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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI PAVAN KUMAR GADALE & SHRI AMARJIT SINGH
ITA No. 1385/Mum/2020 A.Y.2014-15 1 M/s Madhu India Deco Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.1385/Mum/2020 (A.Y. 2014-15) DCIT-15(2)(2) Vs. M/s Madhu India Deco Room No. 357, 3rd Floor, Limited, 20/21, Aayakar Bhavan, M.K. Navnandavan Indl Estate, Road, Marine Lines, L.B.S Marg, Mulund Mumbai – 400 020 (West), Mumbai – 400 080 स्थायी लेखा सं./ जीआइआर सं./ PAN/GIR No: AADCP1825G Respondent .. Appellant
Appellant by : Shri Malav Sheth Respondent by : Smt. Mahita Nair Date of Hearing 02.08.2022 Date of Pronouncement 05.08.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the revenue is directed against the order passed by the ld. CIT(A)-24, Mumbai, which in turn arises from the order passed by the A.O u/s 143(3) of the Act for A.Y.2014-15. The revenue has raised the following grounds before us:
“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred deleting the addition of Rs. 1,50,00,000/ of deemed dividend u/s 2(22)(2). 2. On the facts and circumstances of the case in law, the Ld. CIT(A) has erred in deleting the addition amounting to Rs.98,064/- made from disallowance of employees contribution of PF within the prescribed date.
ITA No. 1385/Mum/2020 A.Y.2014-15 2 M/s Madhu India Deco Ltd. 3. The appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the AO be restored. 4. The applicant craves leave to add, amend or alter any grounds or add new ground, which may be necessary.” 2. Fact in brief is that return of income declaring total income of Rs.nil was filed on 29.11.2014. The case was subject to scrutiny assessment and notice u/s 143(2) of the Act was issued on 31.08.2015. The assessment u/s 143(3) of the Act was finalized on 02.11.2016 assessing total income at Rs.nil after making various additions. The further fact of the case are discussed while adjudicating the grounds of appeal filed by the revenue as under:
(1) Addition of Rs.1,50,00,000/- of deemed dividend u/s 2(22)(e) of the Act:
During the course of assessment the A.O noticed that assessee received Inter corporate loans amounting to Rs.1,50,00,000/- from M/s Madhu Mattor Private Limited. During the course of assessment the A.O noticed that two directors of the assessee Mrs. Madhu A. Gupta & Mr. Anand M Gupta who were holding more than 10% of the shares in M/s Madhu Mattor Private Limited were also having a substantial shareholding in the assessee company of more than 20%. Therefore, assessee was asked to explain why the said amount of loan obtained from M/s Madhu Mattor Private Limited should not be treated as deemed dividend as per provisions of Sec. 2(22)(e) of the Act. The assessee explained that M/s Madhu Mattor Private Limited was a group company having common shareholding and directors and the nature of transaction of Rs.1,50,00,000/- the assessee company with that related company was of inter corporate, therefore, the provision of Sec. 2(22)(e) of the Act cannot be invoked merely on the basis of having common shareholders
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in the associated concerns. However, the A.O has not agreed with the submission of the assessee and treated the amount of Rs.1,50,00,000/- as deemed dividend and added to the total income of the assessee.
Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee. The relevant part of the decision of the CIT(A) is reproduced as under:
“2.5.1 The AO has disallowed an amount of Rs.1,50,00,000/- as deemed dividend received from a shareholder in the appellant company as intercompany loan. Since the appellant was not a shareholder in lender company, therefore, AO was unjustified in taxing loan received by appellant as deemed dividend under section 2(22)(e). Appellant borrowed sum received as intercompany loan from M/s Madhu Mattor Private Limited and the same was added as deemed dividend u/s. 2(22)(e) in the hands of the appellant company. The appellant was not a shareholder in the lending company. Deemed dividend under section 2(22)(e) can be assessed only in the hands of a person who was a shareholder of lender company and not in the hands of a person other than a shareholder. As the appellant in the present case was not a shareholder in lender company, therefore, AO was unjustified in taxing loan received by appellant as deemed dividend under section 2(22)(e). The aforesaid view has since been approved in several decisions rendered by Hon'ble High Court of Bombay and Delhi in the case of CIT Universal Medicare Pvt. Ltd., 324 ITR 263 (Bom), CIT Vs. Ankitech Pvt Ltd. & others 340 ITR 14 (Del), National Travel Services (2012) 249 CTR (del) 540 and the Hon'ble Karnataka High Court in the case of CIT Vs. Sarva Equity (P) Ltd, (2014) 111 DTR 207 (Karn) and the Hon'ble Supreme Court in the case of CIT VS Madhur Housing and Development Co. 401 ITR 152(SC). Since the appellant in the present case is not a shareholder in the lender company, we are of the view that the above decision is squarely applicable to the facts of the appellant's case. Accordingly, the addition made by the AO is hereby deleted. This ground of appeal is allowed.”
Heard both the sides and perused the material on record. The assessee and M/s Madhu Mattor Private Limited were group companies having common shareholders and directors. During the course of
ITA No. 1385/Mum/2020 A.Y.2014-15 4 M/s Madhu India Deco Ltd. appellate proceedings before us the assessee has furnished paper book comprising copies of document and detail of submission made before the A.O and CIT(A) during the course of assessment and appellate proceedings. In the paper book assessee has placed copy of inter corporate deposit receipt issued by the assessee to M/s Madhu Mattor Private Limited for receipt of inter corporate deposit of Rs.1,50,00,000/- and also placed detail of purchases made from M/s Madhu Mattor Private Limited and the details of outstanding payment made for purchases from the inter corporate deposit received by the assessee. It is undisputed fact that the assessee was not a shareholder in the M/s Madhu Mattor Private Limited. Following the decision of Hon’ble Bombay High Court in the case of CIT Vs. Jignesh P. Shah ITA No. 197/2013 and in the case of CIT Vs. Universal Medicare Pvt. Ltd, 324 ITR 263 (Bom) the provisions of Sec. 2(22)(e) cannot be invoked unless the assessee itself is the shareholder of the company who was lending money to the assessee. After considering the aforesaid findings and the facts/findings reported in the order of ld. CIT(A) as supra, we don’t find any reason to interfere in the decision of ld. CIT(A). Accordingly, this ground of appeal of the revenue stand dismissed.
(2) Deleting addition of Employees Contribution to Provident Fund amounting to Rs.98,604/-:
During the course of assessment the A.O noticed that assessee has made delay in depositing the employees contribution to the provident fund aggregating to Rs.98,640/- therefore disallowed the same as per explanation to Sec. 36(1)(va) r.w.s 2(24)(x) of the Act.
The ld. CIT(A) had delted the addition following the decision of Bombay High Court in the case of CIT Vs. Hindustan Organics
ITA No. 1385/Mum/2020 A.Y.2014-15 5 M/s Madhu India Deco Ltd. Chemicals Ltd. 366 ITR 1 holding that the payment was made before the due date of filing the return of income, therefore, the delay in making employees contribution to provident fund is allowable deduction.
Heard both the sides and perused the material on record. The assessee has not deposited the employees contribution aggregating to Rs.98,604/- within the due date as prescribed in the specific act, therefore, the A.O has disallowed the said amount u/s 2(24)(x) r.w.s 36(1)(va) of the Act. The ld. CIT(A) has deleted the said disallowance stating that the payments were made before the due date of filing the return of income after following the decision of Hon’ble Jurisdictional Bombay High Court in the case of Vs. Hindustan Organics Chemicals Ltd. In this regard we have gone through the decision of Hon’ble jurisdictional High Court in the case of Ghatge Patil Transport Ltd. 2014 which is reproduced as under:
“4. Heard both sides and perused the material on record. The assessee has deposited employee’s contribution to PF/ESIC after due date specified in PF/ESIC Acts but before the due date of filing the return of income as prescribed in section 139(1) of the act. We have perused the decision of Hon’ble Jurisdiction Bombay High Court in the case of CIT v. Hindustan Organics Chemicals Ltd. (2014) 366 ITR 1 (Bom) and decision of GhatgePatil Transports Ltd. (2014) 368 ITR 249 (Bom). In the case of Hindustan Organics Chemicals Ltd. it is held that payment of employees contribution towards provident fund could not be disallowed on account of delayed payment in view of amendment to Section 43B of the Act. In the case of GhatgePatil Transports Ltd. (supra), the Hon’ble jurisdictional High Court held that both employers and employee’s contributions are covered under amendment to section 43B and judgment of the Hon’ble Supreme Court in CIT v. Alom Extrusions Ltd. [2009] 319 ITR 306/185 Taxman 416 that payment made was subject to benefit of section 43B. Following the decision of jurisdictional High Court as supra we don’t find any infirmity in the decision of ld. CIT(A), therefore, this ground of appeal of the revenue stand dismissed.
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In the result, the appeal of the revenue is stand dismissed.
Order pronounced in the open court on 05.08.2022
Sd/- Sd/- (PAVAN KUMAR GADALE) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 05.08.2022 PS: Rohit आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, अहमदाबाद / DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//
(Asst. Registrar) ITAT, Mumbai