Sphera Minerals Pvt. Ltd., Chennai vs Department Of Income Tax

The Assistant Commissioner of M/s Sphera Minerals Pvt. Ltd., Income Tax, v. 1, Subbaraya Avenue, Company Circle VI(4), C.P. Ramasamy Road, Chennai - 600 034. Alwarpet, Chennai - 600 018.

PAN : AACCP 0379 A (अपीलाथ,/Appellant) (-.यथ,/Respondent)

अपीलाथ, क/ ओर से/Appellant by : Sh. Joe Sebastian, CIT -.यथ, क/ ओर से/Respondent by : Sh. B.S. Purushotham, CA

सन ु वाई क/ तार ख/Date of Hearing : 26.05.2015 घोषणा क/ तार ख/Date of Pronouncement : 26.06.2015

आदे श /O R D E R

PER N.R.S. GANESAN, JUDICIAL MEMBER:

This appeal of the Revenue is directed against the order of

Commissioner of Income Tax (Appeals)-VI, Chennai, dated

30.08.2013 and pertains to assessment year 2006-07.

2. Sh. Joe Sebastian, the Ld. Departmental Representative,

submitted that the only issue arises for consideration is with regard

to addition made by the Assessing Officer under Section 2(22)(e) of 2 I.T.A. No.2000/Mds/13

the Income-tax Act, 1961 (in short 'the Act') as deemed dividend.

The Ld. D.R. pointed out that the assessee-company has received

`6,42,25,343/- from its sister concern M/s Trimex Industries Private

Limited. According to the Ld. D.R., both, the assessee-company as

well as its sister concern M/s Trimex Industries Private Limited,

have common shareholders and Directors. Therefore, according to

the Ld. D.R., the provisions of Section 2(22)(e) of the Act is squarely

applicable. Referring to the assessment order, the Ld. D.R. pointed

out that the assessee-company entered into agreement with third

parties and the sister concern has also entered into agreement with

third parties for purchasing iron ore. According to the Ld. D.R., the

assessee-company under the pretext of receiving advance money

from sister concern for purchasing of iron ore, received the advance

in violation of Section 2(22)(e) of the Act. According to the Ld. D.R.,

even though the assessee claims that the transaction between the

assessee and its sister concern was commercial in nature, no such

commercial requirement was established. Therefore, the receipt of

advance of `6,42,25,343/- has to be considered as deemed

dividend. Hence, the CIT(Appeals) is not justified in allowing the

claim of the assessee.

3. On the contrary, Shri B.S. Purushotham, the Ld.

representative for the assessee, submitted that the assessee- 3 I.T.A. No.2000/Mds/13

company is not a shareholder in M/s Trimex Industries Private

Limited. Therefore, according to the Ld. representative, there is no

question of applying the provisions of Section 2(22)(e) of the Act in

the hands of the assessee. Even otherwise, according to the Ld.

representative, the advance was paid by the sister concern for

purchasing iron ore. Therefore, there was commercial transaction

between the assessee and M/s Trimex Industries Private Limited.

Since the money was advanced in commercial transaction,

according to the Ld. representative, the provisions of Section

2(22)(e) of the Act will not be applicable.

4. We have considered the rival submissions on either side and

perused the relevant material on record. It is not in dispute that the

assessee-company is not a shareholder in M/s Trimex Industries

Private Limited. Section 2(22)(e) of the Act clearly says that any

payment made by a company by way of advance or loan to a

shareholder or to the benefit of the shareholder, it has to be treated

as deemed dividend under Section 2(22)(e) of the Act. Dividend

has to be assessed only in the hands of the shareholders. If the

payment was made on behalf of the shareholder or benefit of the

shareholder, the assessment has to be made only in the hands of

the shareholder on whose benefit the advance was made as

deemed dividend under Section 2(22)(e) of the Act. In this case, 4 I.T.A. No.2000/Mds/13

even though there are common shareholders/Directors in assessee-

company as well as its sister concern M/s Trimex Industries Private

Limited, admittedly, the assessee-company is not a shareholder,

therefore, addition if any has to be made only in the hands of

common shareholders/Directors on whose benefit the advance was

made. Since the assessee-company is not a shareholder in M/s

Trimex Industries Private Limited, this Tribunal is of the considered

opinion that the provisions of Section 2(22)(e) of the Act is not

applicable. Therefore, we do not find any reason to interfere with

the order of the lower authority. Accordingly, the same is confirmed.

5. In the result, the appeal of the Revenue is dismissed.

Order pronounced on 26th June, 2015 at Chennai.

sd/- sd/- (ए. मोहन अलंकामणी) (एन.आर.एस. गणेशन) (A. Mohan Alankamony) (N.R.S. Ganesan) लेखा सद य/Accountant Member या यक सद य/Judicial Member चे नई/Chennai, th 5दनांक/Dated, the 26 June, 2015.

Kri.

आदे श क/ - त6ल7प अ8े7षत/Copy to:

अपीलाथ,/Appellant / -.यथ,/Respondent / आयकर आय9 ु त (अपील)/ CIT(A)-VI, Chennai-34 / आयकर आय9 ु त/CIT-VI, Chennai-34 / 7वभागीय

- त न ध/DR / गाड( फाईल/GF.