ACIT, New Delhi v. M/s. Shiva Commodities & Derivatives, New Delhi

ITA 3998/DEL/2009 | 2006-2007
Pronouncement Date: 12-02-2010 | Result: Dismissed

Appeal Details

RSA Number 399820114 RSA 2009
Assessee PAN AAWFS1219B
Bench Delhi
Appeal Number ITA 3998/DEL/2009
Duration Of Justice 4 month(s) 13 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Shiva Commodities & Derivatives, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 12-02-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 12-02-2010
Date Of Final Hearing 08-02-2010
Next Hearing Date 08-02-2010
Assessment Year 2006-2007
Appeal Filed On 29-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G: NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA VICE PRESIDENT AND SHRI I.P. BANSAL JUDICIAL MEMBER ITA NO.3998/DEL/2009 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 24 (1) NEW DELHI. VS. M/S SHIVA COMMODITIES & DERIVATIVES K-19 2 ND FLOOR GREEN PARK MAIN NEW DELHI. PAN : AAWFS1219B CO NO.385/DEL/2009 (ITA NO.3998/DEL/2009) ASSESSMENT YEAR : 2006-07 M/S SHIVA COMMODITIES & DERIVATIVES K-19 2 ND FLOOR GREEN PARK MAIN NEW DELHI. PAN : AAWFS1219B VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 24 (1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI INDERJIT SINGH SR. DR ORDER PER I.P. BANSAL JUDICIAL MEMBER THE APPEAL IS FILED BY THE REVENUE AND THE CROSS O BJECTION IS FILED BY THE ASSESSEE. THEY ARE DIRECTED AGAINST THE ORDER CIT (A) DATED 27.07.2009 FOR ASSESSMENT YEAR 2006-07. GROUNDS OF APPEAL READ AS UNDER:- ITA NO.3998/DEL/2009 1. THE LD. CIT (APPEALS) HAS ERRED IN LAW AND ON F ACTS OF THE CASE BY NOT INVOKING THE PROVISIONS OF SECTION 2 (22)(E) OF THE INCOME TAX ACT 1961 BY TREATING THE ASSESSEE FIRM M/S SHI VA ITA NO.3998/DEL/2009 CO NO.385/DEL/2009 2 COMMODITIES & DERIVATIVES AS NOT REGISTERED SHA REHOLDER OF M/S RAM COMMODITIES TRADING PVT. LTD. WHEREAS IT HAS HE LD 10000 SHARES OF THE COMPANY THROUGH ITS PARTNER SHRI ANUJ NAGPAL AND ALSO BEING BENEFICIAL OWNER OF THE SHARES OF M/S JA I SIA RAM COMMODITIES AS IS EVIDENT FROM THE BALANCE SHEET OF THE ASSESSEE FIRM FOR THE YEAR IN QUESTION. 2. THE LD. CIT (APPEALS) HAS ERRED IN LAW BY DELET ING THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEEMED DIVIDEND TO THE EXTENT OF ACCUMULATED PROFIT OF THE COMPANY WH EN ALL THE CONDITIONS AS LAID DOWN FOR INVOKING THE PROVISIONS OF SECTION 2 (22) (E) OF THE INCOME TAX ACT STAND SATISFIED. 3. THE LD. CIT (APPEALS) HAS ERRED IN LAW BY NOT B EING JUSTIFIED IN HOLDING THAT A PERSON HAS TO BE A REGISTERED OWNER AS WELL AS BENEFICIAL OWNER OF THE SHARES TO BE COVERED BY THE PROVISIONS OF SECTION 2 (22) (E) OF THE INCOME TAX ACT. 4. THE LD. CIT (APPEALS) HAS ERRED ON THE FACTS OF THE CASE BY NOT UPHOLDING THE AOS FINDING THAT THE ASSESSEE FIRM W AS A SHAREHOLDER OF M/S JAI SAI RAM COMMODITIES TRADING PVT. LTD. THROUGH ITS PARTNERS FOR THE PURPOSES OF SECTION 2 (22) (E) OF THE INCOME TAX ACT. 5. THE LD. CIT (APPEALS) HAS ERRED IN LAW BY NOT I NVOKING PARA 10.3 OF CBDTS CIRCULAR NO.495 AND EXPLANATION 3 (A ) OF SUB- SECTION 2 (22)(E) OF THE INCOME TAX ACT 1961 BY WH ICH IT IS PROVIDED THAT DEEMED DIVIDEND WOULD BE TAXED IN THE HANDS OF A CONCERN ; WHEREAS ALL THE CONDITIONS PROVIDED THE REFORE ARE SATISFIED IN THIS CASE. CO NO.385/DEL2009 1. LD. ACIT HAS ERRED IN LAW AND FACTS BY TREATING THE CURRENT YEARS PROFIT AS ACCUMULATED PROFIT. 2. LD. ACIT HAS ERRED IN LAW AND ON FATS BY TREATI NG THE BUSINESS TRANSACTION AS DEEMED DIVIDEND U/S 2 (22) (E). 3. LD. ACIT HAS ARBITRARILY CALCULATED THE ACCUMUL ATED PROFIT FOR THE PURPOSE OF SECTION 2 (22) (E). 4. LD. CIT (A) HAS ERRED IN LAW AND FACTS BY REJE CTING THE ADDITIONAL EVIDENCE FILED U/R 46A. ITA NO.3998/DEL/2009 CO NO.385/DEL/2009 3 2. THE ASSESSEE IS A PARTNERSHIP FIRM CONSTITUTED B Y SHRI ANUJ NAGPAL AND SMT. NEELAM NAGPAL HAVING 50% SHARE EACH. SHRI ANU J NAGPAL AND AND SMT. NEELAM NAGPAL WERE HAVING 10000 SHARES AND 5000 SHA RES RESPECTIVELY OF M/S JAI SIYA RAM COMMODITIES TRADING PVT. LTD. A SUM OF RS.1 CRORE WAS ADVANCED AS LOAN TO M/S SHIVA COMMODITIES & DERIVATIVES WHI CH HAS BEEN CONSIDERED AS DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE FIRM U /S 2(22) (E) OF IT ACT 1961 READ WITH EXPLANATION 2. FROM THE AUDIT REPORT IT WAS NOTED BY THE AO THAT IN THE LIST OF LOANS AND DEPOSITS TAKEN OR ACCEPTED AND RE PAID AS PER SECTION 269- SS/269-T THE ASSESSEE HAD RECEIVED A SUM OF RS.2 C RORE FROM M/S JAI SIYA RAM COMMODITIES TRADING PVT. LTD. OUT OF WHICH RS.1 CRORE WAS REPAID BEING LOAN TAKEN OF IT AND AN AMOUNT OF RS.1 CRORE WAS OU TSTANDING AS ON 31 ST MARCH 2006. THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO W HY THE SAID OUTSTANDING AMOUNT MAY NOT BE TREATED AS DEEMED OUTSTANDING U/S 222 (E) OF THE ACT. 3. IN RESPONSE IT WAS SUBMITTED BY THE ASSESSEE TH AT THE SAID AMOUNT OF RS.1 CRORE WAS RECEIVED AS A DEPOSIT BEING A MARGIN TO FACILITATE THE TRADING IN THE COMMODITIES AT NCDEX. IT WAS STATED THAT THOUG H THE COMPANY DID NOT START THE TRADING IN FINANCIAL YEAR 2005-06 THE COMPANY STARTED ITS TRADING ACTIVITIES IN FINANCIAL YEAR 2006-07 AND THE SAID AMOUNT WAS RECE IVED AS MARGIN/ADVANCE FOR THE TRADING ACTIVITIES AND IT WAS NOT IN THE NATURE OF LOAN AS PROVIDED IN THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT. IT WAS FURTHER SUBMITTED THAT M/S JAI SIYA RAM COMMODITIES TRADING PVT. LTD WAS INCORPORA TED ON 24 TH MAY 2005 AND THEREFORE THERE ARE NO ACCUMULATED PROFITS WITH TH E COMPANY AS ON 31 ST MARCH 2005 AND CONTENDED THAT SINCE THERE WERE NO ACCUMUL ATED PROFITS NO ADDITION COULD BE MADE. THE ASSESSEE RELIED ON THE FOLLOWIN G DECISIONS:- (A) M.B. STOCK HOLDING LTD. VS. ACIT (2001) 84 ITD 542 (ITAT AHMEDABAD) (B) CIT VS. AMBASSADOR TRAVELS PVT. LTD. (DELHI HIG H COURT) ORDER DT. 23.4.2008 IN ITA 337/2008. (C) CIT (CENTRAL) BOMBAY VS. P.K. BADIANI 76 ITR 3 69 (BOMBAY) (D) CIT TAMIL NADU VS. G. NARASIMHA 118 ITR 601 ( MADRAS) ITA NO.3998/DEL/2009 CO NO.385/DEL/2009 4 4. IN THE ALTERNATIVE IT WAS SUBMITTED THAT EVEN I F THE SAID AMOUNT IS BEING TAXED AT DIVIDEND INCOME THAT COULD NOT HAVE BEEN D ONE IN THE HANDS OF THE FIRM AND FOR THIS PURPOSE RELIANCE WAS PLACED ON THE D ECISION IN THE CASE OF ANKITECH PVT. LTD. VS. JCIT ORDER DATED 6.6.2008 IN ITA NO. 388 (ITAT DELHI). 5. NOTING FROM THE LEDGER ACCOUNT OF M/S JAI SIYA R AM COMMODITIES TRADING PVT. LTD IN THE BOOKS OF THE ASSESSEE THE AO OBSER VED THAT THE ASSESSEE ITSELF HAD ADVANCED A SUM OF RS.50 LAC EACH ON 17 TH JANUARY 2006 AND 20 TH JANUARY 2006 BUT IT WAS REPAID TO IT ON 3 RD MARCH 2006. FURTHER A LOAN OF RS.1 CRORE WAS RECEIVED BY THE ASSESSEE ON 14 TH MARCH 2006. NO TRANSACTION WITH THE ASSESSEE FOR WHICH THE MARGIN WAS ALLEGEDLY PAID EITHER DURI NG THE PREVIOUS YEAR OR EVEN SUBSEQUENT TO THE END OF THE PREVIOUS YEAR COULD BE DEMONSTRATED TO HAVE BEEN ACTUALLY EXECUTED THROUGH THE ASSESSEE AND THEREFO RE LD. AO HAS COME TO THE CONCLUSION THAT THE CONTENTION OF THE ASSESSEE THAT THE SAID AMOUNT OF RS.1 CRORE WAS RECEIVED TOWARDS MARGIN MONEY COULD NOT BE BOR NE OUT FROM THE FACTS. SO FAR AS IT RELATES TO THE CONTENTION OF THE ASSESSEE REGARDING ACCUMULATED PROFITS THE AO OBSERVED THAT ACCUMULATED PROFITS UPTO THE D ATE OF LOAN OR ADVANCES IS TO BE CONSIDERED. THE AO CALCULATED THE ACCUMULATED P ROFITS OF THE ASSESSEE AS ON 13 TH MARCH 2006 IN FOLLOWING MANNER:- SPECULATION PROFIT 61 29 938.94 REGULAR PROFIT 2 04 00 723.90 REGULAR LOSS 1 33 13 130.84 NET ACCUMULATED PROFIT 1 32 17 532.00 6. THUS IT WAS CONCLUDED BY THE AO THAT THE SAID A MOUNT OF RS.1 CRORE REPRESENTED THE DEEMED DIVIDEND IN THE HANDS OF THE ASSESSEE. 7. IN APPEAL THE ADDITION MADE BY THE AO WAS AGITA TED ON THE GROUND THAT IT BEING A BUSINESS TRANSACTION THEREFORE NO APPLICA TION OF SECTION 2 (22)(E). IT WAS FURTHER SUBMITTED THAT THE TERM ACCUMULATED PR OFITS IS THE AMOUNT WHICH HAS BEEN ACCUMULATED FROM THE PROFITS ARISING FROM THE PAST PERFORMANCE OF THE COMPANY YEAR BY YEAR END. IN THE ALTERNATIVE IT W AS SUBMITTED THAT IF AT ALL ANY ITA NO.3998/DEL/2009 CO NO.385/DEL/2009 5 SUCH ADDITION IS REQUIRED TO BE MADE THAT IS TO BE MADE IN THE HANDS OF THE SHAREHOLDER IN VIEW OF THE FOLLOWING DECISIONS:- A) ANKITECH PVT. LTD. VS. CIT ITA NO.388 (DELHI) D T. 06.06.2008. B) ITO VS. AJANTA CYCLES PVT. LTD. 99 TTJ 1159 C) CIT VS. RAJ KUMAR SINGH & CO. 295 ITR 9. 8. THE CALCULATION MADE BY THE AO IN RESPECT OF ACC UMULATED PROFIT ALSO WAS AGITATED. 9. THE ASSESSEE ALSO SUBMITTED AN APPLICATION FOR A DMISSION OF ADDITIONAL EVIDENCE TO SUBMIT COPY OF AGREEMENT OF THE ASSESSE E WITH M/S JAI SIYA RAM COMMODITIES TRADING PVT. LTD. THE SAID ADDITIONAL EVIDENCE WAS REFERRED TO THE AO BY CIT (A) WHO SUBMITTED HIS REPORT VIDE LETTER DATED 10 TH JULY 2009. THE AO AGITATED THE ADMISSION OF ADDITIONAL EVIDENCE ON TH E GROUND THAT ASSESSEE COULD NOT FULFILL THE CONDITIONS LAID DOWN IN RULE 46A. THE CIT (A) HAS THOUGH REJECTED THE ADMISSION OF ADDITIONAL EVIDENCE BUT ACCEPTED THE CLAIM OF THE ASSESSEE ON MERITS MAINLY ON THE BASIS OF DECISION OF SPECIAL B ENCH IN THE CASE OF ACIT VS. BHAUMIK COLOURS PVT. LTD. 118 ITD 1 (MUM) (SB) ON T HE GROUND THAT ASSESSEE IN THE PRESENT CASE WAS NOT A REGISTERED SHAREHOLDER O F M/S JAI SIYA RAM COMMODITIES TRADING PVT. LTD THEREFORE THE SAID A MOUNT COULD NOT BE ASSESSED AS DEEMED DIVIDEND. THE DEPARTMENT IS AGGRIEVED BY SUCH FINDINGS OF CIT (A) AND THE ASSESSEE IN ITS CROSS OBJECTION HAS ASSAILE D THE ORDER OF THE CIT (A) ON THE BASIS; FIRSTLY THAT DEEMED DIVIDEND COULD NOT B E ASSESSED AS THE SAME WAS NOT BORNE OUT OF ACCUMULATED PROFITS; SECONDLY THE TRANSACTION SHOULD HAVE BEEN TREATED TO BE BUSINESS TRANSACTION THEREFORE OUTS IDE THE PURVIEW OF SECTION 2 (22)(E); THIRDLY THE AO HAS ARBITRARILY CALCULATED THE ACCUMULATED PROFITS FOR THE PURPOSES OF SECTION 2 (22)(E); AND LASTLY THAT THE CIT (A) HAS ERRED IN REJECTING THE ADDITIONAL EVIDENCE FILED BY THE ASSESSEE. ITA NO.3998/DEL/2009 CO NO.385/DEL/2009 6 10. NOTICE OF HEARING WAS SENT TO THE ASSESSEE HOW EVER AT THE TIME OF HEARING NONE WAS PRESENT ON BEHALF OF THE ASSESSEE THEREFORE WE PROCEED TO DECIDE THE PRESENT APPEAL AND CROSS OBJECTION AFTER HEARING LD. DR. 11. AFTER NARRATING THE FACTS RELYING ON THE GROUN DS OF APPEAL AND THE ORDER OF AO LD. DR PLEADED THAT THE AO WAS RIGHT IN TREATIN G THE SAID SUM AS DEEMED DIVIDEND UNDER THE PROVISIONS OF SECTION 2 (22)(E) OF THE ACT AND THE CIT (A) WITHOUT APPRECIATING THE FACTS AND POSITION OF LAW HAS COME TO THE CONCLUSION THAT THE SAME COULD NOT BE ASSESSED AS DEEMED DIVIDEND. 12. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF LD. DR AND ALSO CAREFULLY GONE THROUGH THE ORDER OF AO AND CIT (A). THE ASSE SSEE IN WHOSE HAND THE SAID DIVIDEND HAS BEEN ASSESSED IS A FIRM CONSISTIN G OF ABOVEMENTIONED TWO PARTNERS WHO WERE HAVING THE SHARE OF M/S JAI SIYA RAM COMMODITIES TRADING PVT. LTD. THE SPECIAL BENCH IN THE CASE OF CIT VS. BHAUMIC COLOURS (P) LTD. (SUPRA) HAS HELD THAT DEEMED DIVIDEND COULD BE ASSE SSED ONLY IN THE HANDS OF A PERSON WHO IS A SHAREHOLDER OF THE LENDER COMPANY A ND NOT IN THE HANDS OF A PERSON OTHER THAN THE SHAREHOLDER. IT IS ALSO HELD THAT THE EXPRESSION SHAREHOLDER REFERRED TO IN SECTION 2 (22)(E) REFE RS TO BOTH A REGISTERED SHAREHOLDER AND A BENEFICIAL SHAREHOLDER. IF A PER SON IS A REGISTERED SHAREHOLDER BUT NOT THE BENEFICIAL SHAREHOLDER TH EN THE PROVISIONS OF SECTION 2 (22)(E) MAY NOT APPLY. SIMILARLY IF A PERSON IS B ENEFICIAL SHAREHOLDER BUT NOT A REGISTERED SHAREHOLDER THEN ALSO THE PROVISIONS OF SECTION 2 (22)(E) WILL NOT APPLY. KEEPING IN VIEW THE FACTS OF THE PRESENT CA SE WHICH HAVE BEEN DISCUSSED IN DETAIL IN THE ABOVE PART OF THIS ORDER AND THE P OSITION OF LAW EXPLAINED IN THE CASE OF BHAUMIK COLOURS (P) LTD. (SUPRA) WE ARE OF THE OPINION THAT LD. CIT (A) HAS ARRIVED AT A RIGHT CONCLUSION THAT SUCH ADDITIO N COULD NOT BE MADE IN THE HANDS OF THE ASSESSEE WHO IS A FIRM AND IT IS NEITH ER REGISTERED SHAREHOLDER NOR BENEFICIAL SHAREHOLDER OF THE LENDER COMPANY. THER EFORE WE DECLINE TO INTERFERE IN HIS ORDER. ITA NO.3998/DEL/2009 CO NO.385/DEL/2009 7 13. AS WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) SO AS IT RELATES TO THE DEPARTMENTAL APPEAL WE ARE OF THE OPINION THAT CO FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS THEREFORE WE DECLINE TO ADJUDI CATE THE SAME ON THE GROUNDS RAISED IN THE CROSS OBJECTION AS THE SAME WILL BE ACADEMIC ONLY. 14. IN THE RESULT THE APPEAL FILED BY THE DEPARTME NT AND CROSS OBJECTION FILED BY THE ASSESSEE BOTH ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 12.02.20 10. SD/- SD/- [G.E. VEERABHADRAPPA] [I.P. BANSAL] VICE PRESIDENT JUDICIAL MEMBER DATED 12.02.2010. DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT TRUE COPY BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES