Pratap Singh Kothari, Kolkata vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH: KOLKATA

[Before Hon'ble Shri Mahavir Singh, JM & Hon'ble Shri B.P.Jain, AM ]

I.T.A No.1699/Kol/2012 Assessment Year: 2009-10

I.T.O., Ward-33 (1) Vs. Pratap Singh Kothari Kolkata Kolkata (Appellant) (Respondent) (PAN:AGCPK 9336 M)

For the Appellant : Shri K.L.Kanak, JCIT For the Respondent : Shri S.M.Surana, Advocate

Date of hearing : 22.04.2015. Date of pronouncement: 30.04.2015.

ORDER

Per Shri B.P.Jain, AM :

This appeal of the Revenue arises out of the order of ld.CIT(A)-XX, Kolkata dated 23.08.2012 for Assessment Year 2009-10.

2. The Revenue has raised the following grounds of appeal :-

"1. That the Ld.CIT(A) while deciding the issue in favour of the assessee failed to understand the facts and circumstances of the case in respect of deemed dividend received from the companies having accumulated profits in which the assessee himself is a Director and has got substantial or beneficial interest.

2. That the Ld.CIT(A) failed to appreciate the facts and circumstances of the case while deleting the addition made u/s 40(a)(ia) of the Act read with Sec.194A of the Act that the assessee failed to deduct tax at source although he was liable to deduct tax at source.

3. That the appellant craves leave to add, alter or modify any or all of the above grounds of appeal before or at the time of hearing."

3. As regards ground no.1 of the revenue the brief facts of the case are that the assessee has been treated as substantial shareholder of M/s.Morgan Properties Pvt. Ltd., Satbhai Trade and Properties, Wingston Finvest Pvt. Ltd and Kothari Estates Pvt. Ltd. The assessee was granted interest bearing loan by all four companies amounting to Rs.3,50,000/-, 35,00,000/-, 33,00,000/- and 3,60,000/- as mentioned at page 6 of the assessment order. The AO was of the view that the assesee was a shareholder of the 2 ITA No.1699/Kol/2012 Pratap Singh Kothari.

A.Yr.2009-10

aforesaid four companies having substantial interest and therefore granting of such loan has been treated as deemed dividend within the meaning of section 2(22)(e) of the Act.

3.1. Before the ld. CIT(A) the assessee made the submissions. After considering the submissions the ld. CIT(A) at para 4.2 of his order following the decision of the Jurisdictional High Court in the case of Pradip Kumar Malhotra reported in 338 ITR 538 deleted the addition.

4. We have heard the rival contentions and perused the facts of the case. The undisputed fact in this case is that the assessee has received loans from all the four companies on interest and therefore in view of the decision of the Jurisdictional High Court in the case of Pradip Kumar Mahlhotra (supra) the said loan cannot be treated as deemed dividend. The relevant part as reproduced in the order of ld. CIT(A) is also reproduced herein below for the sake of convenience :-

" After hearing the Ld. Counsel for the parties and after going through the aforesaid provisions of the Act, we are of the opinion that the phrase " by way of advance or loan" appearing in sub clause (e) must be construed to mean those advances or loans which a shareholder enjoys for simply on account of being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) holding not less than ten per cent of the voting power, but if such loan or advance is given to such shareholder as a consequence of any further consideration which is beneficial to the company received from such a shareholder, in such case, such advance or loan cannot be said to be a deemed dividend within the meaning of the Act. Thus, for gratuitous loan or advance given by a company to those classes of the cases where the loan or advance is given in return to an advantage conferred upon the company by such shareholder."

4.1. In such circumstances and facts of the case we find no infirmity in the order of ld. CIT(A), who has rightly deleted the addition made by AO. Thus ground no.1 of the revenue is dismissed.

5. As regards ground no.2 of the revenue the brief facts of the case are that AO made the disallowance u/s 40(a)(ia) of the Act which was deleted by ld. CIT(A) vide para 5.2 of his order following the decisions of the Jurisdictional Tribunal in the case 3 ITA No.1699/Kol/2012 Pratap Singh Kothari.

A.Yr.2009-10

of S.S.Impex ITA No.977/Kol/2011, Capital Transport Corpn ITA NO.1753/Kol/2009 and in the case of Keshan Logistic ITA No.202/Kol/2011.

6. We have heard the rival contentions and perused the facts of the case. In the present case the mere controversy is that the AO was of the view that though the assessee received Form No.15G for non deduction of tax the said form was not submitted to the C.I.T. The assessee cannot absolve its liability to deduct the tax. On identical issue in the case of S.S.Impex (supra), Capital Transport Corpn (Supra) and Keshan Logistic (supra) the ITAT Kolkata Benches have held that if the assesse has received form No.15G the same has not been submitted to the appropriate authorities, no disallowance can be made u/s 40(a)(ia) of the Act. In the present case also the issue lies on the same point that Form No.15G for non deduction of tax at source has been received by the assesse but the same was not submitted before the appropriate authority i.e. CIT. Accordingly following the decision of the ITAT, Kolkata Benches (supra) no disallowance can be made u/s 40(a)(ia) of the Act. Thus we find no infirmity in the order of ld. CIT(A), who has rightly deleted the disallowance so made by AO in para 5.2 of his order. Thus ground no.2 of the revenue is dismissed.

7. Ground No.3 of the revenue being general in nature does not require any adjudication.

8. In the result the appeal of the revenue is dismissed.

Order pronounced in the court on 30.04.2015.

Sd/- Sd/- [ Mahavir Singh ] [B.P.Jain] Judicial Member Accountant Member

Date: 30.04.2015.

R.G.(.P.S.) 4 ITA No.1699/Kol/2012 Pratap Singh Kothari. A.Yr.2009-10

Copy of the order forwarded to:

1. Pratap Singh Kothari, 12, Ho-Chi-Minh Sarani, Kolkata-700071.

2 I.T.O., Ward-33(1), Kolkata.

3. CIT(A)-XX, Kolkata 4. CIT Kolkata.

CIT(DR), Kolkata Benches, Kolkata.

True Copy, By order,

Asst. Registrar, ITAT, Kolkata Benches