Narayan Das Mukhija , Jaipur vs Department Of Income Tax
- CitationITA No. 700/JP/2012
Ratio decidendi
The rule this decision rests on
The Tribunal's reasoning rests on the following propositions, drawn from the text as it stands: Where the Revenue's sole ground concerns an addition under Section 2(22)(e) of the Income Tax Act, 1961 and the identical issue has already been decided in the assessee's favour by a coordinate Bench of the same Tribunal in the assessee's own case for other assessment years, the same view is followed, and the order of the first appellate authority deleting the addition is confirmed on that basis, absent any new argument or evidence brought by the Revenue to controvert the earlier finding. Under Section 2(22)(e), a loan or advance is not to be deemed a dividend where the lending company is one in which the lender-shareholder has a substantial interest, or where the company advancing the amount is itself engaged in the business of money lending or financing activity and the amount was advanced out of that financing activity (the exception in clause (ii) of Section 2(22)(e)); the coordinate Bench's view that the exception applies where the transactions arose from the lending companies' financing business is adopted here. Section 2(22)(e) cannot be invoked to treat an amount as deemed dividend in the hands of a shareholder where the assessee is not a direct shareholder of the lending company holding the requisite share of voting power, and the amount was not advanced to the assessee directly, so that it cannot be treated as deemed income in the assessee's hands.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Jh vkj-ih-rksykuh] U;kf;d lnL; ,oa Jh Vh-vkj-ehuk] ys[kk lnL; ds le{k BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM
vk;dj vihy la-@ITA No. 700/JP/2012 fu/kZkj.k o"kZ@Assessment Year : 2009-10
Dy. Commissioner of cuke Narayan Das Mukhija, Income Tax, Vs. Mukhija Chambers, M.I. Road, Circle-2, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AECPM 1619 K vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri Kailash Mangal (JCIT) fu/kZkfjrh dh vksj ls@ Assessee by : Shri G.G. Mundra (C.A.)
lquokbZ dh rkjh[k@ Date of Hearing : 15/01/2015 ?kks"k.kk dh rkjh[k@ Date of Pronouncement : 27/03/2015
vkns'k@ ORDER
PER: T.R. MEENA, A.M.
This is an appeal filed by the Revenue against the order dated
16/05/2012 passed by the learned CIT (A)-I, Jaipur for A.Y. 2009-10.
The sole ground of appeal is as under:-
"Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) is justified in deleting the addition made by the A.O. under the provision of Section 2(22)(e) of the I.T. Act."
2 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
2. The sole ground of appeal is against deleting the addition made
by the Assessing Officer U/s 2(22)(e) of the Income Tax Act, 1961
(hereinafter referred as the Act). The assessee had income from
production/distribution of films and finance and dealing in shares. The
ld. Assessing Officer observed that the assessee is the beneficiary
owner of shares having more than 17.5% of the voting power in M/s
Navchitra (P) Ltd. whereas the company has accumulated profit of Rs.
96,25,132/- as on 31/3/2009 and Rs. 58,66,993/- as on 01/4/2008. The
assessee was having an opening credit balance of Rs. 41,20,849/- as on
1st April. 2008. There were various credit and debit transactions in this
account and on 14/10/2008 had a peak debit balance of Rs. 43,87,756/-
. At the end of year i.e. on 31/3/2009 the assessee had credit balance
of Rs. 91,57,427/-. The ld Assessing Officer gave reasonable
opportunity of being heard on loan taken from the company M/s
Navchitra Distributors (P) Ltd., should not be treated dividend U/s
2(22)(e) of the Act, which was replied by the assessee vide letter dated
19/12/2011, which has been reproduced by the Assessing Officer at
page Nos. 4 and 5 of the assessment order. After considering the
assessee's reply, the ld Assessing Officer held that as per Hon'ble
Supreme Court decision in the case of Miss. P. Sharda (1998) 229 ITR 3 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
444 (SC), the Hon'ble court held that withdrawal by the shareholder
from the company-amounted to loan or advance by the company to
shareholder-Legal fiction embodied in Sec. 2(22)(e) came into play as
soon as monies were paid by the company. He further relied on the
decision in the case of Mrs. Tarulata Shyam Vs. CIT reported in 108 ITR
345 and held that debit balance in the accounts of the share holders are
loans and advances given by the company to attract the provisions of
Section 2(22)(e) of the Act. M/s Navchitra Distributors Pvt. Ltd. was not
in money lending business but it carry on the business of
distribution/exhibition/ production/financing of cinematographic films,
talkies, short films, advertising films, T.V. films and any other movie
films of every description. The ld Assessing Officer also stated details
and various items of business done by the company on page No. 5 of
the assessment order and also discussed the object incidental or
ancillary as per memorandum of association and other objects. The
company had accumulated profit as on 31/3/2009 at Rs. 96,25,132/-.
The assessee had debit balance of Rs. 84,51,349/- but the deemed
dividend is to be restricted to the extent of available accumulated profit
which is in this case is Rs. 37,58,138/-. The similar additions were made 4 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
in A.Y. 2006-07, 2007-08 and 2008-09 U/s 2(22)(e) of the Act.
Accordingly, he added Rs. 37,58,138/- U/s 2(22)(e) of the Act.
3. Being aggrieved by the order of the Assessing Officer, the
assessee carried the matter before the learned CIT(A), who had allowed
the appeal by observing as under:-
"I have carefully perused the order of the A.O. and the submissions of the A.R. and find that the facts of the case of the assessee are covered by the order of the ITAT, Jaipur Bench in the case of the assessee for A.Y. 2008-09, ITA No. 709/JP/2011 dated 20/04/2012 wherein on the same facts the Hon'ble ITAT had adjudicated in favour of the appellant. It is pertinent to note that the Hon'ble ITAT vide its order Nos. 817/JP/09 and 832/JP/2010 dated 25/03/2011 in the case of the assessee for assessment years 2006-07 and 2007-08 also adjudicated in favour of the appellant on the same facts. The Hon'ble ITAT in its order for A.Y. 2006-07 and 2007-08 (supra) on page 12 of its order, para 13 has given the following findings:-
"In case of remaining two loans given by M/s Navchitra Distributors Pvt. Ltd. and M/s Natraj India Ltd. directly to the assessee, we find that in these cases there was no loan and advance which is covered in section 2(22)(e) as the amount was given by the assessee and taken by the assessee were out of financing activity. There is no dispute that these companies were indulging in financing activities and amount of loan taken from the assessee and given to the assessee were out of this financing activity. Therefore, the casae of the assessee covers by the exception clause (ii) of section 2(22)(e) of the Act."
5 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
Since the Hon'ble ITAT has consistently adjudicated in favour of the assessee on the same facts as mentioned above, the matter is covered by the order of the Hon'ble ITAT Bench (supra). The A.O. has not brought any new arguments or evidence to controvert the finding of the Hon'ble ITAT, Jaipur Bench, therefore, the addition of Rs. 37,58,138/- is deleted."
4. Now the Revenue is in appeal before us. The learned D.R.
vehemently supported the order of the Assessing Officer.
5. At the outset, the learned A.R. for the assessee submitted that
the identical issue in A.Y. 2006-07, 2007-08 and 2008-09 has been
decided by the Hon'ble ITAT, Jaipur Bench, Jaipur in assessee's own
case in ITA No. 709/JP/2011 for A.Y. 2008-09 then ITA No.
817/JP/2009 and 832/JP/2010 for A.Y. 2006-07 and 2007-08 in favour
of the assessee. Therefore, he prayed to confirm the order of the ld
CIT(A).
6. We have heard the rival contentions of both the parties and
perused the material available on record. In the facts and circumstances
of the case, the identical issue has been decided by the Coordinate
Bench in assessee's own case vide order dated 25/03/2011 for A.Y.
2006-07 and 2007-08 passed in ITA No. 817/JP/2009 and 832/JP/2010.
The relevant portion of the order of the Coordinate Bench is reproduced
as under:-
6 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
"12. We have heard rival submissions and considered them carefully. After considering the submissions and perusing the material on record, we find no infirmity in the order of ld. CIT (A). The ld. CIT (A) has examined the facts of the case in respect of each company who has advanced loan to the assessee directly or to the company where assessee is having substantial interest. In three cases i.e. M/s. Navrang Complex Pvt. Ltd., M/s. Navchitra Distributors (Multiplex) Pvt. Ltd. and M/s.
Navrang Refractories Pvt. Ltd. the provisions of section 2(22)(e) are not applicable. The ld. D/R fairly stated that in these cases the conditions of section 2(22)(e) are not satisfied for attracting these provisions. However, he has placed reliance on the order of the AO for the reason that department is in appeal. Finding of ld. CIT (A) has been reproduced somewhere above in this order and those findings of ld. CIT (A) remained uncontroverted. Therefore, in these cases we hold that the ld. CIT (A) was justified in deleting the additions. For the sake of further clarification, we would like to mention that in case of M/s. Navrang Refractories, the transactions between two concerns are not advance but transactions of sale of fire bricks. Therefore, there is no question of attracting provisions of section 2(22)(e). In case of M/s. Navrang Complex Pvt. Ltd. to M/s. Navchitra Distributors Pvt. Ltd. and in case of M/s. Navchitra Distributors (Multiplex) Pvt. Ltd., it is seen that in both these cases assessee holds 10% share in the lender company but does not hold substantial interest i.e. 20% share holding in the company who has received money i.e. M/s. Shri Navchitra 7 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
Distributors Pvt. Ltd. Therefore, conditions are not satisfied for attracting section 2(22)(e) provisions. Accordingly we hold that ld. CIT (A) was justified in canceling the addition of Rs. 20,87,632/- and Rs. 13,49,731/- in case of these two companies. Moreover, the assessee is not a direct shareholder and, therefore, decision of Special Bench in case of Bhowmick is squarely applicable wherein it is held that deemed income can be assessee in case of shareholder only. The amount was not given to the assessee directly, therefore, it cannot be treated as deemed income in the hands of the assessee."
By respectfully following the order of the Coordinate Bench in
assessee's own case, we confirm the order of the Ld. CIT(A).
7. In the result, the revenue's appeal is dismissed.
Order pronounced in the open court on 27/03/2015.
Sd/- Sd/- ¼vkj-ih-rksykuh½ ¼Vh-vkj-ehuk½ (R.P.Tolani) (T.R. Meena) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member
Tk;iqj@Jaipur fnukad@Dated:- 27th March, 2015
*Ranjan
vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The DCIT, Circle-2, Jaipur
2. izR;FkhZ@ The Respondent- Narayan Das Mukhija, Jaipur.
3. vk;dj vk;qDr@ CIT
8 ITA 700/JP/2012_ DCIT Vs. Narayan Das Mukhija
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 700/JP/2012)
vkns'kkuqlkj@ By order,
lgk;d iathdkj@Asst. Registrar
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