Madras High Court
M/S. Nilakantan & Sons Pvt. Ltd vs The Assistant Commissioner Of ... on 25 November, 2021
T.C.A.No. 356 of 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 25.11.2021
CORAM
THE HONOURABLE MR.JUSTICE R.MAHADEVAN
and
THE HONOURABLE MR.JUSTICE MOHAMMED SHAFFIQ
T.C.A.No. 356 of 2009
M/s. Nilakantan & Sons Pvt. Ltd.,
No.2, First Floor, Gokul Tower,
7, C.P.Ramaswamy Road,
Alwarpet, Chennai – 600 018.
(PAN: AAA CN 2125 L) .. Appellant
Vs.
The Assistant Commissioner of Income Tax
Company Circle IV (4), Chennai. ..
Respondent
Tax Case Appeal filed under Section 260A of the Income Tax Act,
1961 against the order of the Income Tax Appellate Tribunal 'B' Bench,
Chennai dated 26.09.2008 in ITA No.1775/Mds/2006 for the assessment
year 2000-01.
For Appellant : Mr. S.Sridhar
For Respondent : Mr. Karthick Ranganathan
1/6
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T.C.A.No. 356 of 2009
JUDGMENT
(Judgment was delivered by R.MAHADEVAN, J.)
This tax case appeal has been filed by the appellant / Assessee,
challenging the order dated 26.09.2008 passed by the Income Tax Appellate
Tribunal, 'B' Bench, Chennai, in I.T.A.No.1775/Mds/2006, relating to the
assessment year 2000-01.
2.By order dated 28.04.2009, this court admitted the aforesaid tax
case appeal on the following substantial questions of law:
“1.Whether in law, receipt by way of security
deposit by the appellant company from another company
M/s.Nilakantan & Brothers Constructions Pvt. Ltd could
be taxed as deemed dividend in the hands of the appellant
when the appellant is admittedly not a shareholder in the
paying company nor the paying company is a shareholder
in the appellant company, in the light of the decisions of
the Supreme Court in the case of C.P.Sarathy Mudaliar
Vs. CIT 83 ITR 170 SC and Rameshwarlal Sanvarmal Vs.
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T.C.A.No. 356 of 2009
CIT 122 ITR 1 SC?
2.Whether in law, security deposit received by the
appellant from the hirer for the user of the appellant's
machinery could be treated as advance or loan within the
meaning S.2 (22) (e) of the Income Tax Act?
3.Whether in law, the Income Tax Appellate
Tribunal was justified in allowing the department's appeal
without validly and consciously reversing the
Commissioner of Income Tax (Appeals)'s order holding
deemed dividend, if any, cannot be assessed in the
assessment year 2000-01, in view of payment in earlier
assessment year reducing the accumulated profits to Nil in
the hands of the paying company, especially in view of
Supreme Court's decision in CIT Vs. G.Narasimhan 236
ITR 327 SC?”
3.When the matter was taken up for consideration, the learned
counsel appearing for both sides, referring to the judgement dated
21.09.2020 passed by a Division Bench of this court in T.C.A. Nos. 512 &
513 of 2018 [Commissioner of Income Tax, Chennai -vs- T.Abdul Wahid
& Co.], jointly submitted that the identical question of law was raised
therein and the same was decided against the Revenue. The relevant passage
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T.C.A.No. 356 of 2009
of the said judgment is profitably, extracted below:
“11. Section 2(22)(e) of the Act, which defines
dividend, an inclusive definition, includes any payment by a
company, not being a company in which the public are
substantially interested, of any sum made after the
31.05.1987, by way of advance or loan, to a share holder, being
a person, who is the 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.
12. 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. On facts, it is clear that the payment has been made to
the assessee, a partnership firm. The partnership firm is not a
share holder in the company. 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. The records placed before the
assessing officer clearly shows the nature of transaction
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T.C.A.No. 356 of 2009
between the firm and the company and it is neither a loan nor
an advance, but a deferred liability. These facts have been noted
by the assessing officer. In such circumstances, this Court is of
the view that the Tribunal rightly reversed the order passed by
the CIT(A) affirming the order of the assessing officer.
For the above said reasons, we find no grounds to
interfere with the order passed by the Tribunal and accordingly,
dismisses the present appeals and answer the substantial
question of law against the Revenue. Consequently, connected
miscellaneous petition is closed. No costs.”
Therefore, the learned counsel prayed that this appeal may be disposed of in
the light of the aforesaid judgement.
4.Following the aforesaid judgment, the substantial questions of law
are answered against the Revenue and this appeal filed by the appellant /
assessee stands allowed by setting aside the order passed by the Tribunal.
No costs.
[R.M.D., J.] [M.S.Q., J.]
25.11.2021
Index : Yes/No
Speaking/Non-Speaking Order
Maya
https://www.mhc.tn.gov.in/judis
T.C.A.No. 356 of 2009
R. MAHADEVAN, J.
and
MOHAMMED SHAFFIQ, J.
Maya
To
1.The Assistant Commissioner of Income Tax
Company Circle IV (4), Chennai.
2.The Income Tax Appellate Tribunal 'B' Bench, Chennai
T.C.A.No. 356 of 2009
25.11.2021
https://www.mhc.tn.gov.in/judis
