TMI Blog2012 (8) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... o be a reasonable period. See Mahindra and Mahindra Limited V/s. DCIT (2009 (4) TMI 207 - ITAT BOMBAY-H) – Decided in favor of Revenue - ITA No.128-129 & 372-373/Hyd/2010 - - - Dated:- 8-6-2012 - Asha Vijayaraghavan And D. Karunakara Rao , JJ. Assessee by : Ajay Gandhi Department by : K. Viswanatham, DR ORDER Per D. Karunakara Rao, Accountant Member: These are cross appeals for two years, viz. assessment years 2005-06 and 2006-07. Hence, there are four appeals in all in this bunch. They are directed against a common order of the CIT(A) II, Hyderabad dated 30.12.2009, disposing off the appeals of the assessee, arising out of the orders of the assessing officer passed under S.201(1)(1) and S.201(1)(1A) of the Income-tax Act, 1961. Since common issues are involved, these appeals are being disposed off with this common order for the sake of convenience. 2. Facts of the case in brief are that the assessee is in the business of manufacture and export of granite products consisting of handicrafts and artistic stone products, tiles, slabs, monuments etc. A survey u/s. 133 A was conducted at the premises of the assessee on 19.8.208 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of ₹ 28,20,079 for the assessment year 2006-07, besides corresponding interest levied under S.201(1A) for both the assessment years. 3. On appeal, the CIT(A) observed that for the application of provisions of S.2(22)(e) of the Act, there should be accumulated profits and the advances should be to a concern in which a shareholder of the assessee should have not less than 10% of registered ownership and such persons should hold more than 20% of registered as well as beneficial ownership in the recipient company. In the assessee s case, the CIT(A) observed, these conditions were fulfilled and hence, the advances paid to OMPL by the assessee company is dividend within the meaning of S.2(22) of the Act. Having held that the advances in question constitute dividend within the meaning of S.2(22)(e) of the Act, the CIT(A) held that the provisions of S.194 are also applicable, and the assessee is liable to deduct tax at source on payment of such advances. He distinguished the case-law relied upon by the assessee. The CIT(A) collected details of the advances in question made by the assessee to OMPL, duly categorized as trade advances and other than trade advances for the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egality and validity of the proceedings under S.201(1) and 201(1A) of the Income-tax Act after lapse of a period of four years, and the second one relates to applicability of the TDS provisions in respect of the advances held as deemed dividends by the assessing officer under S.2(22)(e) of the Act. 7. In connection with the first issue, learned counsel argued by stating that the proceedings initiated by the assessing officer under S.201(1) and 201(1A) of the Act after a lapse of four years from the end of the relevant financial year amount to invalid proceedings. For this purpose, learned counsel relied on various decisions and provided relevant citations too. 8. On the other hand, the Learned Departmental Representative for the Revenue argued by stating that for the purpose of applicability of TDS provisions, six years is held to be a reasonable period. For this purpose, he relied on the decision of the Special Bench of the Tribunal in the case of Mahindra and Mahindra Limited V/s. DCIT (30 SOT 374). 9. We heard both the parties and perused the impugned orders of the lower authorities and other material on record. We have also perused the case-law relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as held by the CIT(A) in the impugned order, and hence the impugned order of the CIT(A) is liable to be upheld. 12. We heard both the parties and perused the orders of the Revenue as well as the paper book field before us. We have also gone through the various citations filed before us by the learned counsel for the assessee in general and the decision of Jaipur Bench of the Tribunal in the case of ANZ Realities (supra) in particular. In the first place and at the very outset, we hold that as far as trade advances are concerned, there is no question of applicability of the provisions of S.194 of the Act, and consequently, applicability of provisions of S.201(1) and S.201(1)(1A) does not arises. As for the other advances as well, We have perused para 6 of the said order of the Tribunal. For the sake of completeness of this order, we reproduce the said para hereunder- 6. We have heard the rival contentions and perused the facts of the case. The arguments made by Shri Rajeev Sogani, learned Authorised Representative, appear to be convincing that s.194 casts obligation for TDS only when payment is made to a shareholder. It is undisputed fact in the present case that the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, are totally artificial and not valid. In this view of the matter, the ratio of the said decision of the Jaipur Bench of the Tribunal in the case of ANZ Reality (supra), applies to the facts of the present case. Hence, in so far as the aspect of deemed divided involved in cash advances is concerned, assessee is entitled for relief in this regard. We accordingly allow the grounds of the assessee in this appeal. 13. In the result, assessee s appeals are allowed. Revenue s Appeals: ITA No.372/Hyd/2010 : Assessment year 2005-06 ITA No.373/Hyd/2010 : Assessment year 2006-07 14. Grounds of both the appeals are identical. There is a mistake in numbering of the grounds. The correct Sl.no and the grounds read as under 1. The Commissioner of Income Tax(Appeals) erred in facts as well as in law. 2. The Commissioner of Income-tax(Appeals) ought to have appreciated that Section 2(22)(e) contemplates all kinds of advances so as to treat as deemed dividend and no distinction is made between advances for trade and processing charges and other kind of advances. 3. The Commissioner of Income-tax(Appeals) ought to have appreciated hat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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