THE DY. CIT, VIJAYAWADA vs. M/S. R.R. CHICKEN PVT.LTD., VIJAYAWADA

आदेश / O R D E R

PER D.S. SUNDER SINGH, Accountant Member:

This appeal filed by the revenue is directed against order of the

Commissioner of Income Tax (Appeals) {CIT(A)}, Vijayawada vide ITA

No.162/CIT(A)/VJA/2015-16 dated 25.8.2016 for the assessment year

2012-13.

ITA No.466/Vizag/2016 M/s. R.R. Chicken Pvt. Ltd., Vijayawada 2. All the grounds of appeal are related to the levy of penalty u/s

271D r.w.s. 269SS of the Income Tax Act, 1961 (hereinafter called as

'the Act'). In this case, the Ld. Addl. CIT observed that the assessee has

received a payment of ` 50 lakhs by way of cash as a loan. Therefore,

the Ld. Addl. CIT, Range-2, Vijayawada has initiated penalty u/s 271D

r.w.s. 269SS of the Act. As per the details furnished by the Ld.

Addl.CIT, the assessee company has received the share application

money from the following Directors of the company.

Sri Peravalli Venkata Ramana - ` 25,00,000/- - ` 25,00,000/- Smt. Peravalli Sabitha

the assessee’s A.R. submitted that the company has not received any

loan or deposit but the company has received the share application

money from it’s Directors i.e. Mr. P.V. Ramana of ` 25 lakhs and Mrs. P.

Sabitha of ` 25 lakhs. Since the assessee has neither received the loan

or deposit in cash the Ld. A.R. argued that the provisions of section

269SS of the Act are not applicable in the assessee’s case, hence,

requested to drop the penalty proceedings while relying on various case

laws as under: a) Hon’ble Delhi High Court in the case of CIT Vs. IP India Pvt. Ltd. b) Hon’ble Madras High Court in the case of CIT Vs. Rugmini Ram Ragav Spinners Pvt. Ltd. c) Hon’ble Punjab and Haryana High Court in the case of CIT Vs. Speed Ways Rubber Pvt. Ltd. 2

ITA No.466/Vizag/2016 M/s. R.R. Chicken Pvt. Ltd., Vijayawada d) Hon’ble ITAT Chandigarh in the case of M/s. Iqbal Inn and Hotels Limited Vs. The JCIT.

assessee and relied on the order of Hon’ble High Court of Jharkhand in

the case of Bhalotia Engineering Works Pvt. Ltd. Vs. CIT (275 ITR 399)

and held that the share application money partakes the character of

deposit, hence, the provisions of section 269SS of the Act are applicable,

accordingly held that the assessee had contravened the provisions of

section 269SS of the Act and imposed penalty of ` 50 lakhs u/s 271D of

the Act.

appeal before the CIT(A) and the Ld. CIT(A) observed that in the

assessee’s case, the assessee has received the share application money

and subsequently the shares were allotted, hence the assessee’s case is

distinguishable in respect of the case law relied upon by the Ld. Addl.

CIT in the case of Bhalotia Engineering Works Pvt. Ltd. (supra) and

following decisions of (i)CIT v. Sri Sidhdata Ispat (P) Ltd. [2012 - TIOL —

786 — HC (Del.)], (ii)CIT v. IP India (P) Ltd. (2012)70 DTR (Del.) 452, 2011-TIOL-811-HC (Del.) (iii) CIT v. ldhayam Publications Ltd. (2006) 285 ITR 221 (Mad.) allowed the appeal of the assessee. For ready reference and for the sake of clarity, we extract relevant

paragraph of the CIT(A)’s order as under:

ITA No.466/Vizag/2016 M/s. R.R. Chicken Pvt. Ltd., Vijayawada

“5. I have perused the submissions of appellant and the case laws relied on by Assessing Officer and appellant.

5.1. Admittedly, in appellant's case, 2.5 lakh (each) shares were allotted in November, 2014 to both directors of the company, viz. (1) Sri P.Venkata Ramana and (2) Smt P.Sabitha. Capital structure of the company after taking into consideration the above allotment is as follows:

Authorized Capital - ` 2.50 crores Issued Capital - ` 2.00 crores Subscribed Capital - ` 2.00 crores Paid up capital - ` 2.00 crores

This is evidenced by Form No.PAS-3 and the intimation given to the Ministry of Corporate Affairs on 19.08.2015 as per Receipt GAR-7/SRN S39047378. Hence, appellant's case is distinguishable on facts from that of the case mentioned by Addl. CIT in his penalty order viz. Bhalotia Engg. Works Pvt. Ltd. vs. CIT (275 ITR 399) (Jharkhand High court), as there was no occasion for refund of share application money to these directors in appellant's case.

5.2. Hon'ble Hyderabad Tribunal deleted the penalty imposed u/s.271D holding that the provisions of section 269SS are not applicable in the case of share application money, being not in the nature of loan or deposit in the case of ITO vs. Sunder Synthetics (P) Ltd. (Asst. Year 2008-09) - ITA No.314/Hyd/2015 order dated 01.07.2015 - (2015) 041 ITR (Trib.) 0618, (2015) Tax Pub (DT) 3229 (Hyd. Trib.).

5.3 In any event, shares were allotted by the company to the directors for the amounts contributed towards share application money. In such a situation, section 269SS will not apply where the contributions received have been converted into share capital by way of allotment of shares, was held by Courts in the following cases i. CIT v. Sri Sidhdata Ispat (P) Ltd. [2012 - TIOL — 786 — HC (Del.)] ii. CIT v. IP India (P) Ltd. (2012)70 DTR (Del.) 452, 2011-TIOL- 811-HC (Del.) iii. CIT v. ldhayam Publications Ltd. (2006) 285 ITR 221 (Mad.)

5.4 In view of the above, I hold that penalty u/s 271D is not leviable in this case. I, therefore, cancel the penalty levied.” 4

ITA No.466/Vizag/2016 M/s. R.R. Chicken Pvt. Ltd., Vijayawada

on record and gone through the orders of the authorities below. In this

case, both the Directors have contributed the share application money

to the assessee company in the year 2011 and subsequently, the shares

were allotted to the share applicants. This is evident from the balance

sheet of the assessee, which was placed before us and also before the

Ld.CIT(A). The Ld. CIT(A) has given a categorical finding that the

shares were allotted to the applicants and the case law relied upon by

the assessee has no application since the facts are distinguishable. The

Ld. CIT(A), following the coordinate bench decision in the case of ITO

Vs. Sunder Synthetics (P) Ltd. in ITA No.314/Hyd/2015 dated 1.7.2015

of ITAT Hyderabad and other decisions (Supra)allowed the appeal of

the assessee. Ld. D.R. could not controvert the fact that the assessee

company had received the share application money and allotted the

shares subsequently. No other decision was brought on record to

support the revenue’s case. Therefore, we do not find any infirmity in

the order of the CIT(A) and the same is upheld.

ITA No.466/Vizag/2016 M/s. R.R. Chicken Pvt. Ltd., Vijayawada 7. In the result, the appeal filed by the revenue is dismissed. The above order was pronounced in the open court on 21st Feb’18.

Sd/- Sd/- (वी. दुगा�राव) ( ड.एस. . . . सु�दर "संह) (V. DURGA RAO) (D.S. SUNDER SINGH) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER #वशाखापटणम /Visakhapatnam: 'दनांक /Dated : 21.02.2018 VG/SPS आदेश क� ��त)ल#प अ*े#षत/Copy of the order forwarded to:-