Iapl/30/2010 Of Commissioner Of Income Tax Ghaziabad v. M/S Progressive Tools And Components Pvt. Ltd

Court No. - 35Case :- INCOME TAX APPEAL No. - 30 of 2010Appellant :- Commissioner Of Income Tax, GhaziabadRespondent :- M/S Progressive Tools And Components Pvt. Ltd.Counsel for Appellant :- S.S.C. I.T.,Piyush AgrawalCounsel for Respondent :- R.R. KapoorHon'ble Bharati Sapru,J.Hon'ble Neeraj Tiwari,J. Heard Sri Dhananjay Awasthi, learned counsel for theappellant and Sri R.R. Kapoor, learned counsel for thedepartment. This appeal has been filed by the department against anorder of Tribunal dated 8.5.2009 for the assessment year2003-04. The question of law referred to is as under. “Whether on the facts and the circumstances of the case, as per the law the Hon'bleITAT was legally justified in deleting the addition made by the AO of Rs. 3,06,83,768/-on account of deemed dividend as per provisions of Section 22/(22)) of the IT Actbecause the Honda Siel Cars Ltd. (India) is subsidiary company of Honda Japanhaving shares holdings of 99.90% and the loan given by said company HSCI is adeemed dividend which was correctly confirmed CIT (A), Ghaziabad.” The facts of the case are that the assessee companyreceived loan of Rs. 3,00,00,000/- from Honda Siel CarsIndia Ltd (hereinafter termed as HSCI) during the relevantperiod under consideration. The interest element amountedto Rs. 6,83,768/- and the entire amount of debt along withinterest was repaid during the same financial year only. The lender, i.e. HSCI is practically a wholly ownedsubsidiary of Honda Japan (hereinafter termed as HJ),wherein the equity to the extent of 99.90% of the totalpaid up share capital of the HSCI is held by HJ. At thefirst instance, the lender, i.e. HSCI is a closely heldcompany in which public is not substantially interested.Thus, the HSCI is covered within the ambit of Section 2(17) of the Income Tax Act, 1961 wherein the "company"means any Indian company and thus duly fulfills the first criteria of lender being a "company" the payment of whichmay attract the provisions of section 2(22)(e) of the Act. The HJ is a registered company as well as beneficial shareholder of HSCI in India. Further, the HJ along with itsassociate/group/subsidiary concerns is holding more than20% of the share capital of another foreign company i.e.F-Tech Inc (herein after referred to as FTI). The foreigncompany i.e. F-Tech Inc. has yet another wholly ownedsubsidiary in Japan which is Fukuda EngineeringCompany Ltd. (FECL) Yet another associate/groupconcern of the same group is Nichimen Inc (NI) located inJapan. All the above stated three Japanese companies areinextricably linked and part and parcel of the JapaneseConglomerate HONDA JAPAN (HJ). The three Japanese companies as mentioned above (F-Tech Inc, Fukuda Engg. and Nichimen Inc.) together held50% of the share capital of the assessee company duringthe relevant period under consideration. These shares ofthe assessee company have been moving from the Indianpromoters to the Japanese associates in the recent years.The shareholding pattern has rapidly changed especially inthe year under consideration as well as the immediatelypreceding year as the holding of the Associated companiesof Honda Japan have acquired almost 50% equity in theAssessee company. Thus from the above share holding pattern as well asinformation available on record, it can be logicallyconcluded that the beneficial ownership of shares of theassessee company vested with HJ i.e. Honda Japan. TheHJ held more than 10% of the voting powers in HSCI andin turn was substantially interested in the assesseecompany through its intermediary concerns, which held50% of the total paid up share capital of the assessee company. The money which flowed from HSCI to theassessee company was for the ultimate benefit of HJ only. With the back ground of the above said undisputed facts,the next step is to ascertain the requisite conditions beforewhich a payment by a company to its beneficial (and notonly registered) shareholder/s can be regarded as dividendwithin the meaning of sub-clause (e) of section 2(22). company. The money which flowed from HSCI to theassessee company was for the ultimate benefit of HJ only. With the back ground of the above said undisputed facts,the next step is to ascertain the requisite conditions beforewhich a payment by a company to its beneficial (and notonly registered) shareholder/s can be regarded as dividendwithin the meaning of sub-clause (e) of section 2(22). The question, therefore, was whether the assessee couldavail the benefits of the provisions of Section 2 (22) (e) ofthe Act. The Tribunal while considering the matter held that it wasof the view that HSCI cannot be given a differenttreatment in regard to its status of company being acompany in which public is substantially interested justbecause its shares are held to the extent of 99.99% byHonda Japan. Obviously, Honda Japan is a companywhich is listed in the Stock Exchange and is a companywhich would have to be held as a company in which thepublic is substantially interested in view of its listing ofstock exchange, and the Indian subsidiary of Honda Japanbeing HSCI was also liable to be held to be a company inwhich public has substantial interest and in view of thisalso the provisions of Section 2 (22) (e) of the Act are notattracted and consequently even on this ground the loangiven by HSCI to the assessee company cannot be treatedas deemed dividend. In similar circumstances, the coordinate bench of theTribunal has given relief to another assessee with regard tothe benefits available under Section 22/(22) of the IT Act.The Tribunal has set aside the findings of the A.O. as wellas the CIT(Appeals) and has remanded the matter back forreconsideration. It is well settled that while resolving a dispute, if onebench of the tribunal takes a certain view, then another coordinate bench of the Tribunal should refrain frompassing contrary order in the similar matter and if itdisagrees with the view of the previous bench, the latershould refer to larger bench for proper adjudication, inorder to maintain judicial discipline. Reliance may beplaced on a decision of Hon'ble Apex Court in the case ofSundarjas Kanyalal Bhatija Vs. Collector, Thane,Maharashtra, AIR 1990 SC 261. Having heard learned Counsel for the parties and havingperused the material on record as well as the impugnedorder of the Tribunal, we are of the view that the viewtaken by the Tribunal is completely justified especially inview of many decisions of the coordinate benches of theTribunal as well as the decisions upto the Apex Courtwherein it has been held that the decisions taken by thecoordinate benches have to be followed by the Tribunalwhile adjudicating similar set of cases. In view of above, the question of law is answered infavour of the assessee and against the department. There is no merit in this appeal. It is accordinglydismissed. Order Date :- 9.1.2018Arvind