DCIT, Circle - 3, Kolkata, Kolkata v. M/s. Jindal India Ltd., Howrah

ITA 368/KOL/2010 | 2005-2006
Pronouncement Date: 30-09-2010

Appeal Details

RSA Number 36823514 RSA 2010
Bench Kolkata
Appeal Number ITA 368/KOL/2010
Duration Of Justice 7 month(s) 11 day(s)
Appellant DCIT, Circle - 3, Kolkata, Kolkata
Respondent M/s. Jindal India Ltd., Howrah
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2010
Appeal Filed By Department
Bench Allotted A
Tribunal Order Date 30-09-2010
Date Of Final Hearing 24-08-2010
Next Hearing Date 24-08-2010
Assessment Year 2005-2006
Appeal Filed On 17-02-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA () BEFORE . . . . . . . . !' !' !' !' /AND . .. . . .. .! !! ! # ) [BEFORE HONBLE SRI D. K. TYAGI JM & HONBLE SRI C . D. RAO AM] '$ '$ '$ '$ / I.T.A NOS. 368 & 369 /KOL/2010 %&' !() %&' !() %&' !() %&' !()/ // / ASSESSMENT YEARS : 2005-06 & 2006-07 DEPUTY COMMISSIONER OF INCOME-TAX -VS- M/S. JIND AL INDIA LTD. CIRCLE-3 KOLKATA. (+ / APPELLANT ) (-+ / RESPONDENT ) FOR THE APPELLANT : SRI D. R. SINDHAL FOR THE RESPONDENT SRI J. P. KHAITAN . / ORDER PER D. K. TYAGI JM ( . . . . . . . . ) THE REVENUE IS AGGRIEVED BY THE ORDERS OF THE LD. C IT(A) KOLKATA BOTH DATED 17.11.2009 FOR ASSESSMENT YEARS 2005-06 & 2006-07. SINCE FACTS ARE IDENTICAL AND GROUNDS ARE COMMON FOR THE SAKE OF BREVITY WE DIS POSE OF BOTH THE APPEALS BY THIS CONSOLIDATED ORDER. 2. THE APPEAL FOR ASSESSMENT YEAR 2005-06 IS TIME B ARRED BY FOUR DAYS. A CONDONATION PETITION HAS BEEN FILED BY THE REVENUE EXPLAINING THE REASONS FOR THE DELAY IN FILING THE APPEAL. AFTER HEARING BOTH THE PARTI ES AND PERUSING THE CONDONATION PETITION WE CONDONE THE DELAY OF FOUR DAYS AND THE APPEAL HAS BEEN TAKEN UP FOR HEARING ON MERITS. 3. IN GROUND NO. 1 FOR BOTH THE ASSESSMENT YEARS T HE REVENUE IS AGITATING AGAINST THE DELETION OF ADDITION OF RS.1 35 48 466/- FOR AS SESSMENT YEAR 2005-06 AND RS.1 18 50 085/- FOR ASSESSMENT YEAR 2006-07 BY TRE ATING IT AS REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE AS HELD BY THE ASSESSING OF FICER. FACTS IN BRIEF AS OBSERVED BY THE ASSESSING OFFICER FOR ASSESSMENT YEAR 2005-06 ARE THAT AT THE TIME OF SCRUTINY THE ASSESSEE WAS ASKED TO PRODUCE DETAILS PURCHASE OF S TORES AND SPARES. PERUSAL OF THE DETAILS REVEAL THAT DURING THE YEAR THE ASSESSEE H AD CLAIMED PURCHASE OF ROLLS AS REVENUE EXPENSES UNDER THE HEAD STORES & SPARES. AS PER PROVISION OF INCOME-TAX RULES ROLLS IN IRON & STEEL INDUSTRIES ARE ELIGIBL E FOR DEPRECIATION @ 80%. WHEN CONFRONTED WITH SUCH FINDING THE ASSESSEE RELIED ON THE DECISION OF THE COURT IN THE CASE OF MALHOTRA INDUSTRIES CORPORATION (MADRAS) 254 ITR 635. THE ASSESSING OFFICER WAS 2 OF THE VIEW THAT THE COURT IN A TERSE ORDER PRECLUD ED THE REVENUE FROM REFERRING THE ISSUE OF DEPRECIATION AS NO SUCH QUESTION WAS REFERRED T O IN THE MEMORANDUM OF APPEAL. THUS ONLY ON TECHNICAL ISSUES THE APPEAL OF THE DE PARTMENT WAS TURNED DOWN. HENCE THE CASE IS NOT APPLICABLE & 80%/40% DEPRECIATION W ILL ONLY BE ALLOWED ON PURCHASE OF ROLLS IN THE CASE OF THE ASSESSEE. HE THUS ARRI VED AT THE CONCLUSION THAT CONSIDERING THE HIGH RATE OF WEAR AND TEAR OF ROLLS HIGH RATE O F DEPRECIATION HAS BEEN PRESCRIBED IN THE RULES ITSELF. THEREFORE BASED UPON THE DATES OF PURCHASES OF ROLLS HE ALLOWED NORMAL DEPRECIATION FOR THE PURCHASE OF RS.41 11 07 3/- UP TO 30 TH SEPTEMBER 2004 AND OF RS.2 12 10 418/- FOR THE PERIOD FROM 01/10/2004 TO 31/03/2005 AT THE PRESCRIBED RATES AND DISALLOWED THE BALANCE CLAIM OF THE ASSESSEE AS EXCESS CLAIM OF EXPENSES RESULTING IN TO THE ABOVEMENTIONED ADDITION OF RS.1 35 48 466 /- TO THE INCOME OF THE ASSESSEE. IN RESPECT OF ASSESSMENT YEAR 2006-07 AN ADDITION OF RS.1 18 50 085/- ON ACCOUNT OF EXCESS EXPENSES CLAIMED FOR THE REPLACEMENT OF STEE L ROLLS. THE LD. DCIT HAD MENTIONED IN HIS ORDER THAT PURCHASE OF ROLLS TO TH E TUNE OF RS.34 05 000/- WAS MADE WITHIN 30 TH SEPTEMBER 2005 WHILE PURCHASE OF RS.1 86 15 141/ - WAS MADE BEFORE 31 ST MARCH 2006. CONSIDERING THE APPLICABLE RATE OF DE PRECIATION THE EXCESS CLAIM OF EXPENSES TO THE TUNE OF RS.1 18 50 085/- WAS MADE IN THE ACCOUNT. HENCE SAME WAS DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSE SSEE FOR ASSESSMENT YEAR 2006-07 ALSO. IN APPEAL THE LD. CIT(A) DELETED THE ADDITIO NS. AGGRIEVED BY THE SAID ORDERS THE REVENUE IS NOW IN APPEALS BEFORE US. 4. AT THE TIME OF HEARING BEFORE US THE LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE LD. CIT(A) WITHOUT A PPRECIATING THE FACT THAT 80% DEPRECIATION IS AVAILABLE ON ROLLS IN IRON AND STE EL INDUSTRY DELETED THE ADDITION WHICH IS NOT AS PER LAW. PLACING RELIANCE ON THE CASES DECI DED BY HYDERABAD BENCH OF ITAT VIZ. ANDHRA CEMENT CO. LTD. VS. ITO 18 ITD 93 AND SPECIAL BENCH DECISION OF MADRAS ITAT IN THE CASE OF RAJAPALAYAM MILLS LTD. VS. ITO 18 ITD 114 SUBMITTED THAT SEC. 32 ALLOWS DEPRECIATION ON THE DIFFERENT ASSETS AT THE RATES PRESCRIBED AND THE APPENDIX CONTAINING THE TABLE OF DEPRECIATION RATES SHOULD B E CONSTRUED IN THE SAME MANNER AS SECTION 32 OF THE ACT. THE LD. DR FURTHER SUBMITTE D THAT THE RELIANCE PLACED BY THE ASSESSEE ON CIT VS. MALHOTRA INDUSTRIAL CORPORATION (2002) 254 ITR 635 IS MISPLACED AS IN THAT CASE APPENDIX 1 CONTAINING THE TABLE OF DEPRECIATION RATES WAS NOT AN ISSUE. THEREFORE THE RATIO AS LAID DOWN BY IT IS NOT APPL ICABLE TO THE FACTS OF THIS CASE. SIMILARLY THE OTHER DECISIONS RELIED ON BY THE ASS ESSEE BEFORE THE LD. CIT(A) ARE ALSO NOT APPLICABLE TO THE FACTS OF THIS CASE. HE THER EFORE CONCLUDING HIS ARGUMENTS PRAYED 3 THAT THE ORDER PASSED BY THE LD. CIT(A) MAY KINDLY BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 5. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE LD. CIT(A) FURT HER PLACED RELIANCE ON EXPLANATORY NOTES SECOND EDITION (1996) VOLUME 3 ON HARMONIZED COMMODITY DESCRIPTION & CODING SYSTEM (RELEVANT PART OF THE NOTES HAS BEEN FILED) AND SUBMITTED THAT ROLLS FOR ROLLING MILLS ARE PARTS OF THE MACHINERY WHICH ARE REPLACED FROM TIME TO TIME DURING THE YEAR ITSELF AND DO NOT GIVE RISE TO ANY ASSET OR AN ADVANTAGE OF ANY ENDURING NATURE WHICH COULD BE TREATED AS CAPITAL EXPENDITURE LIAB LE FOR DEPRECIATION. FOR MAKING THIS SUBMISSION HE PLACED RELIANCE ON THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS P. LTD. (2007) 293 ITR 201 (SC) AND FURTHER PLACED RELIANCE ON THE FOLLOWING DECISIONS : I) CIT VS. MALHOTRA INDUSTRIAL CORPORATION (2002) 2 54 ITR 635 (P&H) II) CIT VS. MYSORE SPUN CONCRETE PIPE PVT. LTD. (19 92) 194 ITR 159 (KAR) AND III) CIT VS- RENU SAGAR POWER CO. LTD. (2008) 298 ITR 94 (ALL) TO MEET THE ARGUMENT OF THE LD. DR THAT SINCE AS PE R PROVISION OF I. T. RULES ROLLS USED IN IRON AND STEEL INDUSTRY ARE ELIGIBLE FOR DEPRECI ATION @ 80% THE EXPENDITURE INCURRED ON THESE ROLLS CANNOT BE ALLOWED AS REVENUE EXPENDI TURE THE LD. COUNSEL FOR THE ASSESEE PLACED RELIANCE ON A DECISION OF DELHI HIGH COURT I N THE CASE OF CIT VS. HI LINE PENS PVT. LTD. (2008) 306 ITR 182 (DEL) AND SUBMITTED TH AT IF THE EXPENSES ARE OTHERWISE ALLOWABLE THE SAME CANNOT BE DISALLOWED SIMPLY BECA USE DEPRECIATION U/S. 32 OF THE ACT IS AVAILABLE TO THE ASSESEE SINCE IN THIS CASE ROLL S USED IN IRON AND STEEL INDUSTRIES ARE THE PARTS OF THE MACHINERY AND ARE REPLACED VERY FREQUE NTLY DURING THE YEAR IT FALLS IN THE NATURE OF CURRENT REPAIRS AS IT DID NOT RESULT IN C REATING ANY CAPITAL ASSET OR BENEFIT OF ENDURING NATURE AND THEREFORE CANNOT BE DISALLOWE D SIMPLY BECAUSE ASSESSEE WAS ENTITLED TO GET 80% DEPRECIATION ON THIS ITEM U/S. 32 OF THE ACT. HE ALSO SUBMITTED THAT LD. DR WAS NOT CORRECT IN STATING THAT THE FACTS OF THE CASE DECIDED BY HONBLE P&H HIGH COURT ARE DIFFERENT FROM THAT OF THE ASSESSEE S CASE ON HAND. ON THE CONTRARY FACTS OF THIS CASE ARE IDENTICAL AS IS CLEAR FROM T HE ORDER OF THE ITAT WHICH WAS CONFIRMED BY THE P&H HIGH COURT IN WHICH PRESCRIBED RATE OF DEPRECIATION OF ROLLS WAS ALSO TAKEN INTO CONSIDERATION. CONCLUDING HIS ARGU MENT HE SUBMITTED THAT THE ORDER PASSED BY THE LD. CIT(A) MAY KINDLY BE CONFIRMED. 4 6. AFTER HEARING THE RIVAL SUBMISSIONS CAREFULLY P ERUSING THE MATERIAL AVAILABLE ON RECORD THE CASE LAWS CITED BY BOTH THE PARTIES AND THE EXPLANATORY NOTES ON HARMMONIZED COMMODITY DESCRIPTION & CODING SYSTEM WE FIND THAT THE FACTS OF THE CASE OF CIT -VS- MALHOTRA INDUSTRIAL CORPORATION (2 002) 254 ITR 635 WHEREIN THE HONBLE P&H HIGH COURT HAD CONFIRMED THE ORDER OF THE CHANDIGARH BENCH ARE IDENTICAL TO THE FACTS OF THE CASE ON HAND. THE IT AT CHANDIGARH BENCH IN THAT ORDER HAS HELD AS UNDER : WE HAVE CONSIDERED THE RIVAL SUBMISSIONS EXAMINED THE FACTS EVIDENCE AND MATERIAL ON RECORD. WE HAVE ALSO PERUSED THE ORDERS OF THE A UTHORITIES BELOW. WE HAVE ALSO REFERRED TO THE VARIOUS DECISIONS RELIED UPON BY LE ARNED COUNSEL FOR THE ASSESSEE NOW THE MAIN ISSUE THAT NEEDS TO BE ADDRESSED BY US IS WHETHER THE EXPENDITURE INCURRED ON REPLACEMENT OF ROLLING MILL ROLLS CONSTITUTES A CAP ITAL EXPENDITURE OR REVENUE EXPENDITURE. THE FACTS DETAILED ABOVE CLEARLY SHOW THAT THE ASSESSEE HAS ALL THROUGHOUT BEEN CLAIMING EXPENDITURE ON REPLACEMENT OF ROLLS A S REVENUE EXPENDITURE UP TO THE ASSESSMENT YEAR 1991-92 THE DEPARTMENT HAS ALLOWED THE SAME AS DEDUCTION. IN NONE OF THE EARLIER ASSESSMENT YEARS THE EXPENDITURE WA S TREATED AS CAPITAL EXPENDITURE NOW THE ONLY ISSUE BEFORE US IS THAT THE MERE FACT THAT THE APPENDIX CITED SUPRA PRESCRIBED THE RATE OF DEPRECIATION OF ROLLS PRIOR TO SEPTEMBE R 30 1991 AS 100 PER CENT AND THEREAFTER AT 50 PER CENT WOULD SHOW THAT THE LEGIS LATURE HAD INTENDED TO TREAT THE SAME AS CAPITAL IN NATURE WE ARE UNABLE TO ACCEPT THE RE ASONING GIVEN BY THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT IF THE INTENTION OF TH E LEGISLATURE WAS NOT TO TREAT SUCH EXPENDITURE AS CAPITAL IN NATURE THERE WAS NO NECE SSITY IN PROVIDING THE RATE OF DEPRECIATION ON THE ROLLS FOR THE SIMPLE REASON THA T EXPENDITURE INCURRED ON ROLLS PRIOR TO THE COMMENCEMENT OF THE BUSINESS WOULD BE CAPITA L IN NATURE. THEREFORE IT IS NECESSARY TO PROVIDE THE RATE OF DEPRECIATION ON RO LLS SO THAT DEPRECIATION AT THAT RATE COULD BE ALLOWED TO THE ASSESSEE. BUT IT DOES NOT MEAN THAT EXPENDITURE INCURRED ON REPLACEMENT OF ROLLS SUBSEQUENT TO THE COMMENCEMENT OF THE BUSINESS WOULD ALSO BE A CAPITAL EXPENDITURE. THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF MYSORE SPUN CONCRETE PIPE PVT. LTD [1992] 194 ITR 159 IS DIRECTLY ON THIS ISSUE. IN THAT CASE THE EXPENDITURE INCURRED WAS ON REPLACEMENT OF DAMA GED MOULDS AND WAS CLAIMED AS REVENUE EXPENDITURE THOUGH PRIOR TO THE COMMENCEME NT OF THE BUSINESS EXPENDITURE ON MOULDS WAS CAPITALIZED. IT MAY BE MENTIONED THAT TH E SAME APPENDIX REFERRED TO ABOVE PRESCRIBED DEPRECIATION AT 40 PER CENT ON MOULDS US ED IN RUBBER AND PLASTIC GOODS FACTORIES AND THIS ITEM FIGURES AT (III) UNDER THE HEAD MACHINERY AND PLANT THIS ONLY SHOWS THAT THE RATE OF DEPRECIATION MENTIONED IN TH E APPENDIX PROVIDES DEPRECIATION WHEN THE EXPENDITURE IS CONSIDERED AS CAPITAL AND N OT IN THE CASE WHERE THE EXPENDITURE ITSELF IS REVENUE IN NATURE. NOW IT IS OBVIOUS THA T THE NATURE OF THE ASSESSEES BUSINESS IS SUCH THAT IT REQUIRES FREQUENT REPLACEMENT OF ROLLS THE EXPENDITURE INCURRED THEREON WOULD CERTAINLY FALL IN THE NATURE OF CURRENT REPAI RS AS THE SAME DOES NOT RESULT IN CREATING A CAPITAL ASSET OR BENEFIT OF ENDURING NAT URE IT MAY FURTHER BE MENTIONED THAT IN THE CASE OF MADRAS CEMNT LTD [1992] 42 TTJ 175 THE INCOME-TAX APPELLATE TRIBUNAL MADRAS HAD HELD THAT THE EXPENDITURE INC URRED ON REPLACEMENT OF PART OF CAPITAL ITEM THOUGH CAPITALIZED WOULD STILL BE I N THE NATURE OF CURRENT REPAIRS. ENTRIES MADE IN THE BOOKS OF ACCOUNT FOR TREATING THE EXPEN DITURE AS CAPITAL WOULD NOT BE A DECISIVE TEST TO DETERMINE THAT THE EXPENDITURE WAS CAPITAL IN NATURE. SIMILARLY IN THE CASE OF JAGATJIT INDUSTRIES LTD. [2000] 241 ITR 556 THE DELHI HIGH COURT HAS HELD THAT THE EXPENDITURE ON REPLACEMENT OF DAMAGED MOULDS WA S REVENUE EXPENDITURE IN THE CASE OF CO-OPERATIVE SUGARS LTD [1999] 235 ITR 343 THE KERALA HIGH COURT HAS HELD THAT EXPENDITURE ON MACHINERY MAINTENANCE OF SUGA R PLANT BY REPLACING SUBSTANTIAL 5 PART OF THE PLANT WAS REVENUE EXPENDITURE AS NO NEW ASSET WAS BROUGHT INTO EXISTENCE. EVEN THE JURISDICTIONAL HIGH COURT OF PUNJAB AND HA RYANA IN THE CASE OF KHALSA NIRBHAI TRANSPORT CO. (P) LTD. [1971] 82 ITR 741 H AS HELD THAT THE EXPENDITURE INCURRED ON REPLACEMENT OF PETROL ENGINES BY DIESEL ENGINES IN ITS BUSES WAS A REVENUE EXPENDITURE IN THE LIGHT OF THE LEGAL POSITION DISC USSED ABOVE WE HOLD THAT THE EXPENDITURE INCURRED ON REPLACEMENT OF DAMAGED ROLL S WAS IN THE NATURE OF REVENUE EXPENDITURE AND NOT CAPITAL IN NATURE THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION AS CURRENT REPAIRS. IN THIS VIEW OF THE MATTER WE SE T ASIDE THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND DIRECT THE ASSESSING OF FICER TO ALLOW DEDUCTION ON THE REPLACEMENT COST OF ROLLS AS CURRENT REPAIRS ACCORD INGLY THIS GROUND OF APPEAL IS ALLOWED FOR BOTH THE ASSESSMENT YEARS. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS- SARAVANA SPINNING MILLS P. LTD. (SUPRA) AT PAGE 208 HAS OBSERVED AS UNDER : TO GIVE AN EXAMPLE A COMPRESSOR IS AN IMPORTANT P ART OF AN AIR-CONDITION MACHINE. REPAIR OF THE COMPRESSOR WILL COME IN THE CONNOTATI ON OF THE WORD CURRENT REPAIRS IN SECTION 31(I) OF THE SAID ACT BECAUSE THE ASSESSEE DOES NOT REPLACE THE AIR-CONDITION MACHINE. AT THE HIGHEST HE REPLACES A PART OF THE AIR-CONDITION MACHINE. SO IS THE CASE OF THE PICTURE TUBE IN A TELEVISION SET WHEN THE PICTURE TUBE IS REPLACED THE TELEVISION SET IS NOT REPLACED THEREFORE SUCH REPAIRS ALONE CAN COME WITHIN THE CONNOTATION OF THE WORD CURRENT REPAIRS IN SECTION 31(I) OF THE SAID ACT AS IT STOOD AT THE MATERIAL TIME. IN THE CASE OF CIT VS- MYSORE SPUN CONCRETE PIPE P VT. LTD. (SUPRA) THE HONBLE KARNATAKA HIGH COURT HAS HELD AS UNDER : HELD THAT IT WAS A MATTER OF COMMON KNOWLEDGE THA T MOULDS DO NOT LAST LONG. THE ASSESEE REQUIRED MOULDS WHICH BY CONSTANT USE NE EDED REPLACEMENT. THE REPLACEMENT OF MOULDS WAS NOT IN THE NATURE OF REPLACEMENT OF A CAPITAL MACHINERY BUT IN THE NATURE OF REPLACING A PART OF A MACHINERY ESPECIALLY IN TH E CONTEXT OF THE ENTIRE SET UP BEING TREATED AS ONE UNIT. THE REPLACEMENT OF MOULDS WAS IN THE NATURE OF MAINTENANCE OF THE MACHINERY INSTALLED IN THE FACTORY. IT COULD BE T ERMED LOOSELY AS REBUILDING OF THE MACHINERY AS A WHOLE USED IN THE PRODUCTIVE PROCESS OF THE ASSESSEE. THEREFORE THE EXPENDITURE INCURRED ON REPLACEMENT OF DAMAGED MOUL DS AND REPLACEMENT OF RUNNERS AND END RINGS WAS REVENUE IN NATURE. IN THE CASE OF CIT VS- RENU SAGAR POWER CO. LTD. ( SUPRA) THE HONBLE ALLAHABAD HIGH COURT HAS HELD AS UNDER : HELD THAT THE TRIBUNAL HAD FOUND THAT THE TURBINE ROTOR WAS PART OF THE TURBO GENERATOR SET. THE TRIBUNAL WAS JUSTIFIED IN HOLDI NG THAT THE EXPENDITURE BY THE ASSESSEE ON THE REPLACEMENT OF ONE TURBINE ROTOR AM OUNTING TO RS.1 05 44 904/- WAS ON ACCOUNT OF CURRENT REPAIRS AND AS SUCH IT WAS REVEN UE EXPENDITURE. WE FURTHER FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE IN THIS CASE ROLLS USED IN IRON AND STEEL INDUSTRIES A RE THE PARTS OF THE MACHINERY AND ARE REPLACED VERY FREQUENTLY DURING THE YEAR THE EXPENS ES INCURRED ON REPLACEMENT OF THE ROLLS IS ALLOWABLE AS CURRENT REPAIRS THEREFORE C ANNOT BE DISALLOWED SIMPLY BECAUSE ASSESSEE WAS ENTITLED TO GET 80% DEPRECIATION ON TH IS ITEM U/S. 32 OF THE ACT. THE 6 HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. HI LINE PENS PVT. LTD. (SUPRA) HAS HELD AS UNDER : HELD THAT THE REPLACEMENT WAS NOT OF THE PREMISES BUT OF CERTAIN PARTS SUCH AS THE INTERNAL WIRES AND GI PIPES. THE ANALOGY OF REPLAC EMENT OF THE ENTIRE MACHINE WAS NOT APPLICABLE TO THE CASE OF THE ASSESEE. IT WAS NOT THE INTENTION OF THE ASSESSEE TO BRING ABOUT ANY NEW CAPITAL ASSET. THE EXPENSES INCURRED BY THE ASSESSEE WERE TOWARDS REPAIRING THE PREMISES TAKEN ON LEASE SO AS TO MAKE THEM MORE CONDUCIVE TO ITS BUSINESS ACTIVITY. SUCH EXPENSES COULD FALL WITHIN THE EXPR ESSION OF REPAIRS TO THE PREMISES AS APPEARING IN SECTION 30(A)(I). ONCE THE ASSESSEES CLAIM FALLS WITHIN THAT PROVISION THERE WAS NO QUESTION OF CONSIDERING THE QUESTION O F APPLICABILITY OF SECTION 32. THUS THE TRIBUNAL RIGHTLY AGREED WITH THE VIEW TAKEN BY THE COMMISSIONER (APPEALS) AND HELD IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE WE FIND NO INFIRMITY IN THE O RDERS OF THE LD. CIT(A) IN DELETING THE ADDITIONS FOR BOTH THE ASSESSMENT YEARS. THEREFORE THE GROUNDS OF APPEAL OF THE REVENUE FOR BOTH THE ASSESSMENT YEARS ARE DISMISSED. 7. GROUND NOS. 2 AND 3 FOR BOTH THE ASSESSMENT YEAR S RELATE TO DELETION OF ADDITIONS ON ACCOUNT DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT . BRIEFLY STATED FACTS OF THE CASE AS OBSERVED BY THE AO ARE AS UNDER : EXAMINATION OF THE ACCOUNTS ALSO REVEALED THAT THE ASSESSEE DURING THE YEAR HAD TAKEN A LOAN OF PS. 5 45 00 000/- FROM M/S BAZALONI GROUP LTD. IN ORDER TO INVESTIGATE FURTHER IN THIS MATTER THE ASSESSEE WAS ASKED TO SUBMIT SHA REHOLDING PATTERN OF BOTH THE COMPANIES. COMPARISON REVEALED THAT BOTH WERE SISTE R CONCERNS SHARING COMMON DIRECTOR/PROMOTERS. HENCE IN THE REQUISITION DATED 06. 10.08 IT WAS POINTED OUT IN REPLY TO MY QUERY RAISED IN RESPECT OF APPLICABILI TY OF SECTION 2(22)(E) OF THE ACT ON ACCEPTANCE OF LOAN BY THE ASSESSEE FROM M/S. BAZAL ONI GROUP LTD. PLEASE SUBMIT NAMES OF THE DIRECTORS WITH THEIR SHAREHOLDING RATI OS AND ALSO MENTION OTHER MAJOR (10% & ABOVE) SHAREHOLDERS & THEIR SHAREHOLDING RAT IOS IN THE CASES OF BOTH ASSESSEE & M/S BAZALONI GROUP LTD. MAJOR SHAREHOLDING OF T HE COMPANIES WERE FOUND TO BE AS FOLLOWS: M/S JINDAL INDIA LTD.: NAME NO. OF SHARES HOLDING RATIO (1) SOYUZ TRADING CO. LTD 1 96 413 13 21% (2) RISHI TRADING CO. LTD. 1 25 242 8.42% (3) M/S BAZALONI GROUP LTD. 1 11 000 7.47% (4) PENROSE MERCANTILE LTD. 1 50 000 10.09% (5) JINDAL PHOTO INVESTMENT LTD. 1 78 300 11.99 % (6) CONSOLIDATED PHOTO & FINVEST LTD 1 90 000 12 .78%. 7 M/S BAZALONI GROUP LTD.: NAME NO. OF SHARES HOLDING RATIO (1) SOYUZ TRADING CO. LTD. 1.96.413 10.43% (2) RISHI TRADING CO. LTD. 1 25 242 16.33% (3) M/S. JINDAL INDIA LTD. 9 84 885 31.52% (4) SMT. R D SARAF 2 04 965 06.56% (5) SRI S S SARAF 3 20 205 10.25% (6) SMT. D SARAF 3 75 145 12.00% (7) SMT. D. SARAF (HUF) 1 54 975 04.96% (8) MASTER H V SARAF 1 94 710 06.23% EVIDENTLY ALL MAJOR SHAREHOLDERS WERE COMMON OR SI STER CONCERNS. GIVEN THIS BACKGROUND THE NATURE OF COLLUSION BETWEEN THESE T WO PARTIES WAS APPARENT OBVIOUS AND PALPABLE. NOW SECTION 2(22)(E) OF THE ACT CLEARLY READS DI VIDEND INCLUDES ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBL IC ARE SUBSTANTIALLY INTERESTED OF ANY SUM .. BY WAY OF ADVANCE OR LOAN TO A SHAREHOL DER HOLDING NOT LESS THAN TEN PERCENT OF THE VOTING POWER .. IN THE PRESENT EASE MONEY IN THE FORM OF LOAN TRA VELLED FROM M/S. BAZALONI GROUP LTD. TO THE ASSESSEE WHO HELD 31.52% OF SHAR ES OF M/S BAZALONI GROUP LTD. IT WAS THUS A CLEAR CASE OF DEEMED DIVIDEND IN THE H ANDS OF THE ASSESSEE TO THE EXTENT OF THE ENTIRE LOAN AMOUNT OF RS.5 45 00 000/-. HOWEVER THE ASSESSEE ARGUED THAT AS PER PROVISIONS OF SECTION 2(18)(B)(B)(C) OF THE ACT M/S BAZALONI GROUP LTD WAS A COMPANY IN WHI CH THE PUBLIC ARE SUBSTANTIALLY INTERESTED AS RISHI TRADING CO. LTD. AND SOYUZ TRA DING CO. LTD WERE QUOTED COMPANIES AND THE ASSESSEE ITSELF THOUGH NOT QUOT ED WAS A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED BY VIRTUE OF SE CTION 2(18)(B)(B)(C) OF THE ACT. CLEARLY IN THE PRESENT CASE ONE THING HAS TO BE AS CERTAINED AND THAT IS THE STATUS OF M/S BAZALONI GROUP LTD. DIRECTLY IT WAS NOT A QUOTED OR WIDELY HELD COMPANY . ITS STATUS WAS TOTALLY DEPENDENT ON THE STATUS OF THE ASSESSEE. AGAIN IT W AS ALSO TRUE THAT THE ASSESSEE IN ITSELF WAS NOT A COMPANY IN WHICH THE PUBLIC ARE S UBSTANTIALLY INTERESTED. THE STATUS OF THE ASSESSEE WAS DEPENDENT UPON THE STATUS OF OTHER COMPANIES HOLDING ITS SHARES. IT WAS OBSERVED THAT ONLY M/S SOYUZ TRADING CO. LTD. M/S RISHI TRADING CO. LTD. AND M/S. PENROSE MERCANTILE LTD. AMONG SHAREHOLDERS W ERE QUOTED COMPANIES. TOTAL 31.72% OF SHARES OF THE ASSESSEE COMPANY WAS HELD BY THESE THREE COMPANIES. CLEARLY THIS FELL MUCH SHORT OF CRITERIA SET OUT IN SECTIO N 2(18)(B)(B) OF THE ACT. THE A/RS FURTHER ARGUED THAT M/S JINDAL PHOTO INVES TMENT LTD. WHICH WAS HOLDING 11.99% OF SHARES OF THE ASSESSEE COMPANY W AS A 100% SUBSIDIARY OF M/S. CONSOLIDATED FINVEST & HOLDING LTD. AND M/S CONSOLI DATED FINVEST & HOLDING LTD. BEING A QUOTED COMPANY THE ASSESSEE CLAIMED THE ST ATUS OF BEING A SUBSTANTIALLY INTERESTED BY VIRTUE OF PROVISION U/S 2(18)(B)(B)(C ) OF THE ACT. THE ARGUMENTS OF THE ASSESSEE SHARE HOLDING PATTER NS AND SECTION 2(18)(B)(B)(C) OF THE ACT AND EXPLANATION THEREOF WAS EXHAUSTIVELY PERUSED. IT WAS ALSO OBSERVED THAT DIRECTLY NONE OF THE COMPANIES I.E. M/S. BAZALONI GROUP LTD. AND TH ASSESSEE MET THE CRITERIA OF BEING WIDELY HELD COM PANIES. FURTHER ALL THESE COMPANIES WERE CLOSELY HELD UNDER THE WINGS OF SAME SETS OF DIRECTORS/PROMOTERS. 8 IN THIS RESPECT THE DECISION OF THE APEX COURT IN T HE CASE OF SAHU JAIN LIMITED 103 ITR 135(SC) WAS ALSO EXAMINED. THE DECISION AN D THE CIRCUMSTANCES ARE CLOSELY COMPARABLE. LIKEWISE THAT IN THE CASE OF THE COMPA NY REFERRED IN THE COURT DECISION BOTH THE ASSESSEE AND M/S. BAZALONI GROUP LTD. WERE CLOSELY HLD. SHARES OF THESE COMPANIES WERE ALSO HELD BY GROUP COMPANIES AND SIS TER CONCERNS WITH COMMON PROMOTER/DIRECTORS. IN THE REFERRED CASE THE COURT HELD THIS IS A CASE WHERE MORE IS MEANT THAN MEETS THE EYE. WE ARE UNABLE TO HOLD I N THIS CASE IN THE ABSENCE OF AN UNRELIABLE EVIDENCE TO THE CONTRARY THAT THE VOTIN G POWER OF SHAREHOLDERS. S P JAIN AND RAMA JAIN ACTING IN CONCERT. IT IS A CLEAR CASE OF ALL THE SHAREHOLDERS ACTING IN CONCERT AND IN UNISON AND THE TWO EMPLOYEE DIRECTORS WERE M ERELY DUMMIES. THERE IS NOT THE SLIGHTEST INKLING OF PUBLIC) BEING INTERESTED FA R LESS SUBSTANTIALLY INTERESTED IN THIS COMPANY. THERE WAS NO ONE WHO COULD COME WITHIN THE TERM PUBLIC OUTSIDE THE RING OF THE SHAREHOLDERS ACTING IN CONCERT FOR THEIR OWN ENDS WITH A COMMON PURPOSE. THERE IS NO EVIDENCE WHATSOEVER IN THIS CASE THAT THE SHA REHOLDERS DID NOT COHERE TOGETHER IN THE MATTER OF TRANSACTION OF THE COMPANYS AFFAIRS. WHEN THE REALITY IS MANIFEST SOME RELIABLE EVIDENCE WITHIN THE SPECIAL KNOWLEDGE OF T HE ASSESSEE MUST BE FORTHCOMING FROM ITS SIDE TO CONTRADICT THE OBVIOUS IN ORDER TO BE COVERED BY THE EXCEPTION. THIS HAS NOT HAPPENED IN THIS CASE. MANIFESTLY AS PER GUID ELINE PROVIDED BY THE SUPREME COURT ON HAS TO LIFT THE CORPORATE VEIL TO UNDERSTAND TH E INTENTION AND OBJECTIVES OF THE ASSESEE. CLEARLY THERE IS MORE THAN WHAT MEETS TH E EYE. THE ENTIRE TRANSACTION WAS NOTHING BUT A COLOURABLE DEVICE BY WHICH ACCUMULAT ED AND UNDISTRIBUTED PROFIT OF M/S. BAZALONI GROUP LTD. WAS PASSED ON TO THE ASSESSEE W ITHOUT PAYMENT OF DIVIDEND TAX. SUCH AVOIDANCE OF TAX SHOULD NOT GO UN-NOTICED. THUS IN THE PRESENT CASE MIS BZALONI GROUP LTD. C AN NEVER BE DESIGNATED AS A COMPANY IN WHICH THE PUBLIC ARC SUBSTANTIALLY INTER ESTED. CONSEQUENTLY THE CASE APPEARED TO BE A FIT CASE FOR APPLICATION OF PROVI SIONS OF SECTION 2(22)(E) OF THE ACT. HOWEVER CONSIDERING THE FACT THAT AVAILABLE RESERV E IN THE ACCOUNT OF M/S. BAZALONI GROUP LTD. WAS ONLY TO THE EXTENT OF RS. 5 24 80 60/- ADDITION ON ACCOUNT OF DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE IS RES TRICTED TO THE SUM OF RS.5 24 80 600/ LIKEWISE IN RESPECT OF ASSESSMENT YEAR 2006-07 ON T HE SAME ANALOGY THE ASSESSING OFFICER MADE THE ADDITION OF RS.18 32 228/-. IN AP PEAL THE LD. CIT(A) DELETED BOTH THE ADDITIONS OF RS.5 24 80 660/- AND RS.18 32 228/- FO R ASSESSMENT YEAR 2005-06 AND 2006-07 RESPECTIVELY MADE ON ACCOUNT OF DEEMED DIVI DEND. AGGRIEVED BY THE SAID ORDER NOW THE REVENUE IS IN APPEALS BEFORE US. 8. AT THE TIME OF HEARING BEFORE US THE LD. DR REL IED ON THE ORDER OF THE ASSESSING OFFICER AND URGED BEFORE THE BENCH TO SET ASIDE THE ORDER OF THE LD. CIT(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 9. ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSES SEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFORE THE LOWER AUTHORITI ES RELIED ON THE ORDER OF THE LD. CIT(A). 9 10. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSIN G THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE LD. CIT(A) WHILE DELETING THE ADDI TION OF RS.5 24 80 660/- FOR ASSESSMENT YEAR 2005-06 HAS OBSERVED AS UNDER : I HAVE GONE THROUGH THE ASSESSMENT ORDER AND THE R EASONS STATED BY THE ASSESSING OFFICER FOR APPLYING THE PROVISIONS OF SEC. 2(22)(E ) OF THE INCOME-TAX ACT. I HAVE ALSO CAREFULLY CONSIDERED THE SUBMISSION MADE BY THE A/R IN HIS WRITTEN SUBMISSION AS WELL AS THE ARGUMENTS PLACED BEFORE ME ON THIS ISSUE. THE LEGAL POSITION AS FAR AS EVIDENT FROM THE ACT A ND THE LAW ON THE SUBJECT IS THAT IN ORDER TO CONSTITUTE A COMPANY IN WHICH THE PUBLIC A RE SUBSTANTIALLY INTERESTED WITHIN THE MEANING OF SECTION 2(18) OF THE ACT THE FOLLOWING C ONDITIONS INTER ALIA ARE TO BE SATISFIED. (B) IF IT IS A COMPANY WHICH IS NOT A PRIVATE COMP ANY AS DEFINED IN THE COMPANIES ACT 1956 AND THE CONDITIONS SPECIFIED E ITHER IN ITEMS (A) OR IN ITEM (B) ARE FULFILLED NAMELY : A) SHARE IN THE COMPANY (NOT BEING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A FURTHER RIGHT TO PARTICIPATE IN P ROFITS) WERE AS ON THE LAST DAY OF THE RELEVANT PREVIOUS Y EAR LISTED IN A RECOGNIZED STOCK EXCHANGE IN INDIA IN ACCORDANCE WITH THE SECURITIES CONTRACTS (REGULATIONS) ACT 1956 AND ANY RULES MADE THERE UNDER: (B) SHARES IN THE COMPANY (NOT BEING SHARE ENTITLED TO A FIXED RATE OF DIVIDEND WITH OR WITHOUT A FURTHER RIGHT TO PARTICIPATE IN PROFITS) CARRYING NOT LESS THAN FIFTY PER OF THE VOTING POWER HAVE BEEN ALLOTTED UNCONDITIONALLY TO OR ACQUIRED UNCONDITIONALLY BY AND WERE THROUGHOUT THE RELEVANT PREVIOUS YEAR BENEFICI ALLY HELD BY ANY COMPANY TO WHICH THIS CLAUSE APPLIES OR ANY SUBSIDIARY COMPANY OF SU CH COMPANY IF THE WHOLE OF THE SHARE CAPITAL OR BY ITS NOMINEES THROUGHOUT THE PREVIOUS YEAR. EXPLANATION UNDER THE AFORESAID CLAUSE PRESCRIBES THE LIMIT OF HOLDING 40% SHARES ONLY IN THE CASE OF MANUFACTURING COMPANIES. AS DISCUSSED ABOVE AS IN THE CASE OF THE APPELLANT ALL THE THREE COMPANIES VIZ. SOYUZ TRADING CO. LTD. RISHI TRADING CO. LTD. AND JINDAL (INDIA) LTD. ARE THE COMPANIES IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED AND THERE FORE SATISFY THE CONDITIONS OF SECTION 2(18)(B)(A) AND (B) HAVING COLLECTIVELY A HOLDING OF MORE THAN 58% SHARES OF BAZALONI GROUP LTD. UNDOUBTEDLY THE BAZALONI GROUP LTD. IS A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED. THE APPELLANT HAS MAD E REFERENCE TO THE FOLLOWING DECISIONS : - 208 ITR 872 AT PAGES 876 877 204 ITR 74 (BOM) 310 ITR 266 (GUJ) IN 310 ITR 266 (GUI) IN THE CASE OF CIT V. EMTICI E NGINEERING LTD. AT PAGES 273 & 274 IT WAS HELD THAT MORE THAN 50% OF THE SHARES WERE HELD BY TWO COMPANIES WHO WERE SUBSIDIARIES OF THE HOLDING COMPANY WHICH INTE RIM WAS A LISTED COMPANY. THE TWO COMPANIES HOLDING MORE THAN 50% SHARES OF THE COMPA NY WERE TO BE TREATED AS A COMPANY IN WHICH THE PUBLIC WERE SUBSTANTIALLY INTE RESTED. THE TWO COMPANIES EVEN THOUGH THEY WERE LIMITED COMPANIES SUBSIDIARIES OF THE HOLDING COMPANY (THE HOLDING COMPANY BEING A COMPANY IN WHICH THE PUBLIC WERE SU BSTANTIALLY INTERESTED) WERE ALSO TO BE TREATED AS COMPANIES IN WHICH THE PUBLIC WERE SUBSTANTIALLY INTERESTED. THIS RELEVANT OBSERVATIONS OF THE GUJARAT HIGH COURT ON THIS ISSUE APPEARS AT PAGE 273. FURTHER OF THE ITR QUOTED ABOVE THE GUJARAT HIGH C OURT OBSERVED THAT IT IS AN ADMITTED 10 POSITION THAT BETWEEN IN QUOTATIONS (P B. INVESTMEN TS AND TRUSTS LTD. AND K. B. INVESTMENT LTD.) THE TWO COMPANIES IN QUESTION HOL D MORE THAN 50% OF THE SHARE CAPITAL OF THE ASSESSEE COMPANY AND WERE HELD TO TH E COMPANIES TO WHICH SECTIONS 2(18)(B)(B)(C) OF THE ACT APPLIES. THIS BEING THE CASE SO FAR AS THE ASSESSEE COMPANY IS CONCERNED IS NOT LESS THAN 50% OF THE SHARES HA VING BEEN UNCONDITIONALLY ALLOTTED TO P.B. INVESTMENTS AND TRUST LTD. AND K.B. INVESTMENT LTD. TOGETHER AND SINCE P.B. INVESTMENTS AND TRUST LTD. AND KB. INVESTMENTS LTD. ARE COMPANIES TO WHICH THE SAID CLAUSE APPLIES THE ASSESSEE COMPANY WOULD ALSO COM E WITHIN THE DEFINITION OF SECTION 2(18) OF THE ACT. THIS DECISION OF THE HONBLE GUJRAT HIGH COURT ALSO SUPPORTS THE STAND OF THE APPELLANT AS SUCH IT IS APPARENT THAT THE BAZALONI GROUP LTD . IS A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED AND THEREFORE THE ASSE SSE HAVING RECEIVED THE LOAN FROM BGL IT CANNOT BE TREATED AS DEEMED DIVIDEND WITHIN THE MEANING OF SECTION 2(22)(E) OF THE ACT. SECTIONS 2(22)(E) OF THE ACT PROVIDES THAT DIVIDEND INCLUDES INTER ALIA ANY PAYMENT BY A COMPANY NOT BEING A COMPANY IN WHICH THE PUBLIC AR E SUBSTANTIALLY INTERESTED OF ANY SUM (WHETHER AS REPRESENTING A PART OF THE ASSETS O F THE COMPANY OR OTHERWISE) MADE AFTER THE 31 ST DAY OF MAY 1987 BY WAY OF ADVANCE OR LOAN TO A S HAREHOLDERS BEING A PERSON WHO IS THE BENEFICIAL OWNER OF SHARES (NOT B EING SHARES ENTITLED TO A FIXED RATE OF DIVIDEND WHETHER WITH OR WITHOUT A RIGHT TO PARTICI PATE IN PROFITS) HOLDING NOT LESS THAN 10% OF THE VOTING POWER OR TO ANY CONCERN IN WHICH SUCH SHAREHOLDERS IS A MEMBER OR A PARTNER IN WHICH HE HAS A SUBSTANTIAL INTERESTED (HEREAFTER IN THIS CLAUSE REFERRED TO AS THE SAID CONCERN)] OR ANY PAYMENT BY ANY SUCH COMPA NY ON BEHALF OR FOR THE INDIVIDUAL BENEFIT OF ANY SUCH SHAREHOLDERS TO THE EXTENT TO WHICH THE COMPANY IN EITHER CASE POSSESSES PROFITS. IT WOULD THEREFORE APPEAR THAT T HE PRIMARY CONDITION WHICH HAS TO BE SATISFIED FOR THE PURPOSE OF APPLICABILITY OF SECTI ON 2(22)(E) OF THE ACT IS THAT IF THE PAYMENT IS TO BE MADE BY A COMPANY WHICH IS NOT A C OMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED THEN AND ONLY THEN A LOAN OR ADVANCE WHICH IS MADE BY SUCH A COMPANY IS TO BE TREATED AS DEEMED DIVIDEND. IN THE PRESENT CASE THE LOAN HAS BEEN OBTAINED FROM BAZALONI GROUP LTD. WHICH IS A COMPAN Y IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED SECTION 2(22)(E) WOULD NO T APPLY AND SUCH A LOAN CANNOT BE TREATED AS DEEMED DIVIDEND FOR THE PURPOSE OF SECTI ONS 2(22)(E) OF THE ACT. IT IS TO BE BORNE IN MIND THAT SECTIONS 2(22) TREATS CERTAIN T RANSACTIONS AS DEEMED DIVIDEND I.E. BY A FICTION IT FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. IT IS NOW WELL SETTLED THAT IF A STATUTORY FICTION IS CREATED IT B BE CONSTRUED STRI CTLY AND MUST BE RESTRICTED FOR THE VERY PURPOSE FOR WHICH SUCH A FICTION IS CREATED. IN VIEW OF THE ABOVE FACTS AND IN THE ARGUMENT PLAC ED BEFORE ME AND AT THE COST OF REPETITION IT IS APPARENT THAT M/S. BAZALONI GROUP LTD. IS A COMPANY IN WHICH THE PUBLIC ARE SUBSTANTIALLY INTERESTED FOR THE REASONS THAT M ORE THAN 58.28% OF ITS SHARES ARE HELD BY THE AFORESAID THREE COMPANIES VIZ. I) SOYUZ TRAD ING CO. LTD. II) RISHI TRADING CO. LTD. AND JINDAL (INDIA) LTD. WHICH ARE WIDELY HELD COMPANIES. THEREFORE ALL THE CONDITIONS LAID DOWN IN SECTION 2(22)(E) OF THE ACT HAVING NOT BEEN FULFILLED THE PROVISIONS OF SEC. 2(22)(E) ARE NOT APPLICABLE IN T HE CASE. ACCORDINGLY THE LOAN BORROWED BY THE APPELLANT FROM THE SAID COMPANY CAN NOT BE TREATED AS DEEMED DIVIDEND FOR THE PURPOSE OF SECTION 2(22)(E) OF THE ACT. HENCE THE ADDITION OF RS.5 24 80 660/- MADE ON ACC OUNT OF DEEMED DIVIDEND IS DELETED. SINCE THE ABOVE FINDING OF THE LD. CIT(A) REMAINED UNCONTROVERTED BEFORE US AND IS BASED ON THE DOCUMENTS AVAILABLE IN THE PAPER BOOK WHICH WERE ALSO AVAILABLE BEFORE THE ASSESSING OFFICER. WE FIND NO INFIRMITY IN HIS ORDER AND THE SAME IS HEREBY UPHELD. 11 SIMILARLY IN RESPECT OF GROUND NOS. 2 AND 3 FOR AS SESSMENT YEAR 2006-07 WE HOLD THAT THE ADDITION OF RS.18 32 288/- U/S. 2(22)(E) IS UNW ARRANTED AND ACCORDINGLY WE CONFIRM THE ACTION OF THE LD. CIT(A) AND DISMISS THE GROUND S OF APPEAL OF THE REVENUE. 11. IN THE RESULT THE APPEALS OF THE REVENUE ARE D ISMISSED. 12. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30.9 .10 SD/- SD/- . . ! # . . (C. D. RAO) (D. K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER ( # # # #) )) ) DATED :30TH SEPTEMBER 2010 !/0 %&12 %3! JD.(SR.P.S.) . 4 -%%5 65(7- COPY OF THE ORDER FORWARDED TO: 1 . + / APPELLANT DCIT CIRCLE-3 KOLKATA. 2 -+ / RESPONDENT M/S. JINDAL INDIA LTD. 2/1 AHMED MAMUJI STREET HOWRAH-711 204 3 . %.& / THE CIT 4 . %.& ( )/ THE CIT(A) KOLKATA 5 . !>% -%& / DR KOLKATA BENCHES KOLKATA 5 -%/ TRUE COPY .&?/ BY ORDER @ '2 / DEPUTY REGISTRAR .