M/s.. Eagle Press, CHENNAI V. DCIT, CHENNAI

MA 186/CHNY/2013

• Counselvise Citation: [2014] 124 COUNSELVISE.COM (IT) 1802 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 07-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2013
• Court: TRIBUNAL
• Department Lawyers: T N BETGERI; GURU BHASHYAM
• Assessee Lawyers: S SRIDHAR
• Keywords: Deemed to accrue or arise in india; Deemed dividend

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER M.P. NO. 186/MDS/2013 (IN ITA NO.527/MDS/2011) ASSESSMENT YEAR : 2007-08 M/S.EAGLE PRESS, NO.35(OLD NO.15), M.S.KOIL STREET, ROYAPURAM, CHENNAI-600 013 VS DY. COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-X CHENNAI [PAN: AABFE 9151 B] (PETITIONER) (RESPONDENT) PETITIONER BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI GURU BHASHYAM, JCIT & SHRI T.N.BETGERI, JCIT DATE OF HEARING : 07-03-2014 DATE OF PRONOUNCEMENT : 16 -05-2014 O R D E R PER VIKAS AWASTHY, J.M: THE MISCELLANEOUS PETITION HAS BEEN FILED BY THE AS SESSEE SEEKING RECTIFICATION OF THE ORDER OF THE TRIBUNAL DT.28-10-2011 IN ITA NO.527/MDS/2011 FOR THE AY.2007-08. THE ASSESS EE IS M.P. NO. 186/MDS/2013 :- 2 -: AGGRIEVED BY DIRECTIONS OF THE TRIBUNAL TO TAX DEEM ED DIVIDEND IN THE HANDS OF THE PARTNERS. THE RELEVANT EXTRACT OF THE PRAYER OF THE ASSESSEE IN THE PETITION FOR RECTIFICATION IS R E-PRODUCED HEREIN BELOW: THE BENCH HAD RECORDED THE FIRST FINDING IN FAVOUR OF THE PETITIONER/RESPONDENT BASED ON JUDICIAL PRECEDE NTS THAT THE ASSESSMENT OF DEEMED DIVIDEND IN THE HANDS OF T HE PETITIONER/RESPONDENT WAS NOT CORRECT AND WHILE HOL DING SO, THE BENCH HAD FURTHER HELD THAT THE DEEMED DIVIDEND SHOULD BE TAXED ONLY IN THE HANDS OF THE PARTNERS BY GIVIN G DIRECTIONS AT PAGE 10. THE LEGAL MISTAKE COMMITTED BY THE BENCH IN THE DISPOSAL OF THE APPEAL IS RELATING TO THE EXCESSIVE JURISDICTION INASMUCH AS THE DIRECTION TO TAX THE DEPOSIT OF ` 3 CRORES AS DEEMED DIVIDEND IN THE HANDS OF THE PARTNERS IS NOT ARISING OUT OF THE SUBJECT MATTER OF THE APPEAL BEFORE THEM. THE DEPARTMENT IN THE SAID APPEAL HAD NOT CHALLENGE D THE FINDINGS OF THE FIRST APPELLATE AUTHORITYS ORD ER IN PARA 6.2 INASMUCH AS THE FINDINGS OF THE FIRST APPELLATE AUT HORITY IN TREATING THE SUM OF ` 3 CRORES RECEIVED BY THE PETITIONER/RESPONDENT FROM THE COMPANY AS DEPOSITS AND NOT AS LOAN OR AN ADVANCE HAS REACHED FINALITY. MOREOV ER, THE BENCH WITHOUT POSED WITH GROUNDS OF APPEAL BY THE DEPARTMENT IN THE ORIGINAL APPEAL PROCEEDINGS QUEST IONING THE M.P. NO. 186/MDS/2013 :- 3 -: NATURE OF THE AMOUNTS RECEIVED BY THE PETITIONER/RE SPONDENT HAD COMMITTED GRAVE MISTAKE IN TREATING SUCH SUM AS DEEMED DIVIDEND WHILE GIVING DIRECTION TO THE AO TO TREAT SUCH SUM AS DEEMED DIVIDEND IN THE HANDS OF THE PARTNERS. THE PETITIONER/RESPONDENT SUBMITS THAT THE SAID FINDING OF THE APPELLATE TRIBUNAL WITHOUT ANY CHALLENGE BY THE APP ELLANT BEFORE THEM IS CLEARLY TANTAMOUNT TO THE EXERCISE O F THEIR JURISDICTION BEYOND THE SCOPE OF THE APPEAL. 2. SHRI S. SRIDHAR, APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT THE TRIBUNAL HAS EXCEEDED ITS JURISD ICTION IN DIRECTING THE ASSESSING OFFICER TO TAKE NECESSARY S TEPS TO TAX DEEMED INCOME U/S.2(22)(E) IN THE HANDS OF THE PART NERS WHO ARE NOT PARTY TO THE APPEAL IS MISTAKE APPARENT FROM RE CORD AND THUS REQUIRES RECTIFICATION. 3. ON THE OTHER HAND, SHRI GURU BHASHYAM AND SHRI T.N.BETGERI, REPRESENTING THE DEPARTMENT SUBMITTED THAT THERE IS NO ERROR IN THE ORDER OF THE TRIBUNAL. THE LD.DRS POINTED OUT THAT IN PROCEEDINGS BEFORE THE FIRST APPELLATE AUTHORITY , THE ASSESSEE HAD ADMITTED THAT DEEMED DIVIDEND U/S.2(22)E IS TAX ABLE IN THE HANDS OF THE SHAREHOLDERS OF THE COMPANY AND NOT IN THE HANDS OF THE ASSESSEE-FIRM. THE DIRECTIONS OF THE TRIBUNAL ARE BASED ON M.P. NO. 186/MDS/2013 :- 4 -: THE ADMISSION MADE BY THE ASSESSEE BEFORE THE CIT(A PPEALS). THE LD.DR PRAYED FOR THE DISMISSAL OF THE PETITION OF THE ASSESSEE. 4. BOTH SIDES HEARD. THE ASSESSEE HAS ALLEGED MIST AKE IN THE ORDER OF TRIBUNAL DT.28-10-2011 WHEREIN THE TRIBUNA L HAS MADE THE FOLLOWING OBSERVATIONS: WE UPHOLD THE ORDER OF LD.CIT(A) TO THE EXTENT THAT ADDITION CAN BE AND TO BE MADE IN THE HANDS OF THE SHARE HOL DER I.E. PARTNERS, FOR WHICH AO IS EXPECTED AND DIRECTED TO TAKE NECESSARY STEPS SO THAT INCOME COULD NOT ESCAPE ASS ESSMENT AS IT IS TO BE TREATED AS DEEMED U/S.2(22)(E) IN TH E HANDS OF PARTNERS, WE HOLD AND DIRECT ACCORDINGLY. WE FIND THAT THE TRIBUNAL WHILE PARTLY ALLOWING THE APPEAL OF THE REVENUE HAS MADE THE AFORESAID OBSERVATIONS. THESE DIRECTIONS WERE GIVEN BY THE TRIBUNAL IN PURSUANCE TO THE ADMI SSION MADE BY THE ASSESSEE BEFORE CIT(APPEALS). THE RELEVANT EXTRACT OF THE ORDER OF CIT(APPEALS) WHEREIN THE ASSESSEE HAD CONC EDED THAT THE DEEMED DIVIDEND IS TAXABLE IN THE HANDS OF THE SHAREHOLDERS IS RE-PRODUCED HEREIN BELOW: M.P. NO. 186/MDS/2013 :- 5 -: 6.3 THE LD.AR HAS ALSO ARGUED IN THE ALTERNATIVE, T HAT DEEMED DIVIDEND U/S.2(22)(E) IS TAXABLE ONLY IN THE HANDS OF THE SHAREHOLDERS OF THE COMPANY AND NOT IN THE HANDS OF THE APPELLANT FIRM. I FIND MERIT IN THE SUBMISSIONS OF THE LD.AR. THE APPELLANT HAS EXPLAINED THAT ONLY THE PARTNERS OF THE APPELLANT FIRM ARE SHAREHOLDERS IN THE COMPANY (EEP L) AND NOT THE APPELLANT FIRM ITSELF. SUCH BEING THE FACT S, THE CASE IF COVERED BY THE DECISION OF THE HONBLE SPECIAL BENC H OF MUMBAI TRIBUNAL WHEREIN IT WAS HELD THAT DEEMED DIV IDEND CAN BE ASSESSEE ONLY IN THE HANDS OF A PERSON WHO I S A SHAREHOLDER OF THE LENDER COMPANY AND NOT IN THE HA NDS OF THE BORROWING CONCERN IN WHICH SUCH SHAREHOLDER IS MEMB ER OR PARTNER HAVING SUBSTANTIAL INTEREST [ACIT V. BHAUMI K COLOUR (P) LTD., (2009), 120 TTJ (MUMBAI)(SB) 865]. FROM THIS VIE ALSO, THE IMPUGNED AMOUNT CANNOT BE TREATED AS DEEM ED DIVIDEND U/S.2(22)(E) IN THE HANDS OF THE APPELLANT . IT IS NOT THE CASE WHERE THE TRIBUNAL HAS MADE OBSE RVATIONS ON ITS OWN. THE DIRECTIONS AGAINST WHICH THE ASSESSEE IS AGGRIEVED ARE BASED ON THE ADMISSION OF THE ASSESSEE BEFORE THE C IT(APPEALS). WE ARE OF CONSIDERED OPINION THAT THERE IS NO ERROR AS ALLEGED BY THE LD.AR OF THE ASSESSEE IN THE ORDER OF THE TRIBU NAL. THE MISCELLANEOUS PETITION OF THE ASSESSEE IS DISMISSED BEING DEVOID OF MERITS. M.P. NO. 186/MDS/2013 :- 6 -: 5. HOWEVER, WE WOULD LIKE TO OBSERVE THAT THE ASSES SING OFFICER WHILE GIVING EFFECT TO THE ORDER OF THE TRI BUNAL SHALL EXAMINE THE FACTS OF THAT CASE AND THEREAFTER PASS ORDERS IN ACCORDANCE WITH LAW. ORDER PRONOUNCED ON FRIDAY, THE 16 TH MAY 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (VIKAS AWASTHY) JUDICIAL MEMBER DATED: 16 TH MAY, 2014 TNMM COPY TO: (1) PETITIONER (4) CIT(A) (2) RESPONDENT (5) D.R. (3) CIT (6) G. F.