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Facts
The assessee, Sahara India Ltd., filed multiple appeals against assessment orders related to various assessment years. The appeals primarily concerned the disallowance of administrative and processing charges and the addition of deemed dividends under Section 2(22)(e) of the Income Tax Act.
Held
The Tribunal allowed the assessee's appeal for AY 1996-97, deleting the deemed dividend addition as the assessee was not a common shareholder. Revenue's appeals for AY 1997-98, 1998-99, 2000-01, and 2001-02 were dismissed due to CBDT circulars and previous tribunal orders. The assessee's appeal for AY 2003-04 was dismissed as the expenditure was not proven to be wholly and exclusively for business purposes.
Key Issues
Whether the addition of deemed dividend under Section 2(22)(e) was justified and whether administrative/processing charges and advertisement/publicity expenses were deductible business expenditures.
Sections Cited
2(22)(e), 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: “F” NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA
ORDER PER BENCH:
The instant batch of ten cases involves the single assessee ‘Sahara India Ltd’. All other remaining details are hereby tabulated as under:
Sl. Appeal No. Appellant Respondent Order Appealed against No. order 898/Lkw/2005 Ltd. Circle-1, Lucknow dated 27.10.2005 in case for AY: 1996-97 no. CIT(A)-I/11/CC- I/Lko/99-20/216 involving proceedings under Section 143(3) of the Act. 2- Central Sahara India Ltd. CIT(A)-1, Kanpur’s order 45/Lkw/2006 Circle-1, dated 07.11.2005 in case WITH Lucknow no. CIT(A)-I/28/CC- C.O. No. I/Lko/2000-01/217, 36/Lkw/2006 involving proceedings under for AY: 1997-98 Section 143(3) of the Act. 4- Central Sahara India Ltd. CIT(A)-1, Kanpur’s order 46/Lkw/2006 Circle-1, dated 10.11.2005 in case WITH Lucknow no. CIT(A)-I/35/CC- C.O. No. I/Lko/2001-02/226, 37/Lkw/2006 involving proceedings under for AY: 1998-99 Section 143(3) of the Act. 6- Central Sahara India Ltd. CIT(A)-1, Kanpur’s order 78/Lkw/2006 Circle-1, dated 24.11.2005 in case WITH Lucknow no. CIT(A)-I/20/CC- C.O. No. I/Lko/2003-04/254, 39/Lkw/2006 involving proceedings under for AY: 2000-01 Section 143(3) of the Act. 8- Central Sahara India Ltd. CIT(A)-1, Kanpur’s order 127/Lkw/2006 Circle-1, dated 02.12.2005 in case WITH Lucknow no. CIT(A)-I/180/CC- C.O. No. I/Lko/2004-05/270, 40/Lkw/2006 involving proceedings under for AY: 2001-02 Section 143(3) of the Act. order 1243/Del/2009 Ltd. Circle-6, Lucknow dated 14.01.2009 in case for AY: 2003-04 no. 127/08-09, involving proceedings under Section 143(3) of the Act.
2 | P a g e 46, 78 & 127/Lkw/2006 &1243/Del/2009 C.O. Nos.36, 37, 39 & 40/Lkw/2006
Heard both the parties at length. Case files perused. We proceed assessment year-wise for the sake of convenience and brevity.
(Assessee’s appeal) AY: 1996-97 3. Learned senior counsel submits at the outset that the assessee/appellant raises its sole substantive ground herein seeking to reverse both the lower authorities’ action invoking section 2(22)(e) deemed dividend addition of Rs.5 crores; in assessment order dated 19.03.1999 as concurred in the lower appellate discussion.
That being the case, we hereby notice with the able assistance coming from both the parties that the learned assessing authority had made it clear that the assessee/appellant is not the shareholder in M/s. Sahara India Financial Corporation since Sh. Subarata Roy held 24.97% and 84.82% stock, respectively. This being the clinching factual position, we are of the considered view that the impugned statutory provision section 2(22)(e) could not have been invoked in the assessee’s case in both the lower proceedings in absence of it being the common shareholder to the specified extent in light of ACIT v. Bhaumik Colour (P.) Ltd. [2009] 3 | P a g e 46, 78 & 127/Lkw/2006 &1243/Del/2009 C.O. Nos.36, 37, 39 & 40/Lkw/2006 118 ITD 1 (Mum.)(SB) and CIT Vs Raj Kumar Singh & Co. (2007) 295 ITR 5 (Ald). We thus delete the impugned section 2(22)(e) deemed dividend addition of Rs. 5 crores in the assessee’s hands for the precise reason to allow its main appeal in very terms. ITA No.45/Lkw/2006 (Revenue’s appeal) C.O. No.36/Lkw/2006 (Assessee’s cross objection) AY: 1997-98 5. Learned CIT(DR) vehemently argues during the course of hearing that the CIT(A) herein has erred in law and on facts in reversing the assessment findings disallowing/adding the assessee’s administrative processing charges etc. of Rs. 71,80,694/- (wrongly incorporated as Rs.13,14,236/-) as well as section 2(22)(e) deemed dividend addition of Rs. 1 crore made in the assessment order framed on 30th March, 2000. We note in this factual backdrop that the CIT(A)’s impugned lower appellate discussion on the above former issue reads as under: “5. The grounds of appeal
Nos. 2 to 4 are related to tax an amount of Rs.13,14,236/- on account of administrative and process charges credited in the profit & loss account. It has been mentioned in this respect that the credit to profit & loss account of Rs. 13,14,236/- is a part of collection of each year which have already been taxed as revenue receipt in the year of receipt.
6. The facts is issue are that the assessee himself treated this amount as revenue receipt in profit & loss account under the head administrative and process charges and subsequently claimed that 4 | P a g e 46, 78 & 127/Lkw/2006 &1243/Del/2009 C.O. Nos.36, 37, 39 & 40/Lkw/2006 its nature is not revenue receipt. The AO was of the view that part of the deposit received by the assessee because of long duration of scheme is liable to be treated as revenue receipt and accordingly he treated the same amount as revenue receipt in the hands of the appellant.
7. This issue has been decided by the Hon'ble ITAT Allahabad Bench, Allahabad vide their order dated 16.10.96. Para Nos. 89 to 99 are relevant on this issue. By following the same decision similar additions have been deleted by me in the case of the appellant in assessment year 1993-94 in Appeal No.CIT(A)-1/8/CC-III/Lko/96- 97/94 dated 12.8.2005, in assessment year 1994-95 in Appeal No.CIT(A)-1/9/CC-III/Lko/97-98/144 dated 9.9.2005 and in assessment year 1995-96 in Appeal No.CIT(A)-1/10/CC-I/L.ko/98- 99/162 dated 22.9.2005. Since there is no change in the set of facts, by following the decision of Hon'ble ITAT Allahabad Bench, Allahabad and my own orders in earlier years, the addition of Rs. 13,14,236/- made by the AO is deleted.”
6. Suffice to say, it has already come on record that this tribunal’s earlier learned coordinate bench’s order dated 16.10.1996 in the preceding assessment years has already settled the issue against the department. We thus adopt judicial consistency to uphold the learned CIT(A)’s lower appellate discussion under challenge. Rejected accordingly.
7. The outcome of the Revenue’s latter substantive ground raising the issue of section 2(22)(e) deemed dividend would hardly be any different since the assessee/respondent has admittedly not found as the common share holder herein as well. We thus uphold the learned CIT(A)’s lower appellate findings on both these counts
5 | P a g e 46, 78 & 127/Lkw/2006 &1243/Del/2009 C.O. Nos.36, 37, 39 & 40/Lkw/2006 in preceding terms. This Revenue’s appeal stands declined therefore.
Learned senior counsel clarifies that the assessee’s cross objection herein C.O. No. 36/Lkw/2006 is only supportive of the CIT(A)’s impugned lower appellate discussion. Dismissed as rendered infructuous.
(Revenue’s appeal) C.O. No. 37/Lkw/2006 (Assessee’s cross objection) AY : 1998-99 And (Revenue’s appeal) C.O. No. 39/Lkw/2006 (Assessee’s cross objection) AY: 2000-01 And (Revenue’s appeal) C.O. No. 40/Lkw/2006 (Assessee’s cross objection) AY : 2001-02 9. We are informed at the outset during the course of hearing that the Revenue’s three substantive grounds raised herein, inter alia, seeks to reverse the CIT(A)’s detailed discussion deleting the impugned administrative and processing charges disallowing of Rs.70,61,004/- and expenditure of Rs.80,86,048/- (held as business income than income from “other sources”) thereby declining the corresponding expenditure and section 2(22)(e)
6 | P a g e 46, 78 & 127/Lkw/2006 &1243/Del/2009 C.O. Nos.36, 37, 39 & 40/Lkw/2006 deemed dividend addition of Rs. 17 lakhs; respectively, made in assessment order dated 23.03.2001.
That being the case, the Revenue could hardly dispute that the total tax effect involved in this appeal file is less than the minimum tax effect prescribed of Rs.60 lakhs in the CBDT’s latest Circular No. 9/2024, dated 17.09.2024 with retrospective effect. Learned CIT (DR) is indeed very fair in not disputing the fact that the CBDT’s foregoing tax effect circular has been made applicable on all pending appeals as well. We thus dismiss the Revenue’s three instant appeals 78 & 127/Lkw/2006 for this precise reason subject to all just exceptions. The assessee’s as many cross objections C.O. Nos. 37, 39 & 40/Lkw/2006 have become infructuous. Dismissed accordingly.
(Assessee’s appeal) For AY: 2003-04 11. We are now left with the assessee’s appeal ITA No. 1243/Del/2009 raising its sole substantive ground that both the learned lower authorities have erred in law and in fact in disallowing its advertisement and publicity expenses of Rs.78,542/- in assessment order as upheld in the lower appellate discussion. 7 | P a g e 46, 78 & 127/Lkw/2006 &1243/Del/2009 C.O. Nos.36, 37, 39 & 40/Lkw/2006