The ACIT, 1 (2), v. Shri Ramesh Chand Agrawal,

ITA 182/IND/2009 | 2005-2006
Pronouncement Date: 24-05-2010 | Result: Dismissed

Appeal Details

RSA Number 18222714 RSA 2009
Assessee PAN ACYPA5011F
Bench Indore
Appeal Number ITA 182/IND/2009
Duration Of Justice 1 year(s) 1 month(s) 15 day(s)
Appellant The ACIT, 1 (2),
Respondent Shri Ramesh Chand Agrawal,
Appeal Type Income Tax Appeal
Pronouncement Date 24-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 24-05-2010
Date Of Final Hearing 06-05-2010
Next Hearing Date 06-05-2010
Assessment Year 2005-2006
Appeal Filed On 08-04-2009
Judgment Text
PAGE 1 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER PAN NO. : ACYPA5011F I.T.A.NO.182/IND/2009 A.Y. : 2005-06 ACIT SHRI RAMESHCHAND AGRAWAL 1(2) VS E-1/79 ARERA COLONY BHOPAL. BHOPAL. APPELLANT RESPONDENT APPELLANT BY : SHRI K.K.SINGH CIT DR RESPONDENT BY : SHRI S.S.DESHPANDE C. A. DATE OF HEARING : 06.05.2010 O R D E R PER V.K. GUPTA A.M. THIS APPEAL FILED BY THE REVENUE ARISES OUT OF ORDE R OF THE LD. CIT(A)-I BHOPAL DATED 19.01.2009 FOR THE ASSESS MENT YEAR 2005-06. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A CHA IRMAN OF BHASKAR GROUP OF INDUSTRIES. THE AO NOTED THAT THE ASSESSEE HAD OBTAINED LOANS FROM VARIOUS GROUP COMPANIES WITHOUT INTEREST. IT WAS FURTHER NOTED THAT THE ASSESSEE WAS EITHER A DIRECT OR OR WAS HOLDING PAGE 2 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. SUBSTANTIAL SHARES IN SUCH COMPANIES. THE AO REQUIR ED THE ASSESSEE TO SUBMIT FURTHER DETAILS OF SUCH LOANS WHICH WAS NOT SUBMITTED INSPITE OF REPEATED OPPORTUNITIES. THE AO FORMED AN OPINION TH AT THE PROVISIONS OF SECTION 2(24)(IV) WERE APPLICABLE AND BENEFIT IN TH E FORM OF NOTIONAL INTEREST TO BE ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. ON AN OPPORTUNITY BY THE ASSESSING OFFICER THE ASSESSEE REPLIED THAT SUCH PROVISIONS WERE NOT APPLICABLE. THE AO HELD THAT IN THE ABSENCE OF EXACT DETAILS IT WAS NOT POSSIBLE TO THE AO TO APPLY THE CORRECT PROVISIONS OF LAW AND SINCE THE ASSESSMENT WAS GETTING TIME BARRED THERE WAS NO OT HER OPTION BUT TO COMPUTE THE BENEFIT ON NOTIONAL BASIS I.E. @ 8% OF THE TOTAL AMOUNT RECEIVED BY THE ASSESSEE AND ADD THE SAME TO THE TO TAL INCOME OF THE ASSESSEE U/S 2(24)(IV) OF THE ACT. ACCORDINGLY TH E AO MADE ADDITION OF RS. 66 08 214/-. AGGRIEVED BY THIS THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A) WHEREIN IT WAS CONTENDED THA T THESE LOANS WERE RECEIVED IN THE NORMAL COURSE OF BUSINESS ACTIVITIE S AND WERE FOR TEMPORARY PERIOD HENCE CALCULATION OF NOTIONAL IN TEREST AND TREATING THE SAME AS INCOME WAS NOT AT ALL JUSTIFIED. IT WAS ALS O CONTENDED THAT AS PER THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF B.M. SALGAONCAR & BROTHERS PRIVATE LIMITED VS. CIT AS REPORTED IN 24 3 ITR 383 AND THE DECISION OF HON'BLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. P. R. S. OBEROI AS REPORTED IN 52 TAXMAN 267 AND IN THE CAS E OF ISHRAN DEVI PAGE 3 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. OBEROI VS. ITO AS REPORTED IN 250 ITR 362 THE PRO VISIONS OF SECTION 2(24)(IV) COULD NOT BE APPLIED TO COMPUTE THE NOTI ONAL INTEREST ON LOAN. IT WAS ALSO CONTENDED THAT THE ASSESSEE WAS NOT A SUBS TANTIAL SHAREHOLDERS ALSO IN VIEW OF THE PROVISIONS OF SECTION 2(32) OF THE ACT AS APPLICABLE TO INVOKE THE PROVISIONS OF SECTION 2(24)(IV) OF THE A CT. THE ASSESSEE ALSO GAVE THE DETAILS OF THE LIST OF SHAREHOLDINGS IN A LL THE COMPANIES TO THE LD. CIT(A) AND AS PER THESE DETAILS THE ASSESSEE WAS F OUND TO HAVE SUBSTANTIAL SHAREHOLDING ONLY IN TWO COMPANIES NAM ELY PEACOCK TRADING AND INVESTMENT PVT.LTD. AND BHOPAL FINANCIA L SERVICES PRIVATE LIMITED. THE LD. CIT(A) FOUND THAT IN RESPECT OF TH ESE TWO COMPANIES THE AMOUNT HAD BEEN ADVANCED TO THE ASSESSEE ON 31.3.20 05 ONLY HENCE NO NOTIONAL INTEREST COULD BE COMPUTED FOR THE YEAR AS A WHOLE ON NOTIONAL BASIS. IN RESPECT OF OTHER COMPANIES THE LD. CIT(A ) HELD THAT THE ASSESSEE WAS NOT HAVING SUBSTANTIAL INTEREST. HENCE PROVISI ONS OF SECTION 2(24)(IV) COULD NOT BE APPLIED. THE LD. CIT(A) ALSO HELD THAT EVEN OTHERWISE THE PROVISIONS OF SECTION 2(24)(IV) COULD NOT BE APPLIE D IN CASE OF INTEREST FREE LOANS ON CONCESSIONAL RATE IN VIEW OF THE DECISION OF THE SUPREME COURT IN THE CASE OF B.M.SALGAONCAR AND BROTHERS PRIVATE LIMITED (SUPRA). ACCORDINGLY HE DELETED THE IMPUGNED ADDITION. AGGR IEVED BY THIS THE REVENUE IS IN APPEAL BEFORE US. PAGE 4 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. 4. THE LD. CIT DR SUBMITTED THAT THE ASSESSEE WAS A DI RECTOR IN ALL THE COMPANIES AND THIS FACT WAS NOT IN DISPUTE HEN CE THE PROVISIONS OF SECTION 2(32) WERE APPLICABLE AND THEREFORE NOTIO NAL INTEREST COULD BE COMPUTED U/S 2(24)(IV). IT WAS ALSO CONTENDED THAT THE ASSESSEE BY NOT FURNISHING THE REQUIRED DETAILS BEFORE THE AO PREVE NTED HIM TO APPLY THE CORRECT PROVISIONS OF LAW. HENCE MERELY FOR THIS R EASON THE AO SHOULD BE GIVEN AN OPPORTUNITY OF READJUDICATING THE MATTE R. THE LD. CIT DR FURTHER ELABORATED THIS POINT BY SUBMITTING THAT TH E ASSESSEE COULD BE SUBSTANTIAL SHAREHOLDERS IN TERMS OF PROVISIONS OF SECTION 2(22)(E) AND THEREFORE SUCH LOANS COULD BE TREATED AS DEEMED DI VIDEND THEREUNDER AND THIS ASPECT HAD TO BE EXAMINED. THE LD. CIT DR IN THIS REGARD CONTENDED THAT THE TRIBUNAL WAS COMPETENT TO DO SO AS PER THE PROVISIONS OF THE ACT AND EVEN IF SUCH REMANDING RESULTED INTO ENHANCEMEN T OF INCOME THE SAME WOULD ALSO BE JUSTIFIED. FOR THIS PROPOSITION THE LD. CIT DR RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BHAVNA CHEMICALS LIMITED VS. CIT AS REPORTED IN 231 ITR 5 07. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTHER HAND CONTENDED THAT APPLICABILITY OF PROVISIONS OF SECTI ON 2(22)(E) WAS NOT A CASE OF REVENUE I.E. OF A.O. AND IF THE AO WAS OF T HE VIEW THAT THOSE PROVISIONS WERE APPLICABLE ATLEAST HE COULD HAVE MA DE AN ADDITION ON PAGE 5 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. PROTECTIVE BASIS AND THAT WAS ALSO NOT DONE HENCE THERE WAS NO MERIT IN THE PRELIMINARY CONTENTIONS RAISED BY THE REVENUE D URING THE COURSE OF HEARING. THE LEARNED COUNSEL FURTHER SUBMITTED THA T IF THE REVENUE WAS OF THE VIEW THAT THE ASSESSMENT ORDER WAS PREJUDICI AL TO THE INTERESTS OF THE REVENUE OR SOME INCOME HAD ESCAPED FROM ASSESSM ENT THEN THE REVENUE COULD HAVE INVOKED THE PROVISIONS OF SECTIO N 147 OR 263 AS THE CASE MAY BE. AS REGARD TO THE MERITS OF THE CASE T HE LEARNED COUNSEL SUBMITTED THAT U/S 2(24)(IV) NOTIONAL INTEREST ON INTEREST FREE LOANS COULD NOT BE CHARGED AS HELD BY THE HON'BLE SUPREME COUR T IN THE CASE OF B.M. SALGAONCAR AND BROTHERS PRIVATE LIMITED (SUPRA). HE NCE WHETHER THE ASSESSEE WAS A DIRECTOR OR NOT THE SAME WAS NOT A FACTOR TO BE CONSIDERED. AS REGARD TO NON-APPLICABILITY OF PROVI SIONS OF SECTION 2(24)(IV) THE LEARNED COUNSEL ALSO RELIED ON THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. S.S.KHOSLA AS REPORTED IN 220 ITR 65 WHEREIN THE HON'BLE HIGH CO URT HAD DISMISSED THE APPEAL OF THE REVENUE BY HOLDING THAT NO QUESTI ON OF LAW AROSE IN THAT APPEAL AS THE HON'BLE COURT HAD DISMISSED OTHER CON NECTED PETITION ALSO BY HOLDING THAT THE PROVISIONS OF SECTION 2(24)(IV) /SECTION 17(2)(3)(A) WERE NOT APPLICABLE IN RESPECT OF INTEREST FREE LOA NS TO EMPLOYEES. THE LEARNED COUNSEL ALSO RELIED ON THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN THE P.KRISHNAMOORTHY VS. CIT AND ANOT HER AS REPORTED IN PAGE 6 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. 224 ITR 183 WHREIN THE HON'BLE COURT HAD HELD THA T PROVISIONS OF SECTION 40A(5) AND SECTION. 17(2)(IV) COULD NOT BE APPLIED IN RESPECT OF INTEREST SUBSIDY GIVEN TO EMPLOYEES. 6. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 7. IT IS NOTED THAT THE ASSESSEE HAS OBTAINED CERTAIN INTEREST FREE LOAN FROM COMPANIES WHEREIN HE IS A DIRECTOR AND/O R HOLDING SUBSTANTIAL SHARE HOLDING. THE AO HAS APPLIED THE PROVISIONS OF SECTION 2(24)(IV) WHICH AT THE VERY OUT-SET CANNOT BE APPLIED IN VI EW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF B.M. SALGAONCA R AND BROTHERS PRIVATE LIMITED (SUPRA). AS REGARD TO THE PRELIMINA RY OBJECTION RAISED BY THE REVENUE IN OUR OPINION THE POWERS OF THE TRIB UNAL ARE CONFINED TO THE DISPUTE BEFORE THE TRIBUNAL OR IN CONSEQUENTIAL /CONNECTED MATTERS WITH SUCH DISPUTE. TO PUT IT DIFFERENTLY THE TRIBU NAL CANNOT ALLOW A FRESH ISSUE TO BE RE-ADJUDICATED BY THE ASSESSING OFFICE R OR THE LD. CIT(A) WHICH WAS NEVER A SUBJECT MATTER OF PROCEEDINGS BEF ORE THEM. HAVING STATED SO WE FURTHER NOTE THAT IN THE CASE OF BHAV NA CHEMICALS LIMITED (SUPRA) THE AO HAD TAXED THE AGRICULTURAL INCOME W HICH COULD NOT BE BROUGHT TO TAX AND HAS ALSO ALLOWED EXPENSES RELATI NG TO AGRICULTURAL ACTIVITIES IN COMPUTING THE TOTAL INCOME. HENCE IN THAT CASE IT IS EVIDENT PAGE 7 OF 7 - I.T.A.NO. 182/IND/2009 RAMESHCHAND AGRAWAL BHOPAL. THAT ISSUES WERE INTERMINGLED AND INTERCONNECTED WH EREAS IN THE PRESENT CASE THE ISSUES ARE ENTIRELY INDEPENDENT I.E. WHET HER SUCH LOANS COULD BE TAXED AS DEEMED DIVIDEND OR INTEREST ON SUCH LOANS COULD BE TAXED ON NOTIONAL BASIS U/S 2(24)(IV) OR NOT. HENCE IN OUR OPINION THE RATIO OF THAT DECISION CANNOT BE APPLIED HERE. WE MOST HUMBLY STA TE THAT IF THE REVENUES CONTENTION IS ACCEPTED THEN ENTIRE ASSE SSMENT COULD BE SENT BACK TO THE AO FOR ONE OR THE OTHER SUCH PRELIMINAR Y POINTS AND THAT CANNOT BE A CORRECT POSITION IN LAW. HENCE WE REJE CT THIS CONTENTION OF THE REVENUE. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE STAN DS DISMISSED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 24 TH MAY 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 24 TH MAY 2010. CPU* 1213