DCIT, CHENNAI V. M/s. Accel Limited, CHENNAI

MA 76/CHNY/2010

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 3736 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T M SREEDHARAN
• Keywords: Deemed dividend

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. (BEFORE SHRI.U.B.S. BEDI J.M. & SHRI. ABRAHAM P. GE ORGE, A.M.) M.A. NO. 76/MDS/2010 [IN I.T.A. NO. 1825/MDS/2008] ASSESSMENT YEAR: 2004-05 THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 1(1), CHENNAI - 34. VS. M/S. ACCEL LIMITED, 75, NELSON MANICKAM ROAD, CHENNAI 600 029. [PAN: AAACA3042P] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB ASSESSEE BY : SHRI T.M. SREEDHARAN ORDER PER U.B.S. BEDI, J.M. BY MEANS OF PRESENT MISCELLANEOUS APPLICATION, THE DEPARTMENT SEEKS TO GET RECTIFIED THE ORDER OF THE BENCH IN I.T.A. NO. 1825/MDS/2008 DATED 11.09.2009 ON THE GROUND THAT WHILE DISPOSING OF TH E APPEAL, THE BENCH HAS NOT CONSIDERED THE GROUND RAISED BY THE DEPARTMENT IN G ROUND NO. 2.4 AND TO SUPPORT THE PLEA, RELIANCE HAS BEEN PLACED ON THE D ECISION IN THE CASE OF TARULATA SHYAM VS. CIT (82 ITR 485)(CAL) AND K.M.S. LAKSHMANA AIYAR VS. ADDL. ITO (40 ITR 469) (MAD) TO STATE THAT REPAYMEN T OF ADVANCE/LOAN TAKEN SUBSEQUENTLY WOULD BE IMMATERIAL AND THAT THE LIABI LITY UNDER SECTION 2(22)(E) ATTACHES THE MOVEMENT THE LOAN IS GIVEN TO THE SHAR EHOLDER. THEREFORE, WITHOUT CONSIDERING THE TRANSACTION ON THE DEBT SIDE WHICH WOULD CONSTITUTE REPAYMENTS, THE ADDITIONAL ADVANCES RECEIVED DURING THE YEAR BY THE ASSESSEE COMPANY FROM ITS SUBSIDIARY ARE TO BE TAXED IN THE YEAR UNDER CO NSIDERATION. THE LD. CIT(A) HAS NOTED THE SUBMISSION MADE IN THE REMAND REPORT AND THE TRIBUNAL HAS ALSO OVERLOOKED THE GROUND TAKEN IN PARA 2.4 OF THE GROU NDS OF APPEAL. THEREFORE, THIS M.P. M.P. M.P. M.P. NO. NO. NO. NO.76 7676 76/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 2 CONSTITUTES MISTAKE APPARENT FROM THE RECORD, WHICH NEEDS TO BE RECTIFIED, IT WAS PRAYED FOR RECTIFICATION OF THE ORDER. 2. THE LD. DR JUST RELIED UPON THE GROUND RAISED I N THE APPLICATION AND EXCEPT THAT HE DID NOT FURTHER ELABORATE ANYTHING TO SUPPO RT THE PLEA RAISED IN THE APPLICATION. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DEPARTMENT IS SEEKING THE REVIEW OF THE ORDER, WHICH IS NOT PERMI SSIBLE AND MOREOVER, THE ISSUE RAISED IN THE APPLICATION ARE OF ARGUMENTATIVE IN N ATURE ON THE POINT ON WHICH THERE CAN BE DIVERGENT VIEWS AND FOR CONSIDERATION OF SUCH POINTS, IT WOULD BE NECESSARY TO EXAMINE OTHER RECORDS, SO IT CANNOT BE CALLED AS MISTAKE APPARENT FROM THE RECORD BECAUSE IT WOULD INVITE FRESH INVES TIGATION INTO THE FACTS OF THE CASE. MOREOVER, THE APPELLATE ORDER HAS ALREADY ATT AINED FINALITY AND REVENUE CANNOT SEEK ANY FURTHER ORDER ON THE FACTS ALLEGED IN THE MA, WITHOUT PREJUDICE TO THE ABOVE, IT WAS SUBMITTED THAT THERE IS NO NON-CO NSIDERATION OF ANY OF THE ISSUE RAISED IN THE APPEAL FROM THE SIDE OF THE DEPARTMEN T, AS SUCH, IT DOES NOT CALL FOR ANY ACTION AS DEMANDED. AS SUCH, THE APPLICATION OF THE DEPARTMENT SHOULD BE DISMISSED. 4. WE HAVE HEARD RIVAL SIDES AND CONSIDERED THE MA TERIALS ON RECORD AS WELL AS CASE LAW CITED AND FIND THAT THE TRIBUNAL CONSID ERED THE ISSUE RAISED IN THE APPEAL AND DRAWN ITS CONCLUSION AS PER PARA 4 TO 8 OF THE ORDER, WHICH READS AS UNDER: 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN TH E LIGHT OF MATERIAL ON RECORD. THE AO MADE THE ADDITION AS DE EMED DIVIDEND U/S 2(22)(E) OF THE ACT FOR THE REASONS GIVEN IN PA RAGRAPHS 4.4 AND 4.5 OF HIS ORDER AS UNDER: M.P. M.P. M.P. M.P. NO. NO. NO. NO.76 7676 76/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 3 4.4 THE PRE-REQUISITE FOR CONSIDERING A TRANSACTIO N AS DEEMED DIVIDEND UNDER SEC. 2(22)(E) ARE AS UNDER: A. THERE MUST BE A PAYMENT BY WAY OF ADVANCE OR LO AN. B. THE PAYMENT SHOULD BE FROM A COMPANY IN WHICH T HE PUBLIC ARE NOT SUBSTANTIALLY INTERESTED. C. THE PAYMENT SHOULD BE TO A SHARE HOLDER. D. THE SHARE HOLDER SHOULD BE THE BENEFICIAL OWNER OF THE EQUITY SHARES HOLDING NOT LESS THAN 10 PERCENT OF THE VOTING POWER. E. THE PAYMENT BY WAY OF LOAN OR ADVANCED SHOULD N OT HAVE BEEN MADE IN THE ORDINARY COURSE OF BUSINESS. F. MONEY LENDING SHOULD NOT BE A SUBSTANTIAL PART OF THE ASSESSEES BUSINESS. 4.5 THE TRANSACTION IN THE PRESENT CASE ON HAND SAT ISFY ALL THE ABOVE INGREDIENTS IN ITS ENTIRETY. HENCE, THE L OAN OF RS.4,16,12,082 IS TREATED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE AND ASSESSABLE UNDER THE HEAD OTHER S OURCES, WITHOUT BENEFIT OF SET OFF OF BROUGHT FORWARD BUSIN ESS LOSSES. 5. THE FACTS IN RELATION TO THE ABOVE ISSUE HAVE B EEN DISCUSSED BY THE CIT(A) IN HIS ORDER IN DETAIL. THE ASSESSEE IS A HOLDING COMPANY OF ITS SUBSIDIARY M/S. ACCEL ICIM SYSTEMS AND SERVICES LIMITED (AICIM FOR SHORT). IN THE NOTES TO THE FINANCIAL STATEMENT S IT WAS MENTIONED THAT THE ASSESSEE OWED TO ITS SUBSIDIARY A SUM OF R S.4,16,12,082/- AS ON 31.03.2004. THE AO TREATED THIS AMOUNT AS DEEME D DIVIDEND U/S 2(22)(E) OF THE ACT. 6. DURING THE APPELLATE PROCEEDING BEFORE HIM THE CIT(A) CALLED FOR A REMAND REPORT WHICH WAS SUBMITTED BY THE AO V IDE HIS LETTER DATED 03.01.2008. A COPY OF THIS REPORT HAS BEEN FI LED BY THE LEARNED CIT(DR) BEFORE US. 7. IT HAS BEEN OBSERVED BY THE CIT(A) IN HIS ORDER THAT THE ASSESSEE - COMPANY HAD IN ITS BOOKS OF ACCOUNT A C URRENT ACCOUNT IN THE NAME OF ITS SUBSIDIARY AICIM FOR THE YEARS ENDE D 31.03.2002, 31.03.2003, 31.03.2004, 31.03.2005 AND 31.03.2006. THE OPENING CREDIT BALANCE IN THIS ACCOUNT, AS ON 31.03.2003, W AS RS.5,45,96,123, WHICH CAME DOWN TO RS.4,16,12,082 AS ON 31.03.2004. A COPY OF THE SAID ACCOUNT FILED BEFORE US CONFIRMS THIS POSITION . 7.1 IN VIEW OF THE FACTS AND CIRCUMSTANCES DISCUSSE D IN THE ABOVE PARAGRAPHS, THE CLOSING CREDIT BALANCE OF RS. 4,16,12,082 CANNOT BE M.P. M.P. M.P. M.P. NO. NO. NO. NO.76 7676 76/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 4 SAID TO REPRESENT A PAYMENT, MADE BY THE ASSESSEE -COMPANY TO ITS SUBSIDIARY DURING THE PREVIOUS YEAR RELEVANT TO AY2 004-05, WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. AND ON THIS GROUND ALONE THE IMPUGNED ADDITION OF RS.4,16,12,082, MADE IN AY 200 4-05, BECOMES UNSUSTAINABLE. WE HOLD ACCORDINGLY. 8. WE LIKE TO MAKE IT CLEAR THAT WE HAVE NOT GONE INTO THE CORRECTNESS OR OTHERWISE OF THE OTHER REASONS, GIVE N BY THE CIT(A) IN HIS ORDER, FOR DELETING THE ABOVE ADDITION. ON PERUSAL OF THE ABOVE NOTED CONCLUSION, WE FIND T HAT EACH AND EVERY ASPECT OF THE MATTER HAS BEEN CONSIDERED AND MOREOVER, THE LD . DR COULD NOT BE ABLE TO POINT OUT ANY APPARENT MISTAKE AND AS SUCH, WHILE C ONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES, WE DO NOT FIND ANY VALID G ROUND TO RECTIFY THE ORDER. THEREFORE, WE DISMISS THE APPLICATION OF THE DEPART MENT BEING DEVOID OF ANY MERITS. 5. IN THE RESULT, THE MISCELLANEOUS APPLICATION OF THE DEPARTMENT GETS DISMISSED. THE ORDER IS PRONOUNCED SOON AFTER THE CONCLUSION OF HEARING ON 30.07.10. SD/- SD/- (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER (U.B.S. BEDI) JUDICIAL MEMBER VM/- DATED :. 30.07.2010. COPY TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.