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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI A. MOHAN ALANKAMONY
आदेश /O R D E R
PER N.R.S. GANESAN, JUDICIAL MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals) – 15, Chennai, dated 08.01.2015 and pertains to assessment year 2005-06.
Shri S. Sridhar, The Ld.counsel for the assessee, submitted that the assessee was holding 2,00,000 shares as on 31.03.2004 as well as on 31.03.2005, which is less than 10% of total shares of the company. According to the Ld. counsel, when the assessee was holding less than 10% shares, the provisions of Section 2(22)(e) of the Income-tax Act, 1961 (in short 'the Act') is not applicable at all.
The Ld.counsel further submitted that on 29.03.2004, the assessee transferred 6,47,059 shares of M/s Seven Seas Petroleum Pvt. Ltd. to Mrs. Linda Manavalan. The transfer of shares was approved by a resolution by the shareholders. A copy of the resolution was filed before the Assessing Officer and the CIT(Appeals). The Ld.counsel further submitted that the Ministry of Corporate Affairs also approved the transfer of shares. The Assessing Officer, however, doubted the transfer of shares to Mrs. Linda Manavalan on the ground that approval of Ministry of Corporate Affairs was granted on 15.05.2008. Therefore, according to the Ld. counsel, the amount received from M/s Seven Seas Petroleum Pvt. Ltd. by the assessee cannot be construed as deemed dividend under Section 2(22)(e) of the Act. The Ld.counsel placed his reliance on the judgment of Kerala High Court in CIT v. Smt. S. Parvathavarthini Ammal (1996)
219 ITR 661 and the judgment of Rajasthan High Court in CIT v.
Mangal Chand (2002) 255 ITR 329. Apart from this, the Ld.counsel submitted that there was a business transaction between the assessee and the company. Therefore, the same has to be taken as business transaction. Hence, the provisions of Section 2(22)(e) of the Act is not applicable at all. The Ld.counsel has also filed copies of the Share Transfer Form for transfer of shares to Mrs. Linda Manavalan and other relevant material filed before the Registrar of Companies for transfer of shares. The Ld.counsel submitted that in view of the transfer of shares, the Assessing Officer is not justified in treating `37,50,000/- as deemed dividend under Section 2(22)(e) of the Act.
On the contrary, Shri K.N. Dhandapani, the Ld. Departmental Representative, submitted that assessee is a registered shareholder of the company, namely, M/s Seven Seas Petroleum Pvt. Ltd., holding 8,47,059 shares which come to nearly 23.52% of the total shares. According to the Ld. D.R., as per the information received from the Assistant Registrar of Companies, the shareholding of the assessee to the extent of 23.52% was confirmed. In the return of income filed by M/s Seven Seas Petroleum Pvt. Ltd. for the assessment year 2005-06, the details were shown including holding of shares exceeding 10% by the assessee. The Ld. D.R. submitted that now the assessee claims that the shares were transferred to his wife Mrs. Linda Manavalan. The information available on record shows that the shares were transferred on 15.05.2008. Therefore, according to the Ld. D.R., the assessee may not be holding more than 10% shares after 15.05.2008. However, it is seen that the assessee was holding 23.52% shares. According to the Ld. D.R., other than the papers filed before the Registrar of Companies, no other material is available on record to suggest that the shares were transferred to Mrs. Linda Manavalan.
4. The Ld. D.R. further submitted that the assessee, by reply dated 07.03.2013, claimed that 6,47,059 shares were transferred at a cost of `10 each, however, as per the copies of transfer deed obtained from the company, in the sale consideration it was disclosed as `2 per share. From this, according to the Ld. D.R., it is obvious that the assessee himself did not know the price at which the shares were transferred. This gives an indication that no transfer of shares actually took place. Therefore, according to the Ld. D.R., the claim of the assessee that the shares were transferred to Mrs. Linda Manavalan was afterthought. Moreover, the assessee has not received any sale consideration for transfer of shares till filing of return of income. Therefore, according to the Ld. D.R., the claim of transfer of shares is not bonafide one, hence, the CIT(Appeals) has rightly confirmed the addition made by the Assessing Officer.
We have considered the rival submissions on either side and perused the relevant material available on record. The assessee admittedly received advance / loan from M/s Seven Seas Petroleum Pvt. Ltd. The assessee claims that he is holding less than 10% of shares, therefore, provisions of Section 2(22)(e) of the Act is not applicable to him. To support his contention, the assessee filed copies of the Share Transfer Form for transfer of shares to Mrs. Linda Manavalan and other relevant material that were said to be filed before the Registrar of Companies. The copies of transfer of shares certificate filed before the Registrar of Companies shows that it was dated 29.03.2004. The assessee has also filed copies of annexures filed along with Share Transfer Form that were filed before the Registrar of Companies. This Share Transfer Form submitted before the Registrar of Copies was apparently not considered by both the authorities below. Therefore, this Tribunal is of the considered opinion that the claim of the assessee that the shares were transferred as on 29.03.2004 needs to be considered in the light of the material filed by the assessee. Since both the authorities below have not examined the Share Transfer Form and the annexures that were filed before the Registrar of Companies, this Tribunal is of the considered opinion that the matter needs to be reconsidered. Accordingly, the orders of the authorities below are set aside and the entire issue is remitted back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh after considering the Share Transfer Form and other annexures that were filed before the Registrar of Companies and thereafter decide the issue in accordance with law after giving reasonable opportunity to the assessee.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on 17th June, 2016 at Chennai.