIVED FROM SUCH A SHAREHOLDER, IN SUCH CASE, SUCH ADVANCE OR LOAN CANNOT BE SAID TO A DEEMED DIVIDEND WITHIN THE MEANING OF THE ACT. THUS, GRATUITOUS LOAN OR ADVANC E GIVEN BY A COMPANY TO THOSE SPECIFIED SHAREHOLDERS WOULD COME WITHIN THE PURVIEW OF S. 2(22) BUT NOT TO THE CASES WHERE THE LOAN OR ADVANCE IS GIVEN IN RETURN TO AN ADVANTAGE CONFERRED UPON THE COMPANY BY SUCH SHAREHOLDER. THE INTENTION BEHIND THE PROVISIONS OF S. 2(22)(E) IS TO TAX DIVIDEND IN THE HANDS OF SHAREHO LDERS. IT IS IN THIS BACKGROUND, THE WORD ANY PAYMENT, B Y A COMPANY, BY WAY OF ADVANCES OR LOANS, HAS TO BE INTERPRETED. THE ATTRIBUTE OF A LOAN IS THAT IT IS A POSITIVE ACT O LENDING MONEY COUPLED WITH ACCEPTANCE BY THE OTHER SIDE OF THE REPAYMENT. THE TERM ADVANCE MAY OR M AY NOT INCLUDE LENDING. THE WORD ADVANCE IF NOT FOU ND IN THE COMPANY OR IN CONJUNCTION WITH THE WORD LOAN MA Y OR MP NO.108/BANG/2017 PAGE 4 OF 5 MAY NOT INCLUDE THE OBLIGATION OF REPAYMENT. IF IT DOES THEN IT WOULD BE A LOAN. HOWEVER, THE LEGISLATURE HAS USED THE EXPRESSION BY WAY OF ADVANCE OR LOAN. THEREFOR E, BOTH THESE WORDS ARE USED TO MEAN DIFFERENT THINGS. THE PRINCIPLE OF STATUTORY INTERPRETATION BY WHICH A GE NERIC WORD RECEIVES A LIMITED INTERPRETATION BY REASON OF ITS COMPANY IS WELL ESTABLISHED. IN SUCH CIRCUMSTANCE, ONE CAN LEGITIMATELY DRAW ON THE NOSCITUR A SOCIIS PRIN CIPLE. IN FACT THIS LATTER MAXIM IS ONLY AN ILLUSTRATION OR S PECIFIC APPLICATION AND BROADER THAN THE MAXIM EJUSDEM GENERIS. 15. WE HAVE ALSO EXAMINED THE ORDER OF THE TRIBUNA L IN THE CASE OF ITO VS. SMT. GAYATRI CHAKROBORTY IN WHICH I T WAS HELD THAT LOAN ACCOUNT IS DIFFERENT FROM THE CURRENT ACC OUNT AND THE TRANSACTION BETWEEN THE ASSESSEE AND THE COMPANY AR E IN THE NATURE OF THE CURRENT ACCOUNT AND THEREFORE PROVISI ONS OF SECTION 2(22)(E) OF THE ACT WILL NOT BE APPLICABLE. SIMIL AR VIEW WAS ALSO EXPRESSED BY THE HONBLE PUNJAB AND HARYANA HIGH CO URT IN THE CASE OF CIT VS. SURAJ DEV DADA. 16. TURNING TO THE FACT OF THE CASE, WE FIND THAT UNDISPUTEDLY THE ASSESSEE MAINTAINED THE CURRENT ACCOUNT WITH TH E COMPANY AND THE AMOUNTS WERE CREDITED TO ITS ACCOUNT TOWARD S PURCHASE OF THE PROPERTY AND LATER ON WHEN THE LOAN WAS SANCTIO NED FROM THE BANK, THE CREDIT ENTRIES WERE SCORED OFF. THEREFOR E, SINCE THE CREDIT ENTRY WAS MADE FOR PURCHASE OF PROPERTY FOR THE COMPANY, THE SAID CREDIT ENTRIES CANNOT BE CALLED THE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, WE FIND NO MER IT IN THE ADDITION AND THEREFORE WE SET ASIDE THE ORDER OF TH E CIT(A) AND DELETE THE ADDITION MADE IN THIS REGARD. 5. HAVING CAREFULLY EXAMINED THE ORDER OF TRIBUNAL, WE FIND THAT THE TRIBUNAL HAS ADJUDICATED THE ISSUE THREADBARE IN TH E LIGHT OF ARGUMENTS RAISED BY THE RESPECTIVE PARTIES AND DOCUMENTS PLAC ED BEFORE IT. SINCE THE TRIBUNAL HAS GIVEN A SPECIFIC FINDING ON THE ISSUE, THE ORDER OF TRIBUNAL CANNOT BE REVIEWED UNDER THE GARB OF RECTIFICATION. SCOPE OF RECTIFICATION U/S. 254(2) OF THE ACT IS VERY LIMITED AS ONLY ARIT HMETICAL OR CLERICAL ERROR CAN MP NO.108/BANG/2017 PAGE 5 OF 5 BE RECTIFIED, BUT THE ORDER OF TRIBUNAL CANNOT BE R EVIEWED U/S. 254(2) OF THE ACT. WE THEREFORE FIND NO MERIT IN THE MISCELLANEO US PETITION OF THE REVENUE AND WE ACCORDINGLY DISMISS THE SAME. 6. IN THE RESULT, THE MISCELLANEOUS PETITION IS DIS MISSED. PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF JUNE, 2017. SD/- SD/- ( JASON P. BOAZ ) (SUNIL KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 23 RD JUNE, 2017. / D ESAI S MURTHY / COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.