TaxTMI 
TaxTMI 
2013 (2) TMI 549
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.... of the CIT(A)-XVI, Kolkata confirming an addition of Rs.1,23,77,060/- under section 40(a)(ia) for the alleged non deduction of tax at source is arbitrary, uncalled for and hence bad in law. 2. That the Ld. CIT(A) failed to appreciate that the provision of section 194C, 194J and 194H as alleged, do not apply to the impugned payments made by the appellant. 3. That the Ld. CIT(A) further erred in having not appreciated that a genuine payment effected against a liability arising in course of business is allowable under section 37 of the Income Tax Act, 1961." 3. We have heard rival submissions and gone through facts and circumstances of the case. Brief facts leading to the above issue are that the Assessing Officer during the course of assessment proceedings noted from the books of account and supporting documents and copies of relevant bills that it had paid following amounts without deduction of TDS: Name of party Nature of payment Amount Rs. Anil Trading Co. Transportation 11,52,614/- Vijay Chandra Mishra Transportation 2,82,725/- MA Chhinnamasta Steel & Power Ltd. Transportation 1,50,300/- Akhilesh Kumar Jaiswal Transportation 1,22,164/- ....
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.... that the payments made by assessee are in the nature of purchase account and not transportation charges in respect to above four parties and once this is the position, the assessee is not liable to deduct any TDS under any of the provisions of Chapter XVIIB of the Act. Once assessee is not liable or not under obligation to deduct TDS, no disallowance u/s. 40(a)(ia) of the Act can be made. Accordingly, in respect of these parties the issue is decided in favour of the assessee. 5. The issue in respect to M/s. A. K. Sons, the Ld. Counsel for the assessee stated that it had paid a sum of Rs.59,16,812/- to M/s. A. K. Sons for purchase of iron ore from the parties namely, Serajuddin & Co., M. B. Ispat Corporation Ltd. & Ritesh Tradefin Ltd. in its regular course of business. The assessee enclosed copies of invoices at pages 1(d) to 1(f) of its paper book 1 in respect to these parties. Assessee's contention before us and before lower authorities was that as per agreement with the suppliers they had to deliver goods at assessee's premises ex godown and they have to engage transporters and not the assessee. It was the contention of the assessee that pursuant to the agreement between the....
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....nth of March, which was paid as on 31.10.2006 i.e. on or before the due date of filing of return by the assessee u/s. 139(1) of the Act. Assessee has deducted TDS in the last month of the previous year and paid on 31.10.2006 and hence assessee has complied with the provision of section 40(a)(ia) of the Act and qua this amount no disallowance is required. Hence, we delete the disallowance and assessee's appeal is allowed. 8. In respect to the balance amount of Rs.9,02,107/- in respect of which TDS was deductible in the month other than the last month of the previous year but TDS was not deposited by the last date of the previous year, the same, if any, after verification by the Assessing Officer can be allowed in the assessment year relevant to the previous year in which such deposit is made. This issue requires verification by the Assessing Officer. 9. In respect to the issue of East Coast Marine Services, we find from the facts of the case that the assessee has credited a sum of Rs.11,67,662/- on account of shed construction, brick boundary wall construction, land development and mixing and taking iron ore at cargo etc. undertaken by East Coast Marine Services. The Ld. Couns....
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....se, the Ld. CIT(A) has erred in law by not treating deemed dividend in hands of firm. 5. On the facts and circumstances of the case, the Ld. CIT(A) has erred in law by deleting the loan of Rs.16,28,951/- which has taken as deemed dividend u/s. 2(22)(e) of the Act." 12. We have heard rival submissions and gone through facts and circumstances of the case. We find that assessee is a partnership firm engaged in the business of purchase and sale of iron ores and other related materials. During the year the assessee-firm had three partners namely Shri Kapil Kumar Katyal, Shri Ravindra Katyal and Smt. Renu Batra. Two of the partners i.e. Shri Kapil Katyal and Shri Ravindra Katyal together hold 88% of the shares in M/s Shilpa Creation (P) Ltd. Further, during the year a loan of Rs. 16,28,951/- was obtained by the assessee from M/s. Shilpa Creation (P) Ltd. During the course of assessment AO noted that partners of the assessee-firm have more than 10% of the voting power in Shilpa Creation Pvt. Ltd and hence, he held the loan to be a deemed dividend u/s 2(22)(e) and added the same to the income of the assessee. Aggrieved, assessee filed appeal before CIT(A), where it was contended t....
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....g loan or advance, and, therefore, Intention of Legislature is to tax dividend only in hands of shareholder and not in hands of concern - held, yes." 13. The provisions of the second limb of section 2(22)(e) i.e. 'to any concern in which such shareholder is a member or a partner and in which he has a substantial interest,' were subject matter of consideration before the Hon'ble Rajasthan High Court in the case of CIT vs. Hotel Hilltop, 217 CTR 527 (RAJ.). The facts of the case before the Hon'ble Court were as follows: The Assessee was one M/s. Hotel Hilltop a partnership firm. This firm received an advance of Rs.10 lacs from a company MIs. Hilltop Palace Hotels (P) Ltd. The shareholding pattern of M/S. Hilltop Palace Hotels (P) Ltd. was as follows: 1. Shri Roop Kumar Khurana 23.33% 2. Smt. Saroj Khurana 4.67% 3. Vikas Khurana 22% 4. Deshbandhu Khurana 25% 5. Shri Rajiv Khurana 25% The constitution of the firm Hotel Hill Top was as follows: 1. Shri Roop Kumar Khurana 45% 2. Shri Deshbandhu Khurana 55% ....
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....d dividend in the hands of the firm, rather it would obviously be deemed dividend in the hands of the individuals, on whose behalf, or on whose individual benefit, being such shareholder, the amount is paid by the company to the concern. Thus, the significant requirement of section 2(22)(e) is not shown to exist. The liability of tax, as deemed dividend, could be attracted in the hands of the individuals, being the shareholders, and not in the hands of the firm." 14. The similar issue came before the Hon'ble High Court in the case of CIT vs. Rajkumar Singh & Co. reported in 295 ITR 9 (All.). In the said case, the Hon'ble Allahabad High Court has held as under: "that clause (e) of section 2(22) of the Act as it existed provided that if the loan is received by the shareholder, it is only then that the loan can be deemed to be dividend in his hands. The assessee firm was not the shareholder of the company and the partners of the firm were the shareholders in the books of the company. Therefore, the loan advanced by the company to the assessee firm could not be deemed to be dividend inasmuch as the loan was not to the shareholder but to the assessee who was not the shareholder in....