The Income Tax Officer, Amritsar. v. M/s NDK Hotel & Resorts Ltd., Amritsar.

ITA 404/ASR/2016 | 2012-2013
Pronouncement Date: 18-10-2016 | Result: Dismissed

Appeal Details

RSA Number 40420914 RSA 2016
Assessee PAN AABCN8395B
Bench Amritsar
Appeal Number ITA 404/ASR/2016
Duration Of Justice 2 month(s) 23 day(s)
Appellant The Income Tax Officer, Amritsar.
Respondent M/s NDK Hotel & Resorts Ltd., Amritsar.
Appeal Type Income Tax Appeal
Pronouncement Date 18-10-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 18-10-2016
Assessment Year 2012-2013
Appeal Filed On 26-07-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY JUDICIAL MEMBER ITA NO.404(ASR)/2016 ASSESSMENT YEAR:2012-13 PAN : AABCN8395B INCOME TAX OFFICER VS. M/S. NDK HOTEL & RESORTS L TD. WARD 5(3) AMRITSAR. LAWRENCE ROAD AMRITSAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. RAHUL DHAWAN DR RESPONDENT BY: ST. T.S. ARORA ADVOCATE DATE OF HEARING: 30/09/2016 DATE OF PRONOUNCEMENT: 18/10/2016 ORDER PER T.S. KAPOOR AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A)-2 AMRITSAR DATED 28.04.2016 RELATING TO A SSESSMENT YEAR 2012- 13. THE REVENUE IS AGGRIEVED WITH THE ACTION OF THE LD. CIT(A) BY WHICH HE HAS DELETED THE ADDITION OF RS.5 72 54 069/- WH ICH THE AO HAS ADDED BACK TO THE INCOME OF THE ASSESSEE AS DEEMED DIVID END UNDER THE PROVISIONS OF SECTION 2(22)(E) OF THE I. T. ACT 19 61. 2. AT THE OUTSET THE LD. DR PLACED HIS STRONG RELI ANCE ON THE ORDER OF THE ASSESSING OFFICER. 3. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER H AND RELIED ON THE ORDER OF THE LD. CIT(A). ITA NO.404/ASR/2016 A.Y. 2012-13 2 4. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT D URING ASSESSMENT PROCEEDINGS THE AO OBSERVED THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF ABOUT RS.18 CRORES FROM ITS SISTER CONCERN. THE REFORE THE ASSESSEE WAS ASKED TO EXPLAIN THE SAME. IN RESPONSE TO THIS THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS.12 57 07 810/- HAS B EEN RECEIVED AS A SHORT-TERM LOAN AND INTEREST IS BEING PAID ON IT. I T WAS STATED THAT THE BALANCE AMOUNT OF RS.5 51 58 769/- IS A BROUGHT FOR WARD AMOUNT OF LAST YEAR WHICH IS APPEARING IN BALANCE SHEET AS SHARE A PPLICATION MONEY AGAINST WHICH NO SHARES HAS BEEN ALLOTTED AS YET. T HE AO FURTHER REQUIRED THE ASSESSEE TO CLARIFY THE NATURE OF DEPO SITS AND ALSO REQUIRED THE ASSESSEE TO EXPLAIN AS TO WHY THE ALLOTMENT WAS PENDING. THE ASSESSEE SUBMITTED THAT THE AMOUNT HAS BEEN REFLECT ED IN SHARE APPLICATION ACCOUNT AND THE ASSESSEE HAD ALSO PAID INTEREST AND ALSO DEDUCTED TAX AT SOURCE. THE AO AFTER THAT CONFRONT ED THE ASSESSEE REGARDING THE APPLICABILITY OF THE PROVISIONS OF SE CTION 2(22)(E) OF THE ACT. THE ASSESSEE SUBMITTED THAT THE PROVISIONS OF SECTI ON 2(22)(E) OF THE ACT WERE NOT APPLICABLE TO THE ASSESSEE AND RELIED UPO N THE JUDGMENTS OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF M/S. ARORA KNIT FABS PVT. LTD. ITA NO.14 OF 2012 AND M/S. OCTAVE AP PARELS ITA NO.132. HOWEVER THE AO DID NOT CONSIDER THE ARGUMENTS OF T HE ASSESSEE AND MADE AN ADDITION OF RS.5 72 54 069/- UNDER SECTION 2(22)(E) OF THE ACT. 5. AGGRIEVED WITH THE ORDER OF THE AO THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) AND MADE VARIOUS SUBMISSIONS. THE LD . CIT(A) AFTER GOING ITA NO.404/ASR/2016 A.Y. 2012-13 3 THROUGH THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY HOLDING AS UNDER: AS PER THE ASSESSMENT DURING THE ASSESSMENT PROCE EDINGS THE AO NOTICED THAT THE AMOUNT TOTALING TO RS 12 57 07 810/- HAS BEEN RECEIVED BY THE APPELLANT COMPANY FROM ITS SIS TER CONCERN M/S NOVELTY ASSOCIATES PVT LTD DURING THE ASSESSMENT YE AR 2012-13 AS SHORT TERM LOAN FROM M/S NOVELTY ASSOCIATES PVT LTD AND INTEREST WAS PAID ON IT. THE SAID LOAN AMOUNT WAS SHOWN UNDE R THE HEAD SHARE APPLICATION ACCOUNT AND THE INTEREST AMOUNT O F RS 87 25 687/- WAS PAID TO M/S NOVELTY ASSOCIATES PVT LTD AND TDS AMOUNTING TO RS 872 570/- WAS DEDUCTED THEREON. THE INTEREST PAI D WAS CAPITALIZED IN THE DEVELOPMENT ACCOUNT OF THE COMPA NY. THE BALANCE AMOUNT OF RS 5 51 58 769/- WAS BROUGHT FORWARD AMOU NT OF LAST YEAR WHICH IS APPEARING IN THE SHARE APPLICATION MO NEY AGAINST WHICH NO SHARES HAVE BEEN ALLOTTED YET. THE AO OBSERVED FROM THE BALANCE SHEET OF M/S NOVEL TY ASSOCIATES PVT LTD THAT THE ACCUMULATED PROFITS OF THE COMPANY FOR THE F Y 2011-12 WERE RS 572 54 069/- WHEREAS THE TO TAL LOAN GIVEN BY IT TO THE APPELLANT WAS RS 12 57 07 810/-. THE A O OBSERVED THE SHAREHOLDING OF M/S NOVELTY ASSOCIATES PVT LTD AND OF M/S NDK HOTEL 85 RESORTS AS ON 31-03-2012 WAS AS UNDER:- NO. NAME & ADDRESS OF SHAREHOLDER OF SHARES I (NOVELTY) HOLDING ELTY OF SHARES 1 (NDK) HOLDING K) SHRI JATINDER SINGH 089 31 001 SHRI MANVINDER SINGH 616 10 001 )3 NOVELTY ASSCIATES PVT. LTD. 1850 57 THE AO HELD THAT ALL THE CONDITIONS WHICH ARE NECES SARY AND SUFFICIENT TO ATTRACT THE PROVISIONS OF SECTION 2(2 2)(E) ARE FULFILLED AND RELYING ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS NATIONAL TRAVEL SERVICES IN ITA NO. 223 OF 2010 THE AO HELD THAT M/S NDK HOTELS & RESORTS LTD IS BENEFICIAL OWNER OF AMOUNT OF RS 12 57 07 810/- AND THEREFORE AN AMOUNT OF RS 572 54 069/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE U/S 2(22)( E) OF THE ACT AS ITA NO.404/ASR/2016 A.Y. 2012-13 4 RESTRICTED TO THE EXTENT OF THE ACCUMULATED PROFITS OF M/S NOVELTY ASSOCIATES PVT LTD. HOWEVER THE AO FAILED TO NOTICE THAT THE APPELLANT M/S NDK HOTELS 8S RESORTS LTD AMRITSAR WAS NOT A SHAREHOLD ER OF M/S NOVELTY ASSOCIATES PVT LTD AMRITSAR AS ON 31-03-20 12. THE COPY OF BALANCE SHEET OF M/S NOVELTY ASSOCIATES PVT LTD AS ON 31-03-2012 AND THE LIST OF SHAREHOLDERS THE SAID COMPANY AS ON 31-03-2012 WAS CALLED FOR FROM THE APPELLANT AND PERUSED WHIC H CONFIRMED THE FACT THAT THE APPELLANT WAS NOT A SHAREHOLDER OF M/ S NOVELTY ASSOCIATES PVT LTD AS ON 31-03-2012. ONE OF THE ESSENTIAL CONDITIONS FOR THE APPLICATION OF SECTION 2(22)(E) OF THE ACT IS THAT THE CONCERN RECEIVING T HE MONEY HAS TO BE A SHAREHOLDER IN THE CONCERN GIVEN THE LOAN. HOWEVER M/S NDK HOTELS & RESORTS LTD IS NOT A SHAREHOLDER OF M/S NOVELTY A SSOCIATES PVT LTD. THAT IT IS AN UNDISPUTED FACT THAT THE PAYMENT BY COMPANY M/S NOVELTY ASSOCIATED PVT LTD IS OF A S UM IN THE NATURE OF SHARE APPLICATION MONEY AND THE SAID PAY MENT IS NOT MADE TO ITS SHAREHOLDER BUT TO THE ASSESSEE WHICH IS A CONCERN IN WHICH SHARE HOLDERS ARE COMMON AS IS CLEAR FROM THE SHAREHOLDING PATTERN AS GIVEN ABOVE IN THE ASSESSMENT ORDER. THE HONBLE ITAT SPECIAL BENCH MUMBAI IN THE CASE OF ACIT VS BHAUMIK COLOUR PVT LTD. 118 ITD 1 (MUM)(SB) HELD BY RELYING ON THE APEX COURT DECISION IN THE CASE OF C P SARATHY MUDALIAR THAT WHEN THE ACT SPEAKS OF SHAREHOLDER IT REFERS TO THE REGISTERED SHAREHOLDER.... THE HONBLE COURT HELD THAT IT IS ONLY WHERE A LOAN IS ADVANCED BY THE COMPANY TO A REGISTERED SHAREHOL DER AND THE OTHER CONDITIONS SET OUT IN SECTION 2(6A)(E) OF THE 1922 ACT WHICH IS SYNONYMOUS TO SECTION 2(22)(E) OF THE I T ACT 1961 ARE SATISFIED THAT THE AMOUNT OF THE LOAN WOULD BE LIABLE TO BE REGARDED AS DEEMED DIVIDEND WITHIN THE MEANING O F SECTION 2(6A)(E) IF A PERSON IS A REGISTERED SHAREHOLDER BUT NOT TH E BENEFICIAL THEN THE PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY. SIMILARLY IF A PERSON IS A BENEFICIAL SHAREHOLDER B UT NOT A REGISTERED SHAREHOLDER THEN ALSO THE FIRST LIMB OF PROVISIONS OF SECTION 2(22)(E) WILL NOT APPLY THE SAID DECISION OF THE SPECIAL BENCH WAS AFFIRMED BY THE BOMBAY HIGH COURT IN THE CASE OF CIT VS UNIVERSAL M EDICARE (P)LTD 190 TAXMAN 144 (BOM). THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS HOTEL HILLTOP 217 CTR (RAJ.) 527 HAS ALSO INTERPRETED THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT IN AN IDENTICAL MANNER. THE DECISION OF THE ITA NO.404/ASR/2016 A.Y. 2012-13 5 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS M/S OCTAVE APPARELS IN ITA NO. 132 OF 2012 (O&M) DATED 11-09-2012 AND C IT VS ARORA KNIT FAB PVT LTD IN ITA NO. 14 OF 2012 (O 8S M) DAT ED 19- 04-2012 HAVE ALSO HELD LIKEWISE. IN VIEW OF THE ABOVE DISCUSSION AND THE CITED CASE LAWS SINCE THE APPELLANT M/S NDK HOTELS & RESORTS LTD IS NOT A SHAREHOLDER OF M/S NOVELTY ASSOCIATES PVT LTD THEREFORE THE SHARE APPLICATION MONEY OF RS 12 57 07 810/- ADVANCED BY M/S NOVELTY ASSOCIATES PVT LTD TO THE APPELLANT DURING THE YEAR 2011-12 S UBJECT TO THE ACCUMULATED PROFITS OF THE LENDER COMPANY OF RS 572 54 069/- CANNOT BE DEEMED DIVIDEND OF THE APPELLANT UNDER TH E PROVISIONS OF SECTION 2(22)(E) OF THE ACT. ACCORDINGLY THE ADDITI ON OF RS 572 54 069/- U/S 2(22)(E) OF THE ACT IS DELETED. 6. NOW THE REVENUE IS AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) AND IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT IT IS AN U NDISPUTED FACT THAT THE ASSESSEE WAS NOT A SHAREHOLDER OF M/S. NOVELTY ASSO CIATES PVT. LTD. FROM WHICH THE AMOUNT WAS RECEIVED. THE LD. CIT(A) HAD C ALLED FOR FROM THE ASSESSEE THE LIST OF SHAREHOLDERS AS ON 31.03.2012 AND HAD CONFIRMED THE FACT THAT THE ASSESSEE WAS NOT A SHAREHOLDER O F M/S. NOVELTY ASSOCIATES PVT. LTD. HE FURTHER HELD THAT ONE OF TH E ESSENTIAL CONDITIONS FOR THE APPLICATION OF SECTION 2(22)(E) OF THE ACT IS THAT THE CONCERN RECEIVING THE MONEY HAS TO BE A SHAREHOLDER IN THE CONCERN WHO AVANCED THE MONEY. THE LD. CIT(A) FURTHER RELIED UPON THE DECISION OF THE SPECIAL BENCH OF THE ITAT MUMBAI IN THE CASE OF ACIT VS. B HAUMIK COLOUR PVT. LTD. 118 ITR 1 (MUM) (SB). THE LD. CIT(A) HAS ALSO NOTED THAT THE DECISION OF THE SPECIAL BENCH OF ITAT MUMBAI BENCH (SUPRA) WAS ITA NO.404/ASR/2016 A.Y. 2012-13 6 AFFIRMED BY THE HONBLE BOMBAY HIGH COURT IN THE C ASE OF CIT VS. UNIVERSAL MEDICARE (P) LTD. 190 TAXMAN 144 (BOM.). THE LD. CIT(A) HAS MADE A FINDING OF FACT THAT THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. M/S. OCTAVE APPARELS IN ITA NO.132 OF 2012 (O&M) DATED 11.09.2012 AND IN THE CASE OF CIT VS. ARORA KNIT F ABS. PVT. LTD. IN ITA NO.14 OF 2012 (O&M) DATED 19.04.2012 HAS ALSO GIV EN SIMILAR FINDINGS. THE LD. DR WAS NOT ABLE TO CONTROVERT ANY OF THE FI NDING OF THE LD. CIT(A). IN VIEW OF THE ABOVE WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED ORDER OF THE LD. CIT(A) AND THE SAME IS UPHELD. TH US THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/10/20 16. SD/- SD/- (N.K. CHOUDHRY) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER /SKR/ DATED: 18/10/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. NDK HOTELS & RESORTS LTD. AMRITSA R. 2. THE ITO WARD 5(3) ASR. 3. THE CIT(A) ASR. 4. THE CIT ASR. 5. THE SR DR ITAT AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH: AMRITSAR.