BHOTIKA TRADE & SERVICES PVT. LTD.,NEW DELHI vs. DCIT, CIRCLE - 9(1), KOLKATA, KOLKATA

The present appeal has been filed by the assessee against the order of the ld. CIT(A)-16, Kolkata dated 31.07.2017.

Following grounds have been raised by the assessee: “1. That the ld. Addl. Commissioner of Income-tax, Range-9, Kolkata is not justified by adding back Rs.1,08,05,000/- as deemed divided u/s 2(22)(e) of the I.T. Act, 1961 on the ground that the two companies i.e. assessee and Bhotika Pipeline Services Co. Pvt. Ltd. are closely held by the Bhotika Family and such transfer of funds, interest free, from one company to another within the same group is done at will, depending on the availability of funds in either case, for the benefit of the companies and the share holders concerned. Against the order we preferred an ./2017

The AO held that the assessee has received monies from the sister concern namely, Bhotika Pipeline Services Pvt. Ltd. wherein the entity namely Rosebay Garden India Pvt. Ltd. is having more than 40% of share holding in both the companies and hence the amounts received from Bhotika Pipeline Services Pvt. Ltd. is liable to be tax u/s 2(22)(e) of the Income Tax Act, 1961. The ld. CIT (A) confirmed the action of the Assessing Officer.

Before us during the arguments, the ld. AR argued that Bhotika Pipeline Services Pvt. Ltd. is not a beneficial owner of the shares of the assessee company and hence no addition u/s 2(22)(e) is called for. He relied on the judgment in the case of DCIT Vs East End Silks Pvt. Ltd. in ITA 87/Kol/2013, DCIT Vs Halani Shipping Pvt. Ltd. in ITA No. 1919/Mum/2013. He further argued that these are business transactions conducted regularly between the two entities.

On the other hand, the ld. DR relied on the judgment of Hon’ble Delhi High Court in the case of National Travel Services 14 Taxman 14 (Del.) and CIT Vs Bharti Overseas Trading Company 21 Taxman 543 (Del.). ./2017 3 Bhotika Trade & Services Pvt. Ltd.

Heard the arguments of both the parties and perused the material available on record.

There is no dispute that the entity namely, Rosebay Garden Pvt. Ltd. is a common share holder in the assessee company as well as Bhotika Pipeline Services Pvt. Ltd. We also find that Bhotika Pipeline Services Pvt. Ltd. is not a share holder of the assessee company nor assessee company is a share holder of the Bhotika Pipeline Services Pvt. Ltd. We also find that there has been an opening debit balance of Rs.54,56,041/- and an amount of Rs.256,15,000/- has been transacted between both the entities during the year. The Assessing Officer has only taken into consideration the transactions conducted between 07.12.2011 to 22.02.2012 disregarding the fact that there has been a closing debit balance of Rs.54.30 lakhs as on 30.03.2012.

Hence, keeping in view the judgments of Hon’ble Delhi High Court in the case of CIT Vs Ankitech Pvt. Ltd. 340 ITR 14, judgments of Hon’ble Mumbai High Court in the case of Bhaumik Colour Pvt. Ltd. 313 ITR 146 and keeping in view the fact that the transactions are in the nature of regular business transactions which are not liable to be taxed u/s 2(22)(e) as held in the case of CIT Vs Suraj Devi Dada 367 ITR 78 (P&H), we hereby hold that no addition in the hands of the assessee is called for u/s 2(22)(e). ./2017 4 Bhotika Trade & Services Pvt. Ltd.

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 26/08/2020.