THE COMMISSIONER OF INCOME TAX V. M/S NAMDHARI SEEDS

ITA/488/2013

AI Insights

This case involves an appeal by the Commissioner of Income-Tax and the Assistant Commissioner of Income-Tax against M/s. Namdhari Seeds concerning the taxation of deemed dividends. The core issue was whether the deemed dividend should be taxed in the hands of the shareholder or the firm. The Income Tax Appellate Tribunal had previously ruled in favor of the assessee, which was upheld by the High Court of Karnataka, referencing a similar case (ITA.No.322/12) where the court had decided that the deemed dividend is to be taxed in the hands of the shareholder.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 729036 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 30-04-2014
• Assessment Year: misc
• Other Referred Cases: The Chief Commissioner of Income Tax-III and another Vs. M/s. Sarva Equity Pvt. Ltd
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: A SHANKAR; M LAVA
• Assessee Lawyers: K V ARAVIND
• Keywords: Deemed dividend; Firm; Shareholder; Taxation
• Section: 260-A

Judgement Text

" - 1 - IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 30th DAY OF APRIL 2014 PRESENT THE HON’BLE MR. JUSTICE DILIP B BHOSALE AND THE HON’BLE MR. JUSTICE B MANOHAR ITA.NO.488/2013 BETWEEN: 1. THE COMMISSIONER OF INCOME-TAX C.R.BUILDING, QUEENS ROAD, BANGALORE 2. THE ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1) NO.59, HMT BHAVAN, 6TH FLOOR, BELLARY ROAD, GANGANAGAR BANGALORE-560 032. ... APPELLANTS (BY SRI K.V.ARAVIND, ADV.,) AND: M/S.NAMDHARI SEEDS NO.119, ARASAPPA COMPLEX 9TH MAIN, IDEAL HOMES TOWNSHIP RAJARAJESHWARI NAGAR, BANGALORE-560 093. ... RESPONDENT (BY SRI.A.SHANKAR & SRI.M.LAVA, ADVS.) THIS ITA FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED:30/05/2010 PASSED IN ITA NO.1603/BANG/2012, FOR THE ASSESSMENT YEAR 2007-08 PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN AND TO ALLOW THE APPEAL BY SETTING ASIDE THE ORDER DATED 30.05.2010 PASSED BY THE ITAT, BANGALORE, IN ITA NO.1603/BANG/2012 AS SOUGHT FOR IN THIS APPEAL. - 2 - THIS ITA COMING ON FOR HEARING, THIS DAY, DILIP B. BHOSALE J., DELIVERED THE FOLLOWING: ORAL JUDGMENT: (DILIP B. BHOSALE J.) This appeal under Section 260-A of the Income Tax Act, 1961 (for short “The Act”) is directed against the order dated 30.5.2013 passed by the Income Tax Appellate Tribunal, Bangalore in ITA.No.1603/2012 whereby the Tribunal confirmed the order passed by the First Appellate Authority dated 17.9.2012. The First Appellate Authority reversed the order passed by the Assessing Officer dated 30.12.2011 in the appeal filed by the assessee. 2. Sri.A.Shankar learned counsel for the respondent - assessee at the outset invited our attention to the judgment of this Court dated 8.1.2014 passed in ITA.No.322/12 (The Chief Commissioner of Income Tax-III and another Vs. M/s. Sarva Equity Pvt. Ltd) and connected appeals to submit that the substantial question of law involved in this appeal is squarely covered by the said judgment. The sole substantial questions of law framed by the Revenue reads thus: - 3 - “Whether on the facts and in the circumstances of the case and in law the Tribunal was correct in holding that the deemed dividend is to be taxed in the hands of the share holder and not the firm without taking into consideration that the beneficiary of the advance amount was the assessee firm?” 3. A similar substantial question of law was framed in ITA.NO.322/12 and connected appeals decided on 8.1.2014 and it was answered in favour of the assessee and against the revenue. 4. Having confronted with the submission of Mr.A.Shanker, Mr.K.V.Aravind, learned counsel for Revenue fairly states that this appeal can also be disposed of in terms of the said judgment answering the above substantial question of law in favour of the assessee and against the revenue. 5. We Accordingly, dispose of this appeal in terms of judgment dated 8.1.2014 rendered in ITA.No.322/12 and connected appeals and answer the aforementioned - 4 - substantial question of law in favour of the assessee and against the revenue. It would be appropriate to reproduce concluding paragraphs in judgment dated 8.1.2014 which read thus: “18. We do not find any reason to take a view other than the one taken by the Delhi and Bombay High courts in the aforementioned judgments nor could the Senior counsel appearing for the revenue persuaded us to take differing view. In the circumstances, we find no reason to interfere with the concurrent finding of facts recorded by the two authorities below namely the appellate Authority and the Tribunal. In the circumstances, we answer the question as formulated by us in favour of the respondent – assessee and against the revenue. 19. Before we part, we observe that it is always open to the revenue to take corrective measure, if any, by treating this as deemed income at the hands of the shareholders by following the due procedure as contemplated by law and in accordance with law. We are so observing, because otherwise it would amount to escapement of income at the hands of those shareholders.” - 5 - 6. As observed in paragraph 19, it would be open to the Revenue to take an corrective measure, if any, by treating the loan/advance amount as deemed dividend in the hands of shareholder by following the due procedure and in accordance with law. SD/- JUDGE SD/- JUDGE RS/*. "