Troikaa Pharamaceuticlas Ltd., ... vs Assessee

सम ी जी.डी.अ वाल, उपा य (अहम. े ) एवं ी कुल भारत, या यक सद य । BEFORE SHRI BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) And SHRI KUL BHARAT, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No.371/Ahd/2012 ( नधा रण वष / Assessment Year : 2008-09) Troikaa Pharmaceuticals Ltd. बनाम/ The Asst.CIT 301, Commrce House No.1 Vs. Circle-8 Opp. Rajvansh Apartments Ahmedabad Judges Bungalow Road Ahmedabad-380 054 थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AABCT 0228 K (अपीलाथ' /Appellant) .. (()यथ' / Respondent)

अपीलाथ' ओर से / Appellant by : Shri Bhavesh Shah, AR ()यथ' क+ ओर से/Respondent by : Shri Nimesh Yadav, Sr.DR

ु वाई क+ तार.ख / सन Date of Hearing 26/05/2015 घोषणा क+ तार.ख /Date of Pronounce ment 29/05/2015

आदे श / O R D E R

PER SHRI KUL BHARAT, JUDICIAL MEMBER :

This appeal by the Assessee is directed against the order of the Ld.Commissioner of Income Tax(Appeals)-XIV, Ahmedabad ('CIT(A)' in short) dated 01/12/2011 pertaining to Assessment Year (AY) 2008-09. The assessee has raised the following grounds of appeal:-

1. The Ld.CIT(A) has grossly erred in law and on facts in partly allowing the appeal. He ought to have allowed the appeal fully in ITA No.371/Ahd/2012 Troikaa Pharmaceuticals Ltd. vs. ACIT Asst.Year - 2008-09 -2-

accordance with the grounds of appeal raised by the appellant before him.

1. ADDITION U/S.2(22)(e) ON ACCOUNT OF DEEMED DIVIDEND

- Rs.56,671/-.

1. The Ld.CIT(A) has erred in law and on facts in confirming the addition of Rs.56,671/- on account of deemed dividend U/s.2(22)(e) of the Act.

2. The appellant submits that the provisions of section 2(22)(e) of the Act, i.e. deemed dividend are applicable/attracted when a company (not being a company in which public are substantially interested) makes payment of any sum by way of loans or advances to a shareholder who is the beneficial owner of the shares holding not less than 10% of the voting power.

The appellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. PRAYER The appellant therefore respectfully prays that:-

1. The addition u/s.2(22)(e) of the Act on account of deemed dividend of Rs.56,671/- confirmed by the Ld.CIT(A) may kindly be deleted.

2. Such and further relief as the nature and circumstances of the case may justify.

2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as "the Act") was framed vide order dated 27/12/2010, thereby the Assessing Officer (AO in short) made various disallowances, namely disallowance of garden expenditure of Rs.1,09,797/-, disallowance of depreciation on tube-well of Rs.2,194/-, ITA No.371/Ahd/2012 Troikaa Pharmaceuticals Ltd. vs. ACIT Asst.Year - 2008-09 -3-

disallowance of depreciation on electric installation of Rs.35,313/- and also made addition u/s.2(22)(e) of the Act amounting to Rs.56,671/-. Against the said assessment order, assessee preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee upheld the addition made u/s.2(22)(e) of the Act by the AO. Now, the assessee is further in appeal before us.

3. The only effective ground in this assessee's appeal is against deletion of addition of Rs.57,671/- made u/s.2(22)(e) of the Act. The ld.counsel for the assessee submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT "B" Bench Ahmedabad rendered in assessee's own case bearing ITA No.922/Ahd/2010 for AY 2006-07, dated 22/06/2012.

3.1. On the contrary, the ld.Sr.DR supported the order of the AO.

4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) dismissed the ground of appeal by observing as under:-

"4.3. Decision:-

I have carefully considered the assessment order and the submission filed by the appellant. It is noted that similar addition was made in the case of the appellant for A.Y. 2006-07. The ITA No.371/Ahd/2012 Troikaa Pharmaceuticals Ltd. vs. ACIT Asst.Year - 2008-09 -4-

addition made by the A.O. has been upheld by my Ld.predecessor in Appeal No.CIT(A)-XIV/Cir.8/240/08-09 dated 16/12/2009. The issue is pending before Hon'ble ITAT for adjudication. The appellant has also not pointed out any different facts for the current year. Respectfully following the decision of my Ld.Predecessor, the addition made by the A.O. is upheld and the ground of appeal is dismissed."

4.1. The Coordinate Bench in assessee's own case for AY 2006-07 in ITA No.922/Ahd/2010 vide order dated 22/06/2012 has held as under:-

"7. Having heard the submissions of both the sides, we are of the view that the latest decision of Ankitech (P) Ltd. 242 CTR 129 (Del.) has held that, reproduced from the conclusion.

"It is the definition of dividend which is enlarged by the deeming provision of s.2(22)(e) and not that of "shareholder" and, therefore, a concern which is given loan or advance by a company cannot be treated as shareholder/member of the latter simply because a shareholder of the lender company holding voting ... power of 10 per cent or more therein has substantial interest in such concern, and such loan or advance cannot be treated as deemed dividend under s.2(22)(e) at the hands of such a concern."

7.1. It was further held that a payment made by an another company to the assessee-company, being a business transaction, which has benefited both the companies, then the provisions of section 2(22)(e) do not apply. It is worth to mention that the decision or Bhaumik Colour Pvt.Ltd. reported at (2009) 120 TTJ 865 (Mum.)[SB] was approved. Further, in the case of DCIT vs. ITA No.371/Ahd/2012 Troikaa Pharmaceuticals Ltd. vs. ACIT Asst.Year - 2008-09 -5-

Atul Engg.Udyog reported at (2011) 57 DTK 433(Agra)(Trib) held as under:-

"Partners of the assessee firm and not the assessee-firm being a shareholder of the company AG Ltd., amount received by the assessee from the company as security deposit cannot be regarded as deemed dividend within the meaning of s.2(22)(e); even otherwise, the amount received by assessee from AG Ltd. being security deposits under an agreement between the parties coupled with certain obligations, it cannot be regarded to be payment by the company by way of advance or loan and hence, it cannot be assessed to tax under s.2(22)(e)."

7.2. We have also perused the Special Bench decision of Bhaumik Colours (P) Ltd. reported at 118 ITD 1 and the conclusion was that for the purpose of invoking section 2(22)(e), "such shareholder" in the concern to which loan is advanced must both be a registered shareholder as also a beneficial shareholder. It was held that the loan obtained by assessee-company in the "N" Trust had 20% share holding from a company in which "N" Trust had 10% share holding, could not be taxed as deemed dividend u/s.2(22)(e) since "N" Trust was only a registered shareholder and not a beneficial shareholder. Following these decisions, we are of the considered opinion that the criteria in which deemed dividend income is to be taxed in the hands of the assessee did not qualify, hence the view taken by the Revenue is hereby reversed and the addition thus stands deleted."

4.2. The facts are identical to the facts of assessee's own case for AY 2006-07 and no change into the facts and circumstances are pointed out by the ld.Sr.DR, therefore respectfully following the decision of the ITA No.371/Ahd/2012 Troikaa Pharmaceuticals Ltd. vs. ACIT Asst.Year - 2008-09 -6-

Coordinate Bench passed in AY 2006-07 in ITA No.922/Ahd/2010 (assessee's own case), this year also, we hereby direct the AO to delete the addition. Accordingly, the ground raised by the assessee is allowed.

5. In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on Friday, the 29th day of May, 2015 at Ahmedabad.

Sd/- Sd/- (जी.डी.अ वाल) (कुल भारत) उपा य (अहम. े ) या यक सद य ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER Ahmedabad; Dated 29/ 05 /2015 ट..सी.नायर, व. न.स./T.C. NAIR, Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ' / The Appellant

2. ()यथ' / The Respondent.

3. संब8ं धत आयकर आय:

ु त / Concerned CIT

4. आयकर आय:

ु त(अपील) / The CIT(A)-XIV, Ahmedabad

5. ;वभागीय ( त न8ध, आयकर अपील.य अ8धकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड= फाईल / Guard file.

आदे शानुसार/ BY ORDER,

स)या;पत ( त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad

1. Date of dictation .. 26.5.15 (dictation-pad 4+ pages attached at the end of this File)

2. Date on which the typed draft is placed before the Dictating Member ..26.5.15

3. Other Member...

4. Date on which the approved draft comes to the Sr.P.S./P.S.................

5. Date on which the fair order is placed before the Dictating Member for pronouncement......

6. Date on which the fair order comes back to the Sr.P.S./P.S.......29.5.15

7. Date on which the file goes to the Bench Clerk.....................29.5.15

8. Date on which the file goes to the Head Clerk..........................................

9. The date on which the file goes to the Assistant Registrar for signature on the order..........................

10. Date of Despatch of the Order..................