The Assistant Commissioner Of Income Tax, Nagpur v. M/S Bharat Hardware & Iron Stores, Nagpur

FARAD CONTINUATION SHEET No.IN THE HIGH COURT OF JUDICATURE AT BOMBAY NAGPUR BENCH AT NAGPUR INCOME TAX APPEAL NO.32/2013ANDINCOME TAX APPEAL NO.35/2013 The Assistant Commissioner of Income Tax, Nagpur...Versus... M/s Bharat Hardware & Iron Stores, Nagpur - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Office Notes, Office Memoranda of Coram, Court's or Judge's ordersappearances, Court's orders of directionsand Registrar's orders - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Shri Anand Parchure, Adv. for appellant in both appealsShri K.P. Dewani, Adv. for respondent in both appeals CORAM : SMT. VASANTI A. NAIK AND A.S. CHANDURKAR, JJ.DATE: 10.10.2013 Since the issue involved in these appeals is identical, they are heard together and are decided by this common order. During the course of assessment proceedings, the Assessing Officer noticed that OCSIPL had advanced a loan to the Assessee Firm to the tune of Rs.1.55 crores during the assessment year 2006-07. It was noticed by the Assessing Officer that one of the partners in the Assessee Firm was also a shareholder in OCSIPL. Though, it was the case of the assessee that OCSIPL had advanced the loan of Rs.1.55 crores to the Assessee Firm, the Assessing Officer discarded the case of the Assessee. According to the Assessing Officer, the addition of Rs.39,22,792/- was liable to be made as deemed dividend under the provisions of Section 2 (22) (e) of the Income Tax Act. The assessee challenged the order in an appeal before the CIT (Appeals). The Commissioner noted that neither the Assessee Firm was a registered shareholder nor a beneficiary shareholder in OCSIPL and hence, the provisions of Section 2 (22) (e) of the Act were not attracted. Being aggrieved by the order of the Commissioner, the Department filed an appeal before the Income Tax Appellate Tribunal. The Tribunal affirmed the order passed by the Commissioner by relying on the judgment of the Tribunal in the case of ACIT...Versus...Bhaumik Colour (P) Ltd. (118 ITD 1). A submission is made on behalf of the Department that the provisions of Section 2 (22) (e) of the Act were attracted in the facts of the case as one of the partners in the Assessee Firm was also a shareholder in OCSIPL. The learned Counsel for the appellant relied on the judgment of the Delhi High Court, in the case of Commissioner of Income-Tax...Versus...National TravelServices, reported in (2012) 347 ITR 305 (Delhi) to state that in similar set of facts the Delhi High Court had ruled in favour of the revenue. On the other hand, it is submitted on behalf of the assessee that the Commissioner as well as Appellate Tribunal had rightly held that the addition was not proper as the provisions of Section 2 (22) (e) of the Act were not attracted in the facts of the case. It is submitted that Section 2 (22) (e) of the Act could be attracted only in cases where a person is a beneficiary shareholder or a registered shareholder. It is submitted that the Assessee Firm is not a shareholder of OCSIPL and hence, it could not be said that the amount received by the Assessee Company from OCSIPL could be treated as dividend under Section 2 (22) (e) of the Act. The learned Counsel relied on the decision of this Court, reported in 2011 237 CTR (Bombay) 147as also a judgment of the Delhi High Court dated 25.1.2012 in Income Tax Appeal No.780/2011 to substantiate his submission. The learned Counsel relied on the decision of this Court, reported in 2011 237 CTR (Bombay) 147as also a judgment of the Delhi High Court dated 25.1.2012 in Income Tax Appeal No.780/2011 to substantiate his submission. On hearing the learned Counsel for the parties and on a perusal of the orders passed by the Commissioner as well as Appellate Tribunal, it appears that the authorities were justified in holding that the Assessing Officer was not justified in making the addition as deemed income under Section 2 (22) (e) of the Act. The Assessee Firm was neither a registered shareholder nor a beneficiary shareholder of OCSIPL. Merely because one of the partners of the Assessee Firm was also a shareholder in OCSIPL, it could not be said that the provisions of Section 2 (22) (e) of the Act were attracted. The findings recorded by the Commissioner as well as Appellate Tribunal are based on a proper appreciation of the facts as well as the provisions of Section 2 (22) (e) of the Act and the findings do not give rise to any substantial question of law. In the result, the Income Tax Appeals are dismissed with no order as to costs. JUDGE JUDGE