The Commissioner of Income-tax, Chennai v. Accel Limited
[Citation -2020-LL-0723-9]

Citation 2020-LL-0723-9
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name Accel Limited
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 23/07/2020
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags corporate guarantee • subsidiary company • advance received • deemed dividend • holding company
Bot Summary: In Order dt.23.07.2020 TCA No.874 of 2016 5.The respondent company is a holding company of M/s. Accel ICIM System and Service Limited. As on 01.04.2001, the respondent company was holding 92.43 of shares in its subsidiary company. During the course of the assessment proceedings and the subsequent remand proceedings for the assessment year 2004-05, the Assessment Officer found that the respondent company had received a sum of Rs.3.00 Crores as loan from its subsidiary company during the financial year relevant to the assessment year 2002-03. 6.According to the Department, the amount advanced by the subsidiary company to its holding company, namely a sum of Rs.3.00 Crores is deemed dividend within the meaning of Section 2(e) of the Act. 8.The department initiated two separate proceedings for the assessment years 2002-03 and 2004-05, for one time advance of Rs.3.00 Crores made by the subsidiary company to its holding company. In Order dt.23.07.2020 TCA No.874 of 2016 10.The present appeal is relating to the assessment year 2002-03, questioning the sum of Rs.3.00 Crores advance made by the subsidiary company to the respondent/holding company. The Commissioner of Income Tax, referring to the decision rendered for the assessment year of 2004-05, held that a sum of Rs.3.00 Crores shown in the balance sheet of the respondent company for the assessment year 2002-03, is only an advance made by its subsidiary company, in the course of the business, for providing corporate guarantee by the respondent, and rejected the contentions of the department.


Order dt.23.07.2020 TCA No.874 of 2016 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.07.2020 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE KRISHNAN RAMASAMY TCA No.874 of 2016 Commissioner of Income Tax, Chennai. ... Appellant Versus M/s. Accel Limited, III Floor, Accel House, 75, Nelson Manickam Road, Aminjikarai, Chennai 600029. Respondent PANO: AACA3042P Prayer ::- Appeal filed against order of Income Tax Appellate Tribunal Madras C Bench, Chennai in ITA No.144/Mds/2015 dated 25.05.2016. For Appellant : Mr.T.Ravikumar, Senior Standing Counsel For Respondent : Mr.S.R.Sivaraman 1/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 ORDER (Made by Krishnan Ramasamy,J) Court was held by Video Conference, as per Resolution of Full Court dated 3 July 2020, by Judges at their respective residences and counsel, staff of Court appearing from their respective residences. 2.This appeal by Revenue, under Section 260 (A) of Income Tax Act, 1961 (hereinafter referred to as Act ), is directed against order of Income Tax Appellate Tribunal, Chennai C Bench, Chennai, in ITA No.144/Mds/2015, dated 25.05.2016 for assessment year 2002-03. 3.This matter was listed today under caption notice regarding admission . 4.Heard, Mr.T.Ravikumar, learned Senior Standing Counsel for appellant and Mr.S.R.Sivaraman, learned counsel appearing for respondent and perused materials available on record. 2/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 5.The respondent company is holding company of M/s. Accel ICIM System and Service Limited. As on 01.04.2001, respondent company was holding 92.43% of shares in its subsidiary company. said share holding was subsequently reduced from 92.43% to 61.24% as on 31.02.2002. During course of assessment proceedings and subsequent remand proceedings for assessment year 2004-05, Assessment Officer found that respondent company had received sum of Rs.3.00 Crores as loan from its subsidiary company during financial year relevant to assessment year 2002-03. said loan amount of Rs.3.00 Crores have been shown in balance sheet of respondent company, relevant to assessment years 2002-03 and 2004- 05. 6.According to Department, amount advanced by subsidiary company to its holding company, namely sum of Rs.3.00 Crores is deemed dividend within meaning of Section 2 (22)(e) of Act. 7.On other hand, respondent contended that amount 3/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 received by it from subsidiary company is only advance towards security for providing corporate guarantee. Though it has received advance towards security, it has paid interest of 1%, higher than normal Bank lending rate. Hence, receipt of sum of Rs.3.00 Crores will not fall within meaning of Section 2(22)(e) of Act, to consider it as deemed dividend. Further, Co-ordinate Bench of this Court has dismissed Department Appeal in TCA.No.167 of 2011, which was filed against order of Tribunal, relating to assessment year 2004-05 and same was also referred by learned counsel for respondent to contend that issue is no more res-integra, since said issue has already been decided by this Court in above said appeal. 8.The department initiated two separate proceedings for assessment years 2002-03 and 2004-05, for one time advance of Rs.3.00 Crores made by subsidiary company to its holding company. 9.As far as issue relating to assessment year 2004-05 is concerned, it has reached finality at level of this Court in TCA.No.167 of 2011 dated 21.01.2019. This Court, while considering 4/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 materials available on record, found that there was no substantial question of law arising for consideration in department appeal, since entire dispute is purely factual and therefore dismissed appeal. relevant portion of paragraph Nos.4 and 5 of judgment is extracted hereunder:- 4.The first aspect to be considered is whether any substantial question of law arises for consideration in this appeal. Upon going through order passed by Commissioner of Income-tax (Appeals)-III, Chennai (for brevity ( CIT(A) ), dated 28.05.2008, as well as impugned order passed by Tribunal, we find that entire dispute is purely factual. 5.The question is whether amount of Rs.4,16,12,082/- is to be construed as deemed dividend under Section 2(22)(e) of Act. We find that this issue was threadbare analysed by CIT(A) in his order dated 28.05.2008, after calling for remand report. This finding recorded by CIT(A) was correct, as there is no payment made by assessee-company to its subsidiary during previous year, relevant to assessment year 2004- 05 within meaning of Section 2(22)(e) of Act. 5/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 10.The present appeal is relating to assessment year 2002-03, questioning sum of Rs.3.00 Crores advance made by subsidiary company to respondent/holding company. Commissioner of Income Tax (Appeals), referring to decision rendered for assessment year of 2004-05, held that sum of Rs.3.00 Crores shown in balance sheet of respondent company for assessment year 2002-03, is only advance made by its subsidiary company, in course of business, for providing corporate guarantee by respondent, and rejected contentions of department. As against said order, department has preferred appeal before Income Tax Appellate Tribunal Madras C Bench, Chennai in ITA No.144/Mds/2015 (for assessment year 2002-03). Tribunal has also passed its order in that appeal on 20.05.2016, holding that Commissioner Income Tax (Appeals) have elaborately dealt with facts of case. Further, it has not found any error in order passed by Commissioner of Income Tax (Appeals). Therefore, appeal of Revenue in I.T.A.No.144/Mds/2015 was dismissed. As against said order, department has preferred present appeal before this Court. 6/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 11.As stated above, this Court already has decided said issue against same appellant, holding that sum of Rs.3.00 Crores received by respondent company from its subsidiary relevant to assessment year 2004-05, is not deemed dividend within meaning of Section 2(22)(e) of Act. 12.Further, advance received by respondent from its subsidiary has been shown in balance sheet of respondent, relevant to assessment years 2002-03 and 2004-05. department has initiated two separate proceedings for single transaction and said proceedings have been dragged up to level of this Court. Obviously, department would have been well aware of fact that amount of Rs.3.00 Crores advanced by subsidiary to its holding company, cannot be taxed twice. When such being position, we are really surprised to see that initiation of two separate proceedings for same transaction is not appreciable. Had department have applied its mind in proper manner, they could have avoided these type of vexatious proceedings and it would have saved precious time of this Court as well as department. 7/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 13.Therefore, issue in present appeal and appeal in TCA.No.167 of 2011 are one and same. Since this Court already has decided said issue, we are of opinion that there is no need for further adjudication by this Court in present appeal once again. Further, we do not find any substantial question of law arising in this appeal, as entire dispute is purely factual. 14. first appellate authority as well as Tribunal have rightly considered factual position and granted relief to assessee. Thus, we find no substantial question of law arising for consideration. Consequently, appeal fails and same is dismissed. There is no order as to costs. (V.K.,J.) (K.R.,J.) 23.07.2020 klt 8/9 http://www.judis.nic.in Order dt.23.07.2020 TCA No.874 of 2016 DR.VINEET KOTHARI, J. and KRISHNAN RAMASAMY, J. klt TCA No.874 of 2016 23.07.2020 9/9 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. Accel Limited
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