Commissioner Of Income Tax vs Sanjay Jain
2010 Latest Caselaw 2643 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                         Judgment delivered on: 18.05.2010

+      ITA 589/2009

COMMISSIONER OF INCOME TAX                                  ..... Appellant

                                        versus

SANJAY JAIN                                                 ..... Respondent

Advocates who appeared in this case:-

For the Appellant            : Ms Prem Lata Bansal
For the Respondent           : Mr Amit Dayal


CORAM:
HON'BLE MR. JUSTICE BADAR DURREZ AHMED
HON'BLE MR. JUSTICE V.K. JAIN

1. Whether Reporters of local papers may be allowed to see the judgment ?

2. To be referred to the Reporter or not ?

3. Whether the judgment should be reported in Digest ?

BADAR DURREZ AHMED, J (ORAL)

1. This appeal is directed against the order of the Income-tax Appellate

Tribunal dated 05.09.2008 passed in ITA No.3881/Del/2004 relating to the

assessment year 2001-02.

2. The assessee is a share-holder in Jyoti Theatres Pvt. Ltd. The assessee

holds 35% of shareholding in that company. In the year in question, the

assessee obtained a loan of Rs 15 lakhs from Jyoti Theatres Pvt. Ltd. The

Assessing Officer treated the said amount as deemed dividend to the extent

of accumulated profit of Rs 13,33,493.85 shown in the balance sheet of the

said company as on 31.03.2001.

3. The Commissioner of Income-tax (Appeals) deleted the said addition

after taking note of the fact that Jyoti Theatres Pvt. Ltd had a liability of Rs

57,81,997/- towards house tax payable by the said company to the Municipal

Corporation of Delhi (MCD). Consequently, if the said sum of Rs

57,81,997/- is deducted from the accumulated profit of Rs 13,33,493.85 as

shown in the balance sheet by the said Jyoti Theatres Pvt. Ltd, then the

company would have accumulated losses rather than profit. As a result, the

said loan of Rs 15 lakhs or any part thereof could not be treated as deemed

dividend within the meaning of Section 2(22)(e) of the Income-tax Act,

1961 (hereinafter referred to as 'the said Act').

4. The tribunal also confirmed the findings returned by the

Commissioner of Income-tax (Appeals) and concluded that the liability

towards house tax was an ascertained liability, although the same had not

been accounted for in the balance sheet of Jyoti Theatres Pvt. Ltd. The

tribunal arrived at the conclusion that the said ascertained liability had to be

deducted from the profit shown by Jyoti Theatres Pvt. Ltd in its balance

sheet for the purposes of working out the accumulated profit of the company

in order to compute the deemed dividend under Section 2(22)(e) of the said

Act. If that were to be done, Jyoti Theatres Pvt. Ltd would not have

accumulated profits but would have accumulated losses. Consequently,

based on the finding of fact that the liability towards house tax was an

ascertained liability, the Tribunal concluded that no deemed dividend arose

in the hands of the assessee.

5. The learned counsel for the appellant/revenue contended that Jyoti

Theatres Pvt. Ltd itself had not shown the said liability towards house tax as

an ascertained liability and had not made any provision for the same in their

profit and loss account. She questioned the role of the Assessing Officer in

the case of the present assessee with regard to consideration of accumulated

profits different from what Jyoti Theatres Pvt. Ltd had themselves prepared

and presented. The answer to this argument is that the books of accounts as

prepared by any assessee are not decisive. The provisions of the Income-tax

Act, 1961 would have to be gone into and the liability has to be determined

on the basis of the provisions of the said Act. Furthermore, the treatment

given by Jyoti Theatres Pvt. Ltd would not bind the present assessee where

the present assessee is able to show that he is not otherwise liable to pay any

tax on a particular item as per the provisions of the said Act. In fact, the

present assessee cannot be precluded from showing that the said amount of

house tax payable was an ascertained liability irrespective of the fact that

Jyoti Theatres Pvt. Ltd had treated the same as a contingent liability.

6. We see no reason to interfere with the findings and conclusions

arrived at by the Tribunal. In any event, no substantial question of law

arises for our consideration. The appeal is dismissed.

BADAR DURREZ AHMED, J

V.K. JAIN, J MAY 18, 2010 dutt