ITO 8(2)(3), MUMBAI v. SAROSH SAMI KHATIB, MUMBAI

ITA 28/MUM/2011 | 2007-2008
Pronouncement Date: 14-11-2014

Appeal Details

RSA Number 2819914 RSA 2011
Assessee PAN AABPK6775F
Bench Mumbai
Appeal Number ITA 28/MUM/2011
Duration Of Justice 3 year(s) 10 month(s) 10 day(s)
Appellant ITO 8(2)(3), MUMBAI
Respondent SAROSH SAMI KHATIB, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Department
Bench Allotted E
Tribunal Order Date 14-11-2014
Date Of Final Hearing 10-11-2014
Next Hearing Date 10-11-2014
Assessment Year 2007-2008
Appeal Filed On 03-01-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; JH FOT; IKY JKO] U;KF;D LNL; OA OA OA OA JH CH JH CH JH CH JH CH- -- - VKJ VKJVKJ VKJ- -- - CKLDJ.K] YS[KK LNL; CKLDJ.K] YS[KK LNL; CKLDJ.K] YS[KK LNL; CKLDJ.K] YS[KK LNL; DS LE{K DS LE{K DS LE{K DS LE{K BEFORE SHRI VIJAY PAL RAO JUDICIAL MEMBER AND SHRI B.R. BASKARAN ACCOUNTANT MEMBER ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 INCOME TAX OFFICER 8(2)-3 ROOM NO. 213 2 ND FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI 400 020. V S. ` SAROSH SAMI KHATIB PLOT NO. 25 SHOA GREATER BOMBAY CO-OP SOC. GULMOHAR CROSS ROAD NO. 5 JVBP SCHEME MUMBAI - 400 049. PAN: AABPK6775F APPELLANT RESPONDENT ORDER PER VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDE R DATED 13.9.2010 OF CIT(A) FOR THE A.Y. 2007-08. THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 27 50 000/- MADE U/S 2(22)(E) OF THE ACT RELYING ON THE DECISION OF THE SPECIAL BENCH IN THE CASE OF ACIT VS. BHAUMIK COLOURS (2009) 27 SOT 270 (MUM-SB) WITHOUT APPRECIATING THE FACTS OF THE CASE WHICH AR E CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE ABOVE CASE DE CIDED BY THE SPECIAL BENCH. REVENUE BY SHRI NEIL PHILLIP ASSESSEE BY SHRI PRAKASH K. JOTWANI DATE OF HEARING 10.11.2014 DATE OF PRONOUNCEMENT 14-11-2014 ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 2 | P A G E 2) 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) HAS FAILED TO APPRECIATE THE CBDT'S CIRCULAR NO. 495 DATED 22.09.1987 WHEREIN THE PROVISIONS OF SECTION 2(22)(E) HAVE BEE N EXPLAINED AS UNDER: THE NEW PROVISION WOULD THEREFORE BE APPLICATION IN A CASE WHERE A SHAREHOLDER HAS 10 PER CENT OR MORE OF THE EQUITY C APITAL. FURTHER DEEMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CONCERN W HERE ALL THE FOLLOWING CONDITIONS ARE SATISFIED. (I) WHERE THE COMPANY MAKES THE PAYMENT BY WAY OF L OANS OR ADVANCES TO A CONCERN; (II) WHERE THE MEMBER OR PARTNER OF THE CONCERN IS ALSO BENEFICIALLY ENTITLED TO 20 PER CENT OF THE INCOME OF SUCH CONCE RN. WITH A VIEW TO AVOID THE HARDSHIP IN THE CASES WHER E ADVANCES OR LOANS HAVE ALREADY BEEN GIVEN THE NEW PROVISIONS HAVE BEEN MA DE APPLICABLE ONLY IN CASES WHERE LOANS OR ADVANCES ARE GIVEN AFTER 31ST MAY 1987. THESE AMENDMENTS WILL APPLY IN RELATION TO ASSESSME NT YEAR 1988-89 AND SUBSEQUENT YEARS.' 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS HAVING 15% OF THE SHARE HOLDING IN M/S MEDLEY LABORATORIES PVT. LTD. AND 99 % SHARE HOLDING IN M/S STERANCO HEALTHCARE PVT. LTD. THE ASSESSING OFFICER N OTED THAT DURING THE YEAR UNDER CONSIDERATION M/S MLPL HAS GIVEN ADVANCE OF R S. 27 25 000/- TO M/S STERANCO HEALTHCARE PVT. LTD. THE ASSESSING OFFICER TR EATED THE SAID ADVANCE AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 3. ON APPEAL THE CIT(A) HAS DELETED THE ADDITION ON T HE GROUND THAT THE SUBSTANTIVE ADDITION MADE IN THE HANDS OF M/S STERANC O HEALTHCARE PVT. LTD HAS BEEN DELETED BY THE CIT(A) BY FOLLOWING THE DECISIO N OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS . M/S.BHAUMIK COLOR PVT. LTD. (313 ITR AT) 146 (SB MUMBAI) AS WELL AS IN THE CASE OF CIT VS. UNIVERSAL MEDICARE PVT. LTD. 324 ITR 263. ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 3 | P A G E 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONS IDERED THE RELEVANT MATERIAL ON RECORD. WE NOTE THAT AN IDENTICAL ISSU E HAS BEEN CONSIDERED BY US IN THE CASE OF ITO VS. SHRI SAHI SAMI KHATIB IN ITA NO. 25/MUM/2011 VIDE EVEN DATED ORDER AS UNDER:- 6. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE RE GARDING THE FACT THAT THE ASSESSEE IS HOLDING 15% SHARES IN M/S MLPL (TH E LENDING COMPANY) AND 45% OF SHARE HOLDING IN M/S ORYX FISHERIES PVT. LTD. (THE BORROWING COMPANY). THE PROVISIONS OF SECTION 2(22) (E) EXPAND THE DEFINITION OF DIVIDEND AND INCLUDES CERTAIN LOAN AN D ADVANCES BY A COMPANY AS DEEMED DIVIDEND IN THE HANDS OF THE SHAR E HOLDER. FOR READY REFERENCE WE QUOTE SECTION 2(22)(E) AS UNDER :- SECTION 2(22) DIVIDEND INCLUDES- *********************** *********************** (E) ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED OF ANY SUM (WH ETHER AS REPRESENTING A PART OF THE ASSETS OF THE COMPANY OR OTHERWISE) [MADE AFTER THE 31ST DAY OF MAY 1987 BY WAY OF ADVANCE OR LOAN TO A SHAREHOLDER BEING A PERSON WHO IS THE BENEFICIAL O WNER OF SHARES (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND W HETHER WITH OR WITHOUT A RIGHT TO PARTICIPATE IN PROFITS) HOLDING NOT LESS THAN TEN PER CENT OF THE VOTING POWER OR TO ANY CONCERN IN WHI CH SUCH SHAREHOLDER IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBS TANTIAL INTEREST (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID C ONCERN)] OR ANY PAYMENT BY ANY SUCH COMPANY ON BEHALF OR FOR- THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES ACCUMULATED PROFITS BUT' DIVIDEND' DOES NOT INCLUDE-- (I) A DISTRIBUTION MADE IN ACCORDANCE WITH SUB- CLAUSE (C) OR SUB- CLAUSE (D) IN RESPECT OF ANY SHARE ISSUED FOR FULL CASH CONSIDERATION WHERE THE HOLDER OF THE SHARE IS NOT ENTITLED IN TH E EVENT OF LIQUIDATION TO PARTICIPATE IN THE SURPLUS ASSETS; (IA) 1 A DISTRIBUTION MADE IN ACCORDANCE WITH SUB- CLAUSE (C) OR SUB- CLAUSE (D) IN SO FAR AS SUCH DISTRIBUTION IS ATTRIB UTABLE TO THE CAPITALISED ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 4 | P A G E PROFITS OF THE COMPANY REPRESENTING BONUS SHARES AL LOTTED TO ITS EQUITY SHAREHOLDERS AFTER THE 31ST DAY OF MARCH 1964 2 AND BEFORE THE 1ST DAY OF APRIL 1965 ];] (II) ANY ADVANCE OR LOAN MADE TO A SHAREHOLDER 3 OR THE SAID CONCERN] BY A COMPANY IN THE ORDINARY COURSE OF ITS BUSINESS WHERE THE LENDING OF MONEY IS A SUBSTANTIAL PART OF THE BUSINESS OF T HE COMPANY; (III) ANY DIVIDEND PAID BY A COMPANY WHICH IS SET OFF BY THE COMPANY AGAINST THE WHOLE OR ANY PART OF ANY SUM PREVIOUSLY PAID BY IT AND TREATED AS A DIVIDEND WITHIN THE MEANING OF SUB- CL AUSE (E) TO THE EXTENT TO WHICH IT IS SO SET OFF. (IV) ANY PAYMENT MADE BY A COMPANY ON PURCHASE OF ITS OWN SHARES FROM A SHAREHOLDER IN ACCORDANCE WITH THE PROVISION S OF SECTION 77A OF HE COMPANIES ACT 1956 (1 OF 1956); (V) ANY DISTRIBUTION OF SHARES PURSUANT TO A DEMERG ER BY THE RESULTING COMPANY TO THE SHAREHOLDERS OF THE DEMERGED COMPANY (WHETHER OR NOT THERE IS REDUCTION OF CAPITAL IN THE DEMERGED COMPANY.] EXPLANATION 1-THE EXPRESSION' ACCUMULATED PROFITS' WHEREVER IT OCCURS IN THIS CLAUSE SHALL NOT INCLUDE CAPITAL GA INS ARISING BEFORE THE 1ST DAY OF APRIL 1946 OR AFTER THE 31ST DAY OF M ARCH 1948 AND BEFORE THE 1ST DAY OF APRIL 1956 . EXPLANATION 2.-- THE EXPRESSION' ACCUMULATED PROFIT S' IN SUB- CLAUSES (A) (B) (D) AND (E) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOS E SUB- CLAUSES AND IN SUBCLAUSE (C) SHALL INCLUDE ALL PROFITS OF THE COMP ANY UP TO THE. DATE OF LIQUIDATION 4 BUT SHALL NOT WHERE THE LIQUIDATION IS CONSEQUENT ON THE COMPULSORY ACQUISITION OF ITS UNDERTAKING BY THE GO VERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT U NDER ANY LAW FOR THE TIME BEING IN FORCE INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIVE PREVIOUS YEARS IMMEDIATELY PRECEDI NG THE PREVIOUS YEAR IN WHICH SUCH ACQUISITION TOOK PLACE]. EXPLANATION 3.- FOR THE PURPOSES OF THIS CLAUSE - (A) ' CONCERN' MEANS A HINDU UNDIVIDED FAMILY OR A FI RM OR AN ASSOCIATION OF PERSONS OR A BODY OF INDIVIDUALS OR A COMPANY; (B) A PERSON SHALL BE DEEMED TO HAVE A SUBSTANTIAL INT EREST IN A CONCERN OTHER THAN A COMPANY IF HE IS AT ANY TIM E DURING THE PREVIOUS YEAR BENEFICIALLY ENTITLED TO NOT LESS TH AN TWENTY PER CENT OF THE INCOME OF SUCH CONCERN;] ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 5 | P A G E 7. CLAUSE (E) OF SECTION 2(22) OF INCOME TAX ACT C ONTEMPLATES THAT ANY PAYMENT BY A COMPANY (NOT BEING A COMPANY IN WH ICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED ) WAS BY WAY OF ADVANC E OR LOAN TO A SHARE HOLDER WHO IS THE BENEFICIAL OWNER OF THE SHARES HO LDING NOT LESS THAN 10% OF VOTING POWER IS DEEMED AS DIVIDEND TO THE EX TENT TO WHICH THE COMPANY POSSESSES ACCUMULATED PROFIT. IT ALSO INCLU DES ANY SUCH PAYMENT BY SUCH COMPANY TO ANY CONCERN IN WHICH SUC H SHARE HOLDER IS MEMBER OR PARTNER AND IN WHICH HE HAS THE SUBSTANTI AL INTEREST. THE THIRD SCENARIO UNDER WHICH ANY PAYMENT BY SUCH COMP ANY IS ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLD ER. THEREFORE THERE ARE THREE POSSIBLE SITUATION UNDER WHICH THE PAYMEN T BY A COMPANY AS SPECIFIED U/S 2(22)(E) WILL BE TREATED AS DIVIDEND. FIRSTLY BY WAY OF LOAN OR ADVANCES TO SHARE HOLDER WHO IS HAVING NOT LESS THAN 10% OF THE VOTING POWERS IN THE SAID COMPANY. SECONDLY THE AD VANCES OR LOAN GIVEN BY THE SAID COMPANY TO A CONCERN IN WHICH A S HARE HOLDER HAVING NOT LESS THAN 10% OF THE VOTING RIGHTS IN THE LENDI NG COMPANY IS A MEMBER OR A PARTNER AND IN WHICH HE HAS A SUBSTANTI AL INTEREST. IN THE CASE IN HAND THE ADVANCE/LOAN HAS BEEN GIVEN BY M/S MLPL TO M/S ORYX FISHERIES PVT. LTD WHICH IS NOT A SHARE HOLDER OF THE LENDER COMPANY BUT THE ASSESSEE IS HOLDING 15% OF THE VOTI NG POWER IN THE LENDING COMPANY AND 45% OF THE SHARES IN THE BORROW ING COMPANY. THEREFORE THE PAYMENT IN QUESTION BEING LOAN HAS T O BE EXAMINED IN THE CONTEXT OF SECOND SITUATION WHEREIN THE PAYMENT I S GIVEN TO ANY CONCERN IN WHICH THE SHARE HOLDER IS A MEMBER OR A PARTNER AND HAS A SUBSTANTIAL INTEREST. THERE IS NO QUARREL ON THE PO INT THAT THE ASSESSEE IS HAVING MORE THAN 10% OF THE VOTING RIGHTS IN THE LE NDING COMPANY. THEREFORE TO BRING THE PAYMENT IN QUESTION UNDER T HE EXPRESSION OF DIVIDEND AS PER CLAUSE (E) OF SECTION 2(22) THE CONDITION THAT THE ASSESSEE IS HAVING A SUBSTANTIAL INTEREST IN THE BO RROWING COMPANY HAS TO BE SATISFIED. THE TERM CONCERN HAS BEEN DEFINE D IN EXPLANATION 3 TO SECTION 2(22)(E) ABOVE WHICH INCLUDES HUF OR FIRM O R AN ASSOCIATION OF PERSON OR A BODY OF INDIVIDUAL OR A COMPANY. THEREF ORE M/S ORYX FISHERIES PVT. LTD FALLS UNDER THE AMBIT OF TERM C ONCERN AS STIPULATED UNDER CLAUSE (E) OF SECTION 2(22). THE SUBSTANTIAL INTEREST IN A COMPANY HAS NOT BEEN DEFINED U/S 2(22)(E) HOWEVER THIS T ERM HAS BEEN DEFINED IN SECTION 2(32) AND EXPLANATION TO SECTION 40A(2) OF THE INCOME TAX ACT. WHEREBY A PERSON SHALL BE DEEMED TO HAVE SUBS TANTIAL INTEREST IN A BUSINESS OR A PROFESSION IF THE BUSINESS AND PROFES SION IS CARRIED ON BY A COMPANY SUCH PERSON IS AT ANY TIME DURING THE PREV IOUS YEAR THE BENEFICIAL OWNER OF SHARES CARRYING NOT LESS THAN 2 0% OF THE VOTING POWERS. IN THE CASE IN HAND THE ASSESSEE IS HAVING 45% OF SHARE HOLDING OF THE BORROWING COMPANY THEREFORE BY APPLYING TH E PARAMETERS AS PER SECTION 2(32) AND EXPLANATION TO SECTION 40A(2) AS WELL AS ANY ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 6 | P A G E OTHER PARAMETERS IN GENERAL THE ASSESSEE IS HAVING SUBSTANTIAL INTEREST IN THE BORROWING COMPANY I.E. M/S ORYX FISHERIES PV T. LTD. THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT. VS. UNIVERSAL MEDICARE PRIVATE LIMITED. (324 ITR 263) WHILE DEALING WITH THE ISSUE OF APPLICABILITY OF SECTION 2(22) (E) HAS OBSERVED AT PAGE 268 AS UNDER:- 10 IN ORDER THAT THE FIRST PART OF CLAUSE (E) OF S ECTION 2(22) IS ATTRACTED THE PAYMENT BY A COMPANY HAS TO BE BY WA Y OF AN ADVANCE OR LOAN. THE ADVANCE OR LOAN HAS TO BE MADE AS THE CASE MAY BE EITHER TO A SHAREHOLDER BEING A BENEFICIAL OWNER HOLDING NOT LESS THAN TEN PER CENT. OF THE VOTING POWER OR TO ANY CONCERN OF WHICH SUCH A SHAREHOLDER IS A MEMBER OR A PARTNE R AND IN WHICH HE HAS A SUBSTANTIAL INTEREST. THE TRIBUNAL I N THE PRESENT CASE HAS FOUND THAT AS A MATTER OF FACT NO LOAN OR ADVANCE WAS GRANTED TO THE ASSESSEE SINCE THE AMOUNT IN QUESTI ON HAD ACTUALLY BEEN DEFALCATED AND WAS NOT REFLECTED IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE. THE FACT THAT THERE WAS A DEFALCATION SEEMS TO HAVE BEEN ACCEPTED SINCE THIS AMOUNT WAS A LLOWED AS A BUSINESS LOSS DURING THE COURSE OF THE ASSESSMENT Y EAR 2006-07. CONSEQUENTLY ACCORDING TO THE TRIBUNAL THE FIRST R EQUIREMENT OF THERE BEING AN ADVANCE OR LOAN WAS NOT FULFILLED. I N OUR VIEW THE FINDING THAT THERE WAS NO ADVANCE OR LOAN IS A PURE FINDING OF FACT WHICH DOES NOT GIVE RISE TO ANY SUBSTANTIAL QU ESTION OF LAW. HOWEVER EVEN ON THE SECOND ASPECT WHICH HAS WEIGHE D WITH THE TRIBUNAL WE ARE OF THE VIEW THAT THE CONSTRUCTION WHICH HAS BEEN PLACED ON THE PROVISIONS OF SECTION 2(22) (E) IS CORRECT. SECTION 2(22)(E) DEFINES THE AMBIT OF THE EXPRESSION 'DIVIDEND'. ALL PAYMENTS BY WAY OF DIVIDEND HAVE TO BE TAXED IN THE HANDS OF THE RECIPIENT OF THE DIVIDEND NAMELY THE SHAREHOLDE R. THE EFFECT OF SECTION 2(22) IS TO PROVIDE AN INCLUSIVE DEFINIT ION OF THE EXPRESSION 'DIVIDEND'. CLAUSE (E) EXPANDS THE NATUR E OF PAYMENTS WHICH CAN BE CLASSIFIED AS A DIVIDEND. CLA USE (E) OF SECTION 2(22) INCLUDES A PAYMENT MADE BY THE COMPAN Y IN WHICH COMPANY IN WHICH THE PUBLIC ARE NOT SUBSTANTI ALLY INTERESTED BY WAY OF AN ADVANCE OR LOAN TO A SHAREH OLDER OR TO ANY CONCERN OF WHICH SUCH SHAREHOLDER IS A MEMBER O R PARTNER SUBJECT TO THE FULFILLMENT OF THE REQUIREMENTS WHIC H ARE SPELT OUT IN THE PROVISION. SIMILARLY A PAYMENT MADE BY A CO MPANY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDER IS TREATED BY CLAUSE (E) TO BE INCLUDED IN THE EXPRESS ION 'DIVIDEND'. CONSEQUENTLY THE EFFECT OF CLAUSE (E) OF SECTION 2 (22) IS TO BROADEN THE AMBIT OF THE EXPRESSION 'DIVIDEND' BY I NCLUDING CERTAIN PAYMENTS WHICH THE COMPANY HAS MADE BY WAY OF A LOAN OR ADVANCE OR PAYMENTS MADE ON BEHALF OF OR FOR THE INDIVIDUAL BENEFIT OF A SHAREHOLDER. THE DEFINITION DOES NOT A LTER THE LEGAL ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 7 | P A G E POSITION THAT DIVIDEND HAS TO BE TAXED IN THE HANDS OF THE SHAREHOLDER. CONSEQUENTLY IN THE PRESENT CASE THE P AYMENT EVEN ASSUMING THAT IT WAS A DIVIDEND WOULD HAVE TO BE T AXED NOT IN THE HANDS OF THE ASSESSEE BUT IN THE HANDS OF THE S HAREHOLDER. THE TRIBUNAL WAS IN THE CIRCUMSTANCES JUSTIFIED IN CO MING TO THE CONCLUSION THAT IN ANY EVENT THE PAYMENT COULD NO T BE TAXED IN THE HANDS OF THE ASSESSEE. WE MAY IN CONCLUDING NOT E THAT THE BASIS ON WHICH THE ASSESSEE IS SOUGHT TO BE TAXED I N THE PRESENT CASE IN RESPECT OF THE AMOUNT OF RS. 32 00 000 IS T HAT THERE WAS A DIVIDEND UNDER SECTION 2(22) (E) AND NO OTHER BASIS HAS BEEN SUGGESTED IN THE ORDER OF THE ASSESSING OFFICER. 9. SINCE THE ASSESSEE IS A SHARE HOLDER OF THE LEND ING COMPANY AND ALSO HAVING A SUBSTANTIAL INTEREST IN THE BORROWING COMPANY THEREFORE THE CONDITION AS PRESCRIBED U/S 2(22)(E) ARE SATISF IED TO INCLUDE THE PAYMENT IN QUESTION IN THE AMBIT OF DIVIDEND TOBE T AXED IN THE HANDS OF THE ASSESSEE. WE DO NOT AGREE WITH THE CONTENTION O F LD. AUTHORIZED REPRESENTATIVE THAT ONLY A PROPORTIONATE OF THE AMO UNT OF LOAN RECEIVED BY THE BORROWING COMPANY CAN BE ASSESSED AS DIVIDEN D IN THE HANDS OF THE ASSESSEE TO THE EXTENT OF HIS SHARE HOLDING IN THE BORROWING COMPANY DUE TO THE SIMPLE REASON THAT AS PER PROVIS IONS OF SECTION 2(22)(E) THE TWO CONDITIONS ARE REQUIRED TO BE FULF ILLED VIZ. THE PERSON HAVING NOT LESS THAN 10% OF VOTING POWER IN THE LEN DING COMPANY AND A SUBSTANTIAL INTEREST IN THE BORROWING CONCERN. BOTH THESE CONDITIONS ARE SATISFIED THEREFORE IN THE ABSENCE OF ANY SUCH P ROVISION OF PROPORTIONATE ADDITION NOTHING CAN BE READ IN BETWE EN THE UNAMBIGUOUS LANGUAGE OF THE PROVISION OF SECTION 2( 22)(E). FURTHER IT IS NOT THE CASE OF MORE THAN ONE SHARE HOLDER COMPLYIN G THE CONDITIONS OF HAVING NOT LESS THAN 10% VOTING POWER IN THE LENDIN G COMPANY AND ALSO HAVING SUBSTANTIAL INTEREST IN THE BORROWING COMPAN Y. FROM PERUSAL OF SHARE HOLDING PATTERN AT PAGE 141 OF THE PAPER BOO K WE FIND THAT ONLY THE ASSESSEE IS HOLDING 15% OF THE VOTING POWER IN THE LENDING COMPANY AND 45% OF VOTING POWER IN THE BORROWING COMPANY A ND NO OTHER PERSON/SHARE HOLDER IS COMMON OTHER THAN THE ASSESS EE. THEREFORE THERE IS NO QUESTION OF ANY PROPORTIONATE ADDITION WHEN THE ASSESSEE IS THE ONLY SHARE HOLDER WHO FULFILLS THE CONDITION PR ESCRIBED U/S 2(22)(E). THE DECISION RELIED UPON BY THE LD. AUTHORIZED REPR ESENTATIVE IN THE CASE OF SHRI SUBRATA BANIK VS. CIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE RATHER THE SAID DECISION IS ON THE QUESTION OF CHANGE OF OPINION WHILE EXERCISING THE JURISDICTION /REVISIONAL POWERS U/S 263 OF THE INCOME TAX ACT. ITA NO.28/MUM/2011 ASSESSMENT YEAR: - 2007-08 8 | P A G E 5. SINCE THE ASSESSEE IS HAVING 15% VOTING POWERS IN T HE LENDING COMPANY AND 99% OF SHARE HOLDING IN THE BORROWING COMPANY THER EFORE THE CONDITION STIPULATED U/S 2(22)(E) FOR INCLUDING THE PAYMENT IN QUESTION AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE ARE SATISFIED. ACCORDINGLY WE SET ASIDE THE IMPUGNED ORDER OF CIT(A) AND RESTORE THE ORDER OF ASSESSING OFFICER. 6. IN THE RESULT APPEAL OF THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14 TH DAY OF NOVEMBER 2014 SD/- SD/- (B.R.BASKARAN) (VIJAY PAL RAO) (ACCOUNTANT MEMBER/ YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 14-11 -2014 SKS SR. P.S COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR E BENCH ITAT MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI