The ITO, 2(1), v. M/s. Destiny Investment Pvt. Ltd.,,

ITA 523/IND/2007 | 1996-1997
Pronouncement Date: 19-01-2010 | Result: Dismissed

Appeal Details

RSA Number 52322714 RSA 2007
Bench Indore
Appeal Number ITA 523/IND/2007
Duration Of Justice 2 year(s) 3 month(s) 9 day(s)
Appellant The ITO, 2(1),
Respondent M/s. Destiny Investment Pvt. Ltd.,,
Appeal Type Income Tax Appeal
Pronouncement Date 19-01-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 19-01-2010
Date Of Final Hearing 19-01-2010
Next Hearing Date 19-01-2010
Assessment Year 1996-1997
Appeal Filed On 10-10-2007
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH AND SHRI V.K. GUPTA AM ITA NO. 523/IND/07 A.Y. 1996-97 INCOME TAX OFFICER 1(2) INDORE APPELLANT VS M/S DESTINY INVESTMENT PVT. LTD INDORE RESPONDENT PAN AAACDS791J APPELLANT BY : SMT. APARNA KARAN SR. DR RESPONDENT BY : S/SHRI AJAY TULSIYAN & MAHESH AGRAW AL O R D E R PER JOGINDER SINGH JM THIS APPEAL IS BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) DATED 6.7.2007 ON THE GROUND THAT THE LEARNE D CIT(A) HAS ERRED IN DELETING THE ADDITION ON ACCOUNT OF DEEMED DIVIDEND. 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SMT. APARNA 2 KARAN LEARNED SENIOR DR FOR THE REVENUE AND SHRI A JAY TULSIYAN ALONG WITH SHRI MAHESH AGRAWAL LEARNED COUNSEL FOR THE ASSESSEE. MRS. KARAN SUPPORTED THE ASSESSMENT ORDER WHEREAS T HE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDE R BY PLACING RELIANCE ON THE DECISION IN THE CASE OF ACIT V. SMT . LAKSHMIKUTTY NARAYANAN;105 ITD 558 (COCHIN) AND CIT VS. SMT. SAV ITHIRI SAM; 236 ITR 1003 (MUMB). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON THE FILE. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HOLDS 288750 EQUITY SHARES OF RS. 10/- EACH OF MARVEL AGREX LIMITED WHICH IS MORE THAN 10% OF THE EQUITY SHARES OF THE COMPANY. THE BALANCE SHEET OF THE COMPANY S HOWED UNSECURED LOANS OF RS.14 22 061/-. THE AO IN VIEW OF THE PROVISIONS OF SECTION 2(22)(E) OF THE INCOME TAX ACT 1961 HE LD THAT SINCE THE ASSESSEE COMPANY WAS HOLDING MORE THAN 10% OF THE S HARES OF MARVEL AGREX LIMITED AS ALSO OBTAINED UNSECURED LOA N OF RS.14 22 061/- THEREFORE THE UNSECURED LOAN OF RS .14 22 061/- WAS TO BE ASSESSED AS DIVIDEND INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR UNDER APPEAL. AGGRIEVED WITH THIS FINDING THE ASSESSEE PREFERRED 3 APPEAL BEFORE THE LEARNED CIT(A) WHO AFTER GIVING DETAILED REASONS HELD THAT THE ASSESSEE HAS NOT RECEIVED ANY BENEFIT AS SIMPLY THE EXISTING LIABILITY CONTINUED IN THE SAME MANNER EXC EPT THE NAME OF THE CREDITOR WAS CHANGED AND AS SUCH THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT AS WELL AS CLEAR JUDICIAL VIEW AVAILABLE ON THE ISSUE AS EMPHASIZED BY THE ASSESSEE CANNOT BE ATTRACTED TO MERE JOURNAL ENTRY PASSED TRANSFERRING THE LIABILITY. THE LEARNED CI T(A) ACCORDINGLY DELETED THE ADDITION MADE BY THE AO. NOW THE REVEN UE IS IN APPEAL BEFORE US. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS OF TH E PARTIES IN VIEW OF THE FACTS OF THE CASE AND THE DECISIONS CITED BE FORE US WE FIND THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF T HE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT V. SMT. SAVITHIRI SAM (SUPRA) IN WHICH IT WAS HELD THAT THE PROVISIONS SECTION 2(22)(E) CL EARLY PROVIDE THAT BY A FICTION DIVIDEND IS MADE TO INCLUDE ANY PAYMENT B Y A COMPANY ETC. THEREFORE IT IS DIFFICULT TO INTRODUCE ANOTHER FIC TION IN RESPECT OF THE WORDS PAYMENT BY THE COMPANY BY CONSTRUING EVEN A TRANSFER ENTRY AS AMOUNTING TO PAYMENT. IN OTHER WORDS WHEN SECT ION 2(22)(E) ITSELF INTRODUCES A FICTION IT IS IMPROPER TO INTRODUCE A NOTHER FICTION AND 4 CONSTRUE A PAYMENT AS EQUIVALENT TO A CONSTRUCTIVE PAYMENT. SIMILARLY IN THE CASE OF ACIT V. SMT. LAKSHMIKUTTY NARAYANAN (SUPRA) IT WAS HELD BY THE COCHIN A BENCH OF THE ITAT THAT ADVANCE TO THE ASSESSEE SHAREHOLDER DIRECTOR HAVIN G BEEN MADE IN THE NORMAL COURSE OF BUSINESS TRANSACTION BETWEEN THE A SSESSEE AND THE COMPANY THE SAME COULD NOT BE TREATED AS DEEMED DI VIDEND UNDER SECTION 2(22)(E) OF THE ACT. WE THEREFORE FOLLOW ING THE RATIO LAID DOWN IN THESE DECISIONS HOLD THAT THE LEARNED CIT( A) WAS QUITE JUSTIFIED IN HOLDING THAT IN VIEW OF THE PROVISIONS OF SECTION 2(22)(E) OF THE ACT THE UNSECURED LOAN OF RS.14 22 061/- CA NNOT BE ASSESSED AS DIVIDEND INCOME IN THE HANDS OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 1996-97. WE THEREFORE UPHOLD THE ORDER OF THE LE ARNED CIT(A) AND DISMISS THIS APPEAL OF THE REVENUE. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF B OTH THE PARTIES AT THE CONCLUSION OF HEARING ON 19 TH JANUARY 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED - 5 TH FEBRUARY 2010 COPY TO APPELLANT RESPONDENT CIT CIT(A) DR GU ARD FILE 5 DN/-