The Commissioner Of Income Tax,Chennai v. M/S. Accel Limited,Iii Floor, Accel House

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.07.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARIANDTHE HON'BLE MR.JUSTICE KRISHNAN RAMASAMY TCA No.874 of 2016 The Commissioner of Income Tax,Chennai. ...Appellant/Appellant Versus M/s. Accel Limited,III Floor, Accel House,75, Nelson Manickam Road,Aminjikarai, Chennai – 600 029. ...Respondent/RespondentPANO: AACA3042P Prayer :- Appeal filed against the order of the IncomeTax Appellate Tribunal Madras “C” Bench, Chennai in ITANo.144/Mds/2015 dated 20.05.2016 against the order of theCommissioner of Income Tax(Appeals)-I, Chennai dated 29/9/2014and made in ITA NO.230/09-10/A-1 and against the order of theDeputy Commissioner of Income Tax Company Circle 1(1) Chennaidated 18/11/2009 made in PA/GIR NO.AAACA3042P/AX6-061 for theAssesment year 2002-2003. For Appellant : Mr.T.Ravikumar, Senior Standing Counsel For Respondent : Mr.S.R.Sivaraman by MR.JUSTICE KRISHNAN RAMASAMY) The Court was held by Video Conference, as per theResolution of the Full Court dated 3 July 2020, by Judges attheir respective residences and the counsel, staff of the Courtappearing from their respective residences. 2.This appeal by the Revenue, under Section 260 (A)of the Income Tax Act, 1961 (hereinafter referred to as “the https://hcservices.ecourts.gov.in/hcservices/ Act”), is directed against the order of the Income Tax AppellateTribunal, Chennai “C” Bench, Chennai, in ITA No.144/Mds/2015,dated 25.05.2016 for the assessment year 2002-03. 3.This matter was listed today under the caption“notice regarding admission”. 4.Heard, Mr.T.Ravikumar, learned Senior StandingCounsel for the appellant and Mr.S.R.Sivaraman, learned counselappearing for the respondent and perused the materials availableon record. 5.The respondent company is a holding company of M/s.Accel ICIM System and Service Limited. As on 01.04.2001, therespondent company was holding 92.43% of shares in itssubsidiary company. The said share holding was subsequentlyreduced from 92.43% to 61.24% as on 31.02.2002. During thecourse of the assessment proceedings and the subsequent remandproceedings for the assessment year 2004-05, the AssessmentOfficer found that the respondent company had received a sum ofRs.3.00 Crores as loan from its subsidiary company during thefinancial year relevant to the assessment year 2002-03. The saidloan amount of Rs.3.00 Crores have been shown in the balancesheet of the respondent company, relevant to the assessmentyears 2002-03 and 2004-05. 6.According to the Department, the amount advanced bythe subsidiary company to its holding company, namely a sum ofRs.3.00 Crores is deemed dividend within the meaning of Section2 (22)(e) of the Act. 7.On the other hand, the respondent contended thatthe amount received by it from the subsidiary company is only anadvance towards security for providing corporate guarantee.Though it has received the advance towards security, it has paidinterest of 1%, higher than the normal Bank lending rate. Hence,the receipt of a sum of Rs.3.00 Crores will not fall within themeaning of Section 2(22)(e) of the Act, to consider it as deemeddividend. Further, a Co-ordinate Bench of this Court hasdismissed the Department Appeal in TCA.No.167 of 2011, which wasfiled against the order of the Tribunal, relating to theassessment year 2004-05 and the same was also referred by thelearned counsel for the respondent to contend that the issue isno more res-integra, since the said issue has already beendecided by this Court in the above said appeal. 8.The department initiated two separate proceedingsfor the assessment years 2002-03 and 2004-05, for one timeadvance of Rs.3.00 Crores made by the subsidiary company to itsholding company. 8.The department initiated two separate proceedingsfor the assessment years 2002-03 and 2004-05, for one timeadvance of Rs.3.00 Crores made by the subsidiary company to itsholding company. 9.As far as the issue relating to the assessment year2004-05 is concerned, it has reached a finality at the level ofthis Court in TCA.No.167 of 2011 dated 21.01.2019. This Court, https://hcservices.ecourts.gov.in/hcservices/ while considering the materials available on record, found thatthere was no substantial question of law arising forconsideration in the department appeal, since the entire disputeis purely factual and therefore dismissed the appeal. Therelevant portion of paragraph Nos.4 and 5 of the judgment isextracted hereunder:- “4.The first aspect to be considered iswhether any substantial question of law arisesfor consideration in this appeal. Upon goingthrough the order passed by the Commissioner ofIncome-tax (Appeals)-III, Chennai (for brevity(“the CIT(A)”), dated 28.05.2008, as well as theimpugned order passed by the Tribunal, we findthat the entire dispute is purely factual. 5.The question is whether the amount ofRs.4,16,12,082/- is to be construed as a deemeddividend under Section 2(22)(e) of the Act. Wefind that this issue was threadbare analysed bythe CIT(A) in his order dated 28.05.2008, aftercalling for a remand report. This findingrecorded by the CIT(A) was correct, as there isno payment made by the assessee-company to itssubsidiary during the previous year, relevant tothe assessment year 2004-05 within the meaning ofSection 2(22)(e) of the Act.” 10.The present appeal is relating to the assessmentyear 2002-03, questioning the sum of Rs.3.00 Crores advance madeby the subsidiary company to the respondent/holding company. TheCommissioner of Income Tax (Appeals), referring to the decisionrendered for the assessment year of 2004-05, held that a sum ofRs.3.00 Crores shown in the balance sheet of the respondentcompany for the assessment year 2002-03, is only an advance madeby its subsidiary company, in the course of the business, forproviding corporate guarantee by the respondent, and rejectedthe contentions of the department. As against the said order,the department has preferred an appeal before the Income TaxAppellate Tribunal Madras “C” Bench, Chennai in ITANo.144/Mds/2015 (for the assessment year 2002-03). The Tribunalhas also passed its order in that appeal on 20.05.2016, holdingthat the Commissioner Income Tax (Appeals) have elaboratelydealt with the facts of the case. Further, it has not found anyerror in the order passed by the Commissioner of Income Tax(Appeals). Therefore, the appeal of the Revenue inI.T.A.No.144/Mds/2015 was dismissed. As against the said order,the department has preferred the present appeal before thisCourt. 11.As stated above, this Court already has decided thesaid issue against the same appellant, holding that the sum ofRs.3.00 Crores received by the respondent company from itssubsidiary relevant to the assessment year 2004-05, is notdeemed dividend within the meaning of Section 2(22)(e) of theAct. 11.As stated above, this Court already has decided thesaid issue against the same appellant, holding that the sum ofRs.3.00 Crores received by the respondent company from itssubsidiary relevant to the assessment year 2004-05, is notdeemed dividend within the meaning of Section 2(22)(e) of theAct. 12.Further, the advance received by the respondentfrom its subsidiary has been shown in the balance sheet of therespondent, relevant to the assessment years 2002-03 and 2004-05. The department has initiated two separate proceedings forthe single transaction and the said proceedings have beendragged up to the level of this Court. Obviously, the departmentwould have been well aware of the fact that the amount ofRs.3.00 Crores advanced by the subsidiary to its holdingcompany, cannot be taxed twice. When such being the position, weare really surprised to see that the initiation of two separateproceedings for the same transaction is not appreciable. Had thedepartment have applied its mind in a proper manner, they couldhave avoided these type of vexatious proceedings and it wouldhave saved the precious time of this Court as well as thedepartment. 13.Therefore, the issue in the present appeal and theappeal in TCA.No.167 of 2011 are one and the same. Since thisCourt already has decided the said issue, we are of the opinionthat there is no need for further adjudication by this Court inthe present appeal once again. Further, we do not find anysubstantial question of law arising in this appeal, as theentire dispute is purely factual. 14. The first appellate authority as well as theTribunal have rightly considered the factual position andgranted relief to the assessee. Thus, we find no substantialquestion of law arising for consideration. Consequently, theappeal fails and the same is dismissed. There is no order as tocosts. To 1. Income Tax Appellate Tribunal 'C' Bench 'C' Bench https://hcservices.ecourts.gov.in/hcservices/ 2.The Commissioner of Income Tax,(Appeals)-1, Chennai(Appeals)-1, Chennai 3. The Deputy Commissioner Of Income Tax Company Circle1(1), Chennai Company Circle1(1), Chennai 4.The Commissioner Of Income Tax, Chennai +1cc to Mr.T.Ravikumar, Advocate, in SR.25120 TCA No.874 of 2016VG-II(CO)RV(14/09/2020)