The Commissioner of Income-tax, Chennai v. Checkpoint Apparel Labelling Solutions India Ltd
[Citation -2020-LL-0929-53]

Citation 2020-LL-0929-53
Appellant Name The Commissioner of Income-tax, Chennai
Respondent Name Checkpoint Apparel Labelling Solutions India Ltd.
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 29/09/2020
Assessment Year 2013-14
Judgment View Judgment
Keyword Tags substantial question of law • money lending business • nature of transaction • substantial interest • loans or advances • beneficial owner • deemed dividend • interest paid • voting power • share holder
Bot Summary: The question, which would fall for consideration is as to whether the Assessing Officer was right in holding that the only exclusion provided by the Statute under Section 2(22)(e) of the Act was in the case of money lending business and the payments that are made in the ordinary course of business, as, for doing money lending business, a person is required to obtain a licence from the Reserve Bank of India or whether it is a non banking financial company. The Assessing Officer held that the assessee was not one such company falling under anyone of the categories. In the said decision, in support of his contentions, the learned Senior Standing Counsel referred to the decisions in the cases of Gopal Sons Vs. CIT reported in 145 DR 0289; Miss.P.Sarada Vs. CIT reported in 1998 229 ITR 444; CIT Vs. National Travel Services reported in 347 ITR 0305; and National Travel Services Vs. CIT, reported in 401 ITR 0154, in which, the Hon'ble Supreme Court doubted the correctness of the decision in the case of CIT Vs. Ankitech Pvt. Lt. reported in 340 ITR 0014. 307 of 2019 beneficial owner of shares holding not less than 10 of the voting power, or to any concern in which such share holder is a member or a partner and in which he has a substantial interest or any payment by any such company on behalf, or for the individual benefit, of any such share holder, to the extent to which the company in either case possesses accumulated profits. The said provision would stand attracted when a payment is made by a company, in which public are not substantial interested by way of advance or loan to a share holder, being a person who is the beneficial owner of the shares. If such is the factual position, the decision in the case of National Travel Services relied on by the revenue cannot be applied, nor the case of Gopal and Sons, as they are factually distinguishable. Accordingly, the above tax case appeal is dismissed, the impugned order is confirmed and the substantial questions of law are answered against the Revenue.


TCA.No.307 of 2019 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 29.9.2020 CORAM HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN T.C.A.No.307 of 2019 Commissioner of Income Tax, Chennai ...Appellant Vs M/s.Checkpoint Apparel Labelling Solutions India Ltd., Chengalput. 603209 Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 30.11.2018 passed by Income Tax Appellate Tribunal, Chennai Bench in I.T.A.No.429/Chny/2018 for assessment years 2013-14. For Appellant : Mrs.R.Hemalatha, SSC For Respondent: No appearance Judgment was delivered by T.S.SIVAGNANAM,J This appeal, filed by Revenue under Section 260A of Income Tax Act, 1961 ( Act for brevity), is directed against 1/9 http://www.judis.nic.in TCA.No.307 of 2019 order dated 30.11.2018 passed by Income Tax Appellate Tribunal, Bench Chennai (for short, Tribunal) in I.T.A.No.429/Chny/2018 for assessment year 2013-14. 2. above appeal has been admitted on 10.6.2019 on following substantial questions of law: (i) Whether reasoning and finding of Tribunal is proper by applying decision of Apex Court in case of Madhur Housing and Development Company which had upheld decision of Delhi High court in case of Anikitech P Ltd dealt with issue relating to first condition that person should be shareholder under Sec.2(22)(e) of Act, but in present case issue relates to usage relating to beneficial owner of shares which is 2nd condition enunciated in Sec.2(22)(e) for its applicability? And (ii) Whether Tribunal was right in applying decision of Anikitech P Ltd. of Delhi High Court especially when Hon'ble Apex Court in case of National Travel Services reported in 401 ITR page 154 had held that view taken in Anikitech P 2/9 http://www.judis.nic.in TCA.No.307 of 2019 Ltd., requires reconsideration and that too without going into other question whether 2 nd limb of amended clause of Section 2(22)(e) of Income Tax Act would apply or not? 3. We have heard Mrs.R.Hemalatha, learned Senior Standing Counsel appearing for appellant Revenue. Though notice was served on respondent and their name printed in cause list, none appears for respondent. 4. assessee is limited company filed its return of income for assessment year under consideration namely AY 2013-14 on 29.11.2013 declaring loss of Rs.8,19,048/-. case was selected for scrutiny and notice under Section 143(2) dated 02.9.2014 was issued. Thereafter, notice under Section 142(1) of Act along with questionnaire was issued on 13.7.2014. assessee, through their authorized representative, cooperated with assessment proceedings. Ultimately, assessment was completed by order dated 25.2.2016. 3/9 http://www.judis.nic.in TCA.No.307 of 2019 5. major assessment being that loan was held to be deemed dividend under Section 2(22)(e) of Act and disallowance of Rs.4,25,00,000/- was made. Aggrieved by such order and other subsidiary issues, assessee filed appeal before Commissioner of Income Tax (Appeals)-1, Chennai-34, who, by order dated 29.11.2017, allowed appeal. Aggrieved by that, Revenue filed appeal before Tribunal, which dismissed appeal by impugned order. Thus, Revenue is before us. 6. question, which would fall for consideration is as to whether Assessing Officer was right in holding that only exclusion provided by Statute under Section 2(22)(e) of Act was in case of money lending business and payments that are made in ordinary course of business, as, for doing money lending business, person is required to obtain licence from Reserve Bank of India or whether it is non banking financial company. 7. Assessing Officer held that assessee was not one such company falling under anyone of categories. Accordingly, contention of assessee was rejected and in doing so, Assessing Officer relied upon decision of Delhi High Court in case of 4/9 http://www.judis.nic.in TCA.No.307 of 2019 CIT Vs. National Travel Services [reported in (2012) 347 ITR 305]. Further, Assessing Officer took note of payment made by assessee to tune of Rs.43,29,603/- as interest to one M/s.OTA Systems Software India Private Limited against loan received amounting to Rs.42,50,00,000/-. This was considered as deemed dividend in hands of assessee and interest paid was disallowed as expenditure on ground that there was no provision under Act to allow interest charged on deemed dividend. 8. We had occasion to consider identical substantial question of law in case of CIT Vs. M/s.T.Abdul Wahid & Co. [TCA.Nos.512 & 513 of 2018 dated 21.9.2020]. As contended before us in this appeal, argument was made by Mr.T.Ravikumar, learned Senior Standing Counsel in said decision that loans or advances had to be treated as dividend to extent of accumulated profits and loan or advances may be given directly to shareholder or it may be given for benefit of shareholder or on behalf of shareholder. Therefore, it was contended that Assessing Officer was right in treating loan as deemed dividend under Section 2(22)(e) of Act. 5/9 http://www.judis.nic.in TCA.No.307 of 2019 9. In said decision, in support of his contentions, learned Senior Standing Counsel referred to decisions in cases of (i) Gopal & Sons (HUF) Vs. CIT [reported in (2017) 145 DR 0289 (SC)]; (ii) Miss.P.Sarada Vs. CIT [reported in [1998] 229 ITR 444 (SC)]; (iii) CIT Vs. National Travel Services [reported in (2012) 347 ITR 0305]; and (iv) National Travel Services Vs. CIT, [reported in (2018) 401 ITR 0154 (SC)], in which, Hon'ble Supreme Court doubted correctness of decision in case of CIT Vs. Ankitech Pvt. Lt. [reported in (2012) 340 ITR 0014]. 10. In said decision, after considering rival submissions, we dismissed appeals filed by Revenue by returning following findings : 11. Section 2(22)(e) of Act, which defines dividend, inclusive definition, includes any payment by company, not being company in which public are substantially interested, of any summade after 31.05.1987, by way of advance or loan, to share holder, being person, who is 6/9 http://www.judis.nic.in TCA.No.307 of 2019 beneficial owner of shares holding not less than 10% of voting power, or to any concern in which such share holder is member or partner and in which he has substantial interest or any payment by any such company on behalf, or for individual benefit, of any such share holder, to extent to which company in either case possesses accumulated profits. 12. said provision would stand attracted when payment is made by company, in which public are not substantial interested by way of advance or loan to share holder, being person who is beneficial owner of shares. On facts, it is clear that payment has been made to assessee, partnership firm. partnership firm is not share holder in company. If such is factual position, decision in case of National Travel Services relied on by revenue cannot be applied, nor case of Gopal and Sons, as they are factually distinguishable. records placed before assessing officer clearly shows nature of transaction between firm and company and it is neither loan nor advance, but deferred liability. These factshave been noted 7/9 http://www.judis.nic.in TCA.No.307 of 2019 by assessing officer. In such circumstances, this Court is of view that Tribunal rightly reversed order passed by CIT(A) affirming order of assessing officer. 11. above decision would fully approve stand taken by Tribunal in impugned order. Therefore, necessarily we have to reject appeal filed by Revenue. 12. Accordingly, above tax case appeal is dismissed, impugned order is confirmed and substantial questions of law are answered against Revenue. 29.9.2020 To Income Tax Appellate Tribunal, Chennai Bench RS 8/9 http://www.judis.nic.in TCA.No.307 of 2019 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS TCA.No.307 of 2019 29.9.2020 9/9 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. Checkpoint Apparel Labelling Solutions India Ltd
Report Error