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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
ITA No. 2051/Ahd/2015 DCIT v/s Seasons Hotels Pvt Ltd Assessment year: 2011-2012 Page 1 of 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH, AHMEDABAD [Coram: Pramod Kumar AM and S S Godara JM]
ITA No. 2051/Ahd/2015 Assessment year: 2011-12
Dy. Commissioner of Income-tax, .......…………......Appellant Circle-4(1)(1), Ahmedabad Vs.
Seasons Hotels Pvt. Ltd. .......................Respondent 469/7, Parsi Chawl, Kalupur, Sakar Bazar, Opp. Maskati Market, Ahmedabad - 380002 [PAN : AAFCS 7065 K]
Appearances by: Mudit Nagpal for the appellant PD Shah for the respondent
Date of concluding the hearing : 23.10.2017 Date of pronouncing the order : 23.10.2017
O R D E R Per Pramod Kumar, AM: 1. By way of this appeal, the Assessing Officer has challenged correctness of order dated 17th April 2015, passed by the CIT(A), for the assessment year 2011-12, on the following ground:
“Whether the Ld. Commissioner of Income-tax (Appeals) is right in law and on facts in deleting the addition of Rs.99,50,273/- made on account of deemed dividend u/s 2(22)(e) of the Act by the A.O.”
To adjudicate on this appeal, only a few material facts need to be taken note of. There is no dispute that the assessee before us, i.e. Seasons Hotels Pvt Ltd, is not a shareholder in Inder Hotels Pvt Ltd. Yet, the Assessing Officer treated inter corporate loan from Inder Hotels Pvt Ltd, to the extent of accumulated profits of Rs.99,50,273/-, as deemed dividend on the ground that “the assessee company has received loan from the company having substantial interest in the company”. Even the Tribunal’s decision in favour of the assessee, on the same issue, were held to be “unacceptable”, as the same not have been accepted by the revenue authorities. However, when matter travelled in appeal before the CIT(A), he reversed the action of the Assessing Officer and observed as follows:-
ITA No. 2051/Ahd/2015 DCIT v/s Seasons Hotels Pvt Ltd Assessment year: 2011-2012 Page 2 of 3
“3.2 I have carefully considered the rival contentions. It is seen that, in earlier years CIT (Appeals)-XIV have deleted the addition on same ground in Asst. Year 2004-05, 2005-06, 2006-07, 2008-09 which has also been confirmed by the Appellate Tribunal. I am in agreement with the contention of appellant in view of the decisions of my predecessors and Hon’ble Jurisdictional ITAT. On merit also it is beyond doubt as held by Hon’ble Jurisdictional ITAT in appellants own case for AY 2004-05, 2005-06, 2006-07, that since the appellant company is not the registered shareholder of the lender company, therefore the addition made by AO in the hands of appellant co. is bad in law Hon’ble ITAT and my predecessors have relied upon the decisions in following cases:- (a) DCIT vs. Lakra Bros, reported in 106 TTJ 250 (b) CIT vs. Rajkumar reported in 23 DTR 304 (c) Bharat C Gandhi vs. ACIT reported in 178 Taxman 83 Respectfully following the decision of jurisdictional ITAT in appellants own case and the decisions of earlier CIT(Appeals) the addition of Rs.99,50,273/- as deemed dividend income, is ordered to be deleted.”
The Assessing Officer is aggrieved and is in appeal before us.
We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.
We find that in CIT vs. Ankitech Pvt Ltd (2012) 340 ITR 14, Hon'ble Delhi High Court was dealing with a situation in which the assessee, a company, received advances of Rs. 6.32 crores by way of book entry from Jacksons Generators Pvt. Ltd, a closely held company, and admittedly the shareholders having substantial interest in the assessee company were also having 10% of the voting power in Jacksons Generators. The AO & CIT(A) held that as the shareholders who held substantial interest in Jacksons Generators also had substantial interest in the assessee company, for purposes of s. 2(22)(e), the amount received by the assessee from Jacksons constituted “advances and loans” and was assessable as deemed dividend. However, in appeal, this Tribunal, relying on Bhaumik Colour 313 ITR 146 (Mum) (SB), deleted the addition on the ground that though the amount received by the assessee by way of book entry was “deemed dividend” u/s 2(22)(e), it was not assessable in the hands of assessee company as it was not a shareholder of Jacksons Generators. On appeal by the department to the High Court, the High Court dismissed the appeal on the basis that: (i) U/s 2(22)(e), any payment by a closely-held company by way of advance or loan to a concern in which a substantial shareholder is a member holding a substantial interest is deemed to be “dividend” on the presumption that the loans or advances would ultimately be made available to the shareholders of the company giving the loan or advance.; (ii)The legal fiction in s. 2(22)(e) enlarges the definition of dividend but does not extend to, or broaden the concept of, a “shareholder”. As the assessee was not a shareholder of the paying
ITA No. 2051/Ahd/2015 DCIT v/s Seasons Hotels Pvt Ltd Assessment year: 2011-2012 Page 3 of 3 company, the “dividend” was not assessable in its hands; and (iii) As the conditions stipulated in s. 2(22)(e) treating the loan and advance as deemed dividend are established in these cases, it is open to the Revenue to take corrective measure by treating this dividend income at the hands of the shareholders and tax them accordingly as otherwise it amounts to escapement of income at the hands of those shareholders. Hon'ble Supreme Court, vide recent unreported judgment dated 5th October 2017, a copy of which has been filed before us by the learned counsel, has categorically approved the stand so taken by Hon'ble Delhi High Court. In view of this legal position as also bearing in mind the undisputed factual position that the assessee is not a shareholder in Inder Hotels Pvt Ltd, the stand of the Assessing Officer is wholly unsustainable in law. The conclusions arrived at in the impugned order do not, therefore, call for any interference.
In view of the above discussions, as also bearing in mind entirety of the case, we approve the conclusions arrived at by the CIT(A) and decline to interfere in the matter.
In the result, the appeal is dismissed. Pronounced in the open court today on the 23rd October, 2017.
Sd/- Sd/-
S S Godara Pramod Kumar (Judicial Member) (Accountant Member) Ahmedabad, the 23rd day of October, 2017 **bt Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad
Date of dictation: .......two pages manuscripts of Hon’ble AM attached...23.10.2017 2. Date on which the typed draft is placed before the Dictating Member: ... 23.10.2017........ 3. Date on which the approved draft comes to the Sr. P.S./P.S.: .. 23.10.2017..... . 4. Date on which the fair order is placed before the Dictating Member for Pronouncement:… 23.10.2017... 5. Date on which the file goes to the Bench Clerk : . 24.10.2017..... 6. Date on which the file goes to the Head Clerk : ……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order: ……