TMI Blog2011 (2) TMI 1439X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment proceedings for the said year, it was noticed by the Assessing Officer that the assessee is a shareholder in a company, viz. M/s.Ruchiraj Shares Stock Brokers Pvt. Ltd., having more than 10% of the voting rights. He also noticed that the assessee has entered into several transactions with the said company including the transactions involving taking of loans in the previous year relevant to the assessment year 2006-07 as well as in the previous years relevant to assessment years 2002-03 to 2005-06. According to the Assessing Officer, the provisions of section 2(22)(e) were applicable to the said transactions and the amounts involved therein were liable to be taxed in the hands of the assessee as deemed dividend. He, therefore, reopened the assessments for the assessment years 2002-03 to 2005-06 also in order to bring to tax the said income which had escaped assessment. In the assessments completed for the assessment year 2006-07 under section 143(3) and for the assessment years 2002-03 to 2004-05 under section 143(3) read with section 147, the aggregate amount of receipts by the assessee as involved in the transactions with M/s. Ruchiraj Shares Stock Brokers Pvt. Ltd., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on trading account between the assessee and M/s.Ruchiraj Shares Stock Brokers Pvt. Ltd., which were treated by the Assessing Officer as covered under section 2(22)(e), the learned CIT(A) found that there were certain transactions which had been separately entered into by the assessee with M/s. Ruchiraj Shares Stock Brokers Pvt. Ltd., on trading account involving purchase and sale of shares. He also found from the perusal of the relevant ledger accounts that there was no entry relating to receipt of any amount by cash or cheque by the assessee from the said company reflected in the said trading account. He found that all these entries were related to bills regarding purchase and sale of shares made by the said company as broker on behalf of the assessee. He also noted that the balance payable by the assessee to the company on account of trading transactions was consistently reduced during the years under consideration. He, therefore, held that the said transactions representing regular business transactions between the assessee and M/s.Ruchiraj Shares Stock Brokers Pvt. Ltd., were not covered by the provisions of section 2(22)(e) and directed the Assessing Officer to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismiss the appeal of the assessee. 7. Now we shall take up the appeals of the revenue for all the five years under consideration being ITA Nos.1939 to 1943/Mum/2010. 8. Ground No. 1 raised by the revenue in all these appeals is general seeking no specific decision from the Tribunal. 9. In ground No. 2, which is identical in all these five appeals, the revenue has challenged the action of the learned CIT(A) in holding that accumulated profits would exclude share premium for the purpose of computing deemed dividend under section 2(22)(e). 10. We have heard the arguments of both sides on this issue and also perused the relevant material on record. It is observed that this issue has been decided by the learned CIT(A) in favor of the assessee relying on the decision of Delhi Bench of I.T.A.T in the case of DCIT v. Maipo India Ltd. (supra) and at the time of hearing before us, the learned counsel for the assessee has contended that the said decision of the Tribunal squarely covers this issue in favor of the assessee. In the said decision, it was held by the Tribunal relying on the provisions of section 78 of the Companies Act, 1956 that not only is there a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mean all profits of the company which as rightly held by the Tribunal in the case of Maipo India Ltd. (supra) prefers to commercial profit and the share premium received by the assessee on capital account and treated as capital reserves cannot be treated as such profits by any stretch of imagination. 12. The learned Departmental Representative has also relied on the provisions of clause (b) to section 2(22) and submitted that even the bonus shares are treated as deemed dividend. He contended that since such bonus shares can be issued from the share premium account available with the company, such amount is liable to be included in the accumulated profit for application of section 2(22)(e). A perusal of the provisions of clause (b) to section 2(22), however, shows that the same are applicable only to the shares distributed by way of bonus by the company to its preferential shareholders and not to the equity shareholders. In any case, we are concerned with the provisions of clause (e) of section 2((22) in the present case and the provisions of clause (b) of that section cannot be read into clause (e) which applies in a different situation. 13. The learned Departmental Repres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remium before the commencement of the Companies Act, 1956, would by virtue of section 78 have to open a share premium account and transfer it to the premium so received. Explaining further, it was observed by the Hon ble Supreme Court that if the company, however, had already dealt with the premium before the commencement of the said Act, in such a way that it had ceased to exist as an identifiable part of the Companies reserves, the premium so dealt with shall be disregarded in determining the sum to be included in the share premium account. It was thus held that if such premium is to be disregarded for creation of share premium account as per the provisions of section 78 of the Companies Act, 1956, it is difficult to appreciate how the assessee can utilize the said provisions for the purpose of showing that the premium which has already been distributed remained invested with the character of capital in the hands of the distributing company. In the said case, the share premium account thus was not only received by the declaring/distributing company prior to the enactment of section 78 of the Companies Act, 1956 but the same was also utilized by the assessee before the said enactm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Departmental Representative submitted that these details apparently were furnished by the assessee before the CIT(A) for the first time and the latter decided the issue in favour of the assessee relying on the said details without giving any opportunity to the A.O. to verify the same. However, as pointed out by the learned counsel for the assessee from page No. 3 of the Assessing Officer s order, it was categorically submitted by the assessee before the Assessing Officer during the course of assessment proceedings that two separate accounts were being maintained by him with M/s. Ruchiraj Shares Stock Brokers Pvt. Ltd., and one of them was relating to his transactions in the Stock Exchange made through the company which is purely a trading account. It was submitted that there was thus no question of any advance or loan given by the assessee to the said company in relation to the said account. It is observed that this issue has been discussed by the Assessing Officer on page No.7 of his order and a perusal of the relevant discussion made by the Assessing Officer in this context shows that the nature of transactions entered into by the assessee with the company on tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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