Hemkunt Chemicals Pvt. Ltd.,, New Delhi v. ITO, New Delhi

ITA 4227/DEL/2015 | 2006-2007
Pronouncement Date: 28-09-2016 | Result: Dismissed

Appeal Details

RSA Number 422720114 RSA 2015
Bench Delhi
Appeal Number ITA 4227/DEL/2015
Duration Of Justice 1 year(s) 2 month(s) 29 day(s)
Appellant Hemkunt Chemicals Pvt. Ltd.,, New Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted SMC 1
Tribunal Order Date 28-09-2016
Date Of Final Hearing 19-09-2016
Next Hearing Date 19-09-2016
Assessment Year 2006-2007
Appeal Filed On 29-06-2015
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-I : NEW DELHI BEFORE SHRI R.S. SYAL ACCOUNTANT MEMBER ITA NO.4227/DEL/2015 ASSESSMENT YEAR : 2006-07 HEMKUNT CHEMICALS PVT. LTD. SECOND FLOOR 87 ZAMRUDPUR GREATER KAILASH-I NEW DELHI. VS. ITO WARD 12(3) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.B. MATHUR CA DEPARTMENT BY : SHRI RAJESH KUMAR SR. DR DATE OF HEARING : 27.09.2016 DATE OF PRONOUNCEMENT : .09.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE CIT(A) ON 20.5.2015 IN RELATION TO THE ASSES SMENT YEAR 2006-07. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAIN ST MAKING OF ADDITION OF RS.10 LAC BY THE LD. CIT(A) ON ACCOUNT OF DEEMED DI VIDEND U/S 2(22)(E) OF THE ACT IN RESPECT OF LOANS RECEIVED BY THE ASSESSE E FROM M/S PSB INDUSTRIES (INDIA) PVT. LTD. ITA NO.4227/DEL/2015 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT T HE ASSESSEE SHOWED TO HAVE RECEIVED AN UNSECURED LOAN OF RS.10 LAC FROM M /S PSB INDUSTRIES (INDIA) PVT. LTD. IN WHICH THE ASSESSEE IS A SHARE HOLDER. THE LD. CIT(A) OBSERVED THAT THIS COMPANY WAS HAVING SIGNIFICANT R ESERVES AND SURPLUS AMOUNTING TO RS.39 06 577/-. HE CALLED UPON THE AS SESSEE TO EXPLAIN AS TO WHY THE AMOUNT OF LOAN RECEIVED BE NOT TREATED AS D EEMED DIVIDEND U/S 2(22)(E) OF THE ACT. DESPITE REPEATED OPPORTUNITIE S THE ASSESSEE DID NOT EITHER APPEAR BEFORE THE LD. CIT(A) OR FURNISH ANY EXPLANATION. THIS LED TO THE MAKING OF ADDITION OF RS.10 LAC U/S 2(22)(E) OF THE ACT. THE ASSESSEE IS AGGRIEVED AGAINST THIS ADDITION. 4. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FACT THAT TH E ASSESSEE IS A SHAREHOLDER IN M/S PSB INDUSTRIES (INDIA) PVT. LTD. IT IS FURTHER UNDISPUTED THAT THE ASSESSEE RECEIVED A SUM OF RS.10 LAC AS L OAN FROM THIS COMPANY DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THE QUESTION ARISES IS AS TO WHETHE R THE ADDITION U/S 2(22)(E) IS CALLED FOR IN THE GIVEN CIRCUMSTANCES? ITA NO.4227/DEL/2015 3 5. THE LD. AR SUBMITTED THAT M/S PSB INDUSTRIES ( INDIA) PVT. LTD. WAS ENGAGED IN MONEY LENDING BUSINESS AND HENCE THE A MOUNT ADVANCED TO THE ASSESSEE COULD NOT BE TREATED AS DEEMED DIVIDEN D. ON A PERTINENT QUERY MY ATTENTION WAS DRAWN TOWARDS THE ANNUAL AC COUNTS OF THIS COMPANY. A COPY OF BALANCE SHEET HAS BEEN PLACED O N PAGE 20 OF THE PAPER BOOK WHICH DIVULGES THE FIGURE OF CURRENT LI ABILITIES AT RS.67.07 CRORE AND LOANS AND ADVANCES UNDER THE HEAD CURREN T ASSETS AT RS.55.61 CRORE. ON A FURTHER QUERY IT WAS STATED THAT LIAB ILITY OF RS.67.07 CRORE REPRESENTED THE AMOUNT OF SECURITY DEPOSIT RECEIVED FROM BANK AT THE TIME OF LETTING OUT ITS PREMISES. OUT OF SUCH SECURITY D EPOSIT THE ASSESSEE ADVANCED LOANS AND ADVANCES AMOUNTING TO RS.55.61 CRORE TO ITS SISTER CONCERNS. ON A PERUSAL OF THE PROFIT & LOSS ACCOUN T OF THIS COMPANY IT TRANSPIRES THAT IT DID NEITHER EARN ANY INTEREST IN COME NOR PAID ANY INTEREST EXPENDITURE. IN MY CONSIDERED OPINION ADVANCING O F INTEREST FREE LOANS TO SISTER CONCERNS DOES NOT AMOUNT TO CARRYING ON MON EY LENDING BUSINESS. IN THIS VIEW OF THE MATTER THE CONTENTION OF THE L D. AR THAT M/S PSB INDUSTRIES (INDIA) PVT. LTD. WAS ENGAGED IN THE MON EY LENDING BUSINESS ITA NO.4227/DEL/2015 4 AND HENCE THE LOAN OF RS.10 LAC GIVEN TO THE ASSE SSEE BE TREATED AS AN ACT OF ADVANCING MONEY IN ORDINARY COURSE OF BUSINESS IS JETTISONED. 6. THE NEXT ARGUMENT WAS MADE BY THE LD. AR THAT EV EN THOUGH M/S PSB INDUSTRIES (INDIA) PVT. LTD. HAD RESERVES AND S URPLUS AMOUNTING TO RS.35.47 LAC AS AT THE END OF THE YEAR BUT THERE WERE NO PROFITS AVAILABLE WITH IT TO ADVANCE ANY LOANS TO THE ASSESSEE COMPAN Y. IT WAS THEREFORE CLAIMED THAT THERE DID NOT EXIST ANY ACTUAL RESERVE AND SURPLUS TO ATTRACT THE PROVISIONS OF THIS SECTION. 7. THIS CONTENTION AGAIN DOES NOT MERIT ACCEPTAN CE. THE REQUIREMENT U/S 2(22)(E) IS THAT THERE SHOULD BE ACCUMULATED PROFI TS AVAILABLE WITH THE COMPANY GIVING LOANS AND ADVANCES. THE EXPRESSION ACCUMULATED PROFITS HAS BEEN DEFINED IN EXPLANATION 2 BELOW SE CTION 2(22)(E) AS UNDER:- `THE EXPRESSION 'ACCUMULATED PROFITS' IN SUB-CLAUSE S ( A) (B) (D ) AND ( E ) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTION OR PAYMENT REFERRED TO IN THOSE SUB-CLAUSES AND IN SU B-CLAUSE ( C ) SHALL INCLUDE ALL PROFITS OF THE COMPANY UP TO THE DATE O F LIQUIDATION BUT SHALL NOT WHERE THE LIQUIDATION IS CONSEQUENT ON THE COM PULSORY ACQUISITION OF ITS UNDERTAKING BY THE GOVERNMENT OR A CORPORATION OWNED OR CONTROLLED BY THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE INCLUDE ANY PROFITS OF THE COMPANY PRIOR TO THREE SUCCESSIV E PREVIOUS YEARS ITA NO.4227/DEL/2015 5 IMMEDIATELY PRECEDING THE PREVIOUS YEAR IN WHICH SU CH ACQUISITION TOOK PLACE. 8. THIS EXPLANATION CLEARLY REFERS TO THE ACCUMULA TED PROFITS AS ALL PROFITS OF THE COMPANY UP TO THE DATE OF DISTRIBUTI ON OF DIVIDEND. WHEN THERE IS A BALANCE IN THE RESERVE AND SURPLUS ACCOU NTS OF M/S PSB INDUSTRIES (INDIA) PVT. LTD. WHICH IS MORE THAN TH E AMOUNT OF RS.10 LAC ADVANCED TO THE ASSESSEE COMPANY I FAIL TO APPRECI ATE THE CONTENTION OF THE LD. AR THAT THE ACTUAL AVAILABILITY OF PROFITS BE CONSIDERED FOR THIS PURPOSE. THE SAME BEING DE HORS MERITS IS HEREBY REJECTED. 9. LASTLY THE LD. AR CONTENDED THAT THE ASSESSE E WAS REGULARLY RECEIVING AND REPAYING LOANS TO M/S PSB INDUSTRIES (INDIA) PV T. LTD. IT WAS ARGUED THAT THE ADDITION IF ANY SHOULD HAVE BEEN MADE IN THE FIRST YEAR OF THE RECEIPT OF LOAN. ON A PERUSAL OF THE COPY OF ACCOU NT OF M/S PSB INDUSTRIES (INDIA) PVT. LTD. IN THE ASSESSEES BOOKS OF ACCOUN T IT IS APPARENT THAT A SUM OF RS.10 LAC WAS RECEIVED BY THE ASSESSEE DURIN G THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . THE CONTENTION THAT THE LOANS RECEIVED IN EARLIER YEARS WERE REPAID IN MY CONSIDERED OPINION DOES NOT STAND IN VIEW OF THE DIRECT JUDGMENT OF TH E HONBLE SUPREME ITA NO.4227/DEL/2015 6 COURT IN THE CASE OF MISS P. SARADA VS. CIT (1998) 229 ITR 444 (SC) IN WHICH IT HAS BEEN HELD THAT THE WITHDRAWALS MADE BY THE MAJOR SHAREHOLDER IS DIVIDEND U/S 2(22)(E) EVEN IF IT IS ADJUSTED LATER ON. 10. IN VIEW OF THE FOREGOING DISCUSSION I AM OF TH E CONSIDERED OPINION THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN TREATING THE SUM OF RS.10 LAC AS DEEMED DIVIDEND U/S 2(22)(E) OF THE ACT. THE IMPUGN ED ORDER IS COUNTENANCED TO THIS EXTENT. 11. IN THE RESULT THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.09.2 016. SD/- [R.S. SYAL] ACCOUNTANT MEMBER DATED 28 TH SEPTEMBER 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT AR ITAT NEW DELHI.