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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: SHRI JASON P. BOAZ (AM) & SHRI SANDEEP GOSAIN (JM)
This appeal by the assessee is directed against the order of the CIT -17, Mumbai dt. 19/05/2014 for Asst. year 2011-12.
The facts of the case, briefly, are as under:-
2.1 The assessee company engaged in dealing all kinds of fashion products etc. filed its return of income for Asst. year 2011-12 on 21/09/2011 declaring income of Rs. 6,53,43,040/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (in short ‘the Act’) and the case was subsequently taken up for scrutiny. The assessment was concluded u/s 143(3) of the Act, vide order dt. 20/01/2014, wherein the income of the assessee under normal provisions was determined at Rs. 6,91,64,110/- in view of an addition of Rs. 38,21,073/- as deemed dividend u/s 2(22)(e) of the Act. The ‘book profits’ u/s 115JB of the Act were accepted as returned by the assessee at Rs. 7,02,79,567/-.
2.2 Aggrieved by the order of assessment dt. 20/01/2014 for Asst. year 2011-12, the assessee preferred an appeal before the CIT(AppealsO-17, Mumbai. The Ld. CIT(A) dismissed the assessee’s appeal vide order dt. 19/05/2014.
Being aggrieved with order of the CIT(Appeals)-17, Mumbai, the assessee has preferred this appeal before the Tribunal raising the following grounds:-
1. Against addition of Rs. 2,621,073/- as deemed dividend u/s 2(22)(e) of the Act The CIT(A) has erred in upholding the addition of Rs. 2,621,073/- made by the Assessing Officer ('AO') u/ s 2(22)(e) of the Act ignoring the facts of the case. The CIT (A) should have appreciated that out of the said amount, Rs. 2,621,073/- represents repayment of expenses incurred by the appellant for and on behalf of Tainwala Holdings Pvt. Ltd. (THPL) during the year under consideration.
The CIT (A) failed to appreciate that since no loan or advance has been received by the appellant from THPL during the year, the provisions of section 2(22)(e) of the Act are not attracted.
The appellant humbly prays that the impugned addition made by the CIT (A) be deleted, in the interest of natural justice.
2. Against addition of Rs. 50,000/- as deemed dividend u/s 2(22)(e) of the Act The CIT (A) has erred in upholding an addition of Rs. 50,000/- u/s 2(22)(e) of the Act made by the AO without considering the facts of the case. The CIT (A) should have appreciated that the said sum of Rs. 50,000/- represents mere repayment of expenses incurred by the appellant for and on behalf of Tainwala Trading and Investment Co. Pvt. Ltd (TTICPL) during the year under consideration.
The CIT (A) failed to appreciate that since no loan or advance has been received by the appellant from TTICPL during the year, the provisions of section 2(22)(e) of the Act are not attracted.
The appellant humbly prays that the impugned addition made by the CIT (A) be deleted, in the interest of natural justice.
3. The appellant craves leaves to add, alter, amend and/or supplement any ground or grounds, if necessary, at the time of hearing of the appeal.
Ground No. 1 – Addition of Rs. 26, 21,073/- as deemed dividend u/s 2 (22) (e) of the Act.
4.1 In this ground, the assessee contends that the Ld. CIT(A) erred in upholding the addition of Rs. 26,21,073/- made by the Assessing Officer (‘AO’) u/s 2 (22)(e) of the Act. It was submitted that this amount of Rs. 26,21,073/- represents repayment of expenses incurred by the assessee for and on behalf of Tainwala Holdings Pvt. Ltd. It is submitted that the said amount was not a loan or advance received by the assessee and therefore the provisions of Section 2 (22)(e) of the Act would not apply. It was brought to the notice of the bench that a factually similar issue of addition on account of deemed dividend u/s 2 (22)(e) of the Act was considered by a co-ordinate bench of this tribunal in the assessee’s own case for Asst. year 2010-11 and the issue was decided in favour of the assessee. The Ld. AR contends that the facts being similar in this year also, the assessee’s appeal on this ground ought to be allowed.
4.2 Per contra, the Ld. DR placed strong reliance on the decisions of the Ld. CIT(A) on the impugned order.
4.3.1 We have heard both parties and perused and carefully considered the material on record; including the judicial decision cited. The addition, which is the subject matter of appeal, is Rs. 26,70,073/-, comprising of two limbs, namely an amount of Rs. 26,21,073/- purported to have been received by M/s. Tainwala Holdings and a sum of Rs. 50,000/- representing amount received from Tainwala Trading and Investment Co. Ltd. The former addition is agitated by way of ground of appeal no. 1 and the latter is agitated by way of ground of appeal no. 2 before us.
4.3.2 With respect to the addition of Rs. 26,21,073/- considered as ‘deemed dividend’ u/s 2 (22)(e) of the Act, we find that the similar factual matter of an addition on account of deemed dividend u/s 2 (22)(e) of the Act was considered by the co-ordinate bench of this Tribunal in the assessee’s own case for Asst. year 2010-11. In its order in dt. 21/08/2015, the co-ordinate bench following the ratio of the decision of the Hon’ble Bombay High Court in the case of CIT vs. Universal Medicare Pvt. Ltd., (324 ITR 263) (Bom) held that since the assessee is not a shareholder in the said concern, M/s. Tainwala Holdings Pvt. Ltd., such amount could not be assessed in the hands of the assessee. At paras 5 to 7 of its order the co-ordinate bench held as under:-
With respect to the addition of Rs. 28,74,875/-, considered as ‘deemed dividend’ under section 2 (22)(e) of the Act, it is contended that the said addition is not tenable in view of the judgment of Hon’ble Bombay High Court in the case of CIT vs. Universal Medicare Pvt. Ltd., 324 ITR 263(Bom). It is submitted that the said amount is purported to have been received from M/s. Tainwala Holding Pvt. Ltd. and since assessee was not a shareholder in the said concern, such amount could not be assessed in the hands of the assessee company following the ratio of the judgment in the case CIT vs. Universal Medicare Pvt. Ltd. (supra).
On this aspect, the Ld. DR appearing for the Revenue has not disputed the factual matrix brought out by Ld. Representative for the assessee.
7. In view of the aforesaid factual matrix, the plea of the assessee, based on the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Universal Medicare Pvt. Ltd. (supra) is liable to be upheld, thereby resulting in deletion of an addition of Rs. 28,74,875/- in the hands of the assessee company. Accordingly, we set aside the order of CIT(A) on this aspect and direct the Assessing Officer to delete the addition of Rs. 28,74,875/- made in the hands of the assessee on the ground that such dividend could not be taxed in the hands of the assessee as it is not a shareholder in M/s. Tainwals Holding Pvt. Ltd.
4.3.2 Respectfully following the decision of the co-ordinate bench of this Tribunal in the assessee’s own case for Asst. year 2010-11 in dt. 21/08/2015, wherein the ratio of the decision of the Hon’ble Bombay High Court in the case of Universal Medicare Pvt. Ltd. (supra) was followed, we set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the addition of Rs. 26,21,073/- made in the hands of the assessee on the ground that such dividend could not be taxed in the hands of the assessee as it was not a shareholder in M/s. Tainwala Holdings Pvt. Ltd.. Ground of appeal at Sr. No. 1 is accordingly allowed.
5. Ground No: 2 in respect of the addition of Rs. 50,000/- u/s 2 (22)(e) of the Act was not pressed by the Ld. AR for the assessee. In view of this ground not being pressed, it is rendered infructuous and is accordingly dismissed.
6. Ground No: 3 is general in nature and therefore no adjudication is called for thereon.
In the result, the assessee’s appeal for Asst. year 2010-11 is partly allowed.
Order pronounced in the open court on 29th January, 2016