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2014 Supreme(Bom) 1309
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. DHARMADHIKARI & B.P. COLABAWALLA, JJ.
The Commissioner of Income Tax-9 - Appellant
Vs.
Impact Containers Pvt. Ltd - Respondent
INCOME TAX APPEAL NO. 114 OF 2012, INCOME TAX APPEAL NO. 4102, 4151 OF 2009, INCOME TAX APPEAL NO. 2281, 3163, 3170, 5029, 5346, 6823 OF 2010, INCOME TAX APPEAL NO. 1028, 1351, 1844, 2301 OF 2011, INCOME TAX APPEAL NO. 154, 317, 318, 398, 1069, 1162, 1647 OF 2012, INCOME TAX APPEAL NO. 16, 540, 578, 694 OF 2013 AND ITS/4909/MUM/2011, INCOME TAX APPEAL NO. 1174 OF 2013 AND ITA/4311/MUM/2011, INCOME TAX APPEAL NO. 1399 OF 2013 AND ITA/8287/MUM/2011, INCOME TAX APPEAL NO. 1499 OF 2013 AND ITA 7554/MUM/2011, INCOME TAX APPEAL NO. 1666 OF 2013 AND ITA/7232/M/2010 INCOME TAX APPEAL NO. 1870 OF 2013 ND ITA/8750/2010,
Decided on: JULY 4, 2014
Advocate Appeared
Mr. Vimal Gupta, Senior Advocate a/w Ms. Padma Divakar, for the Revenue in ITXA NOS.114/12, 2281/10, 6823/10, 1647/12.
Mr. Vimal Gupta, Senior Advocate a/w Ms. Anamika Malhotra, for the Revenue in ITXA 4151/09
Ms. A. Vissanjee a/w Mr. S. J. Mehta, for Assessee in ITXA 114/12.
Mr. Hiro Rai a/w S. S. Shetty, for Assessee in ITXA 4102 and 4151/09.
Mr. Suresh Kumar, for Revenue in 3163/10, 3170/10, 5029/10, 1028/11, 316/12, 317/12, 318/12, 1870/13, 1351/11.
Mr. F. B. Andhyarujina, Senior Advocate a/w Mr. S. G. Dalal and Ms. Shraddha Vavhal i/b. Ms.Pallavi Divekar, for Assessee in ITXA 3170/10.
Mr.A. K. Jasani, for the Assessee in ITXA 5029/10, 5346/10, 154/12, 398/12, 1647/12, 16/13.
Mr. Subhash Shetty, for Assessee in ITXA 1162/13, 694/13.
Mr B. V. Jhaveri, for Assessee in ITXA 6823/10, 1399/13, 1870/13.
Ms. Aarti Sathe, for Assessee in ITXA 1028/11, 1351/11.
Mr. A. R. Malhotra a/w N. A. Kazi for Revenue in ITXA 154/12, 398/12, 540/13, 1174/13.
Mr. Deepak Pralshawala a/w Mr. Vishnu H. Hadade, for the Assessee in ITXA 316/12, 317/12, 318/12.
Mr. Abhay Ahuja, for Revenue in ITXA 5346/10, 1351/11, 1069/12, 16/13.
Mr. Tejveer Singh, for Revenue in ITXA 1162/112, 1499/12, 1666/13, 578/13.
Mr. Arvind Pinto, for Revenue in ITXA 694/13, 1399/13.
Mr. K. Shivram, Sernior Advocate a/w Mr. Rahul Hakani and Neelam Jadhav, for the Assessee in ITXA 1666/13.
Mr. Jignesh P. Shah, for Assessee, in ITXA Nos. 1499 and 578/13.
The main legal point established in the judgment is that the recipient must be a shareholder in the lending company to attract the provisions of Section 2(22)(e) of the Income Tax Act, 1961, and that the dividend must be taxed in the hands of the shareholder.
Headnote:
Section 2(22)(e) - Income Tax - 1961 - [Section 2(22)(e)] - The court discussed the provisions of Section 2(22)(e) of the Income Tax Act, 1961 and its interpretation in the context of the case. The court analyzed the legal framework and the intent of the legislature behind the amendment, and concluded that the recipient must be a shareholder in the lending company to attract the provisions of Section 2(22)(e). The court also highlighted the significance of the definition of 'dividend' and the requirement to tax dividend in the hands of the shareholder.
Fact of the Case:
The case involved a challenge to the order of the Income Tax Appellate Tribunal regarding the application of Section 2(22)(e) of the Income Tax Act, 1961. The dispute arose from the interpretation of the provision and whether the assessee company was a shareholder in the lending company.
Finding of the Court:
The court found that the recipient must be a shareholder in the lending company to attract the provisions of Section 2(22)(e). It also concluded that the dividend must be taxed in the hands of the shareholder, emphasizing the legal position and status of the shareholder as recognized in law.
Issues: The issues revolved around the interpretation of Section 2(22)(e) of the Income Tax Act, 1961, and whether the recipient must be a shareholder in the lending company to attract the provisions of the section.
Ratio Decidendi: The court's decision was based on the interpretation of the legal provisions, including the definition of 'dividend' and the requirement to tax dividend in the hands of the shareholder. The court also relied on previous judgments and the intent of the legislature behind the amendment to Section 2(22)(e).
Final Decision: The court held that the recipient must be a shareholder in the lending company to attract the provisions of Section 2(22)(e) and that the dividend must be taxed in the hands of the shareholder. The court's decision covered all similar cases where the recipient was not a shareholder of the lending company.
In these Appeals which have been filed by the Revenue, the challenge is to the order of the Income Tax Appellate Tribunal holding that the provisions of Section 2(22)(e) of the Income Tax Act,1961(for short “I. T. Act) cannot be invoked as the assessee company was not a shareholder in the lending company. The argument in all these Appeals on behalf of the Revenue is that, though the assessee is a common shareholder with controlling stake in the lending company, the Tribunal found that Section 2(22)(e) of the I. T. Act, is not attracted and this finding raises a substantial question of law.
2. It was then contended that the Income Tax Appellate Tribunal has applied the ratio of its own special bench decision in the case of Assistant Commissioner of Income Tax v/s Bhaumik Colour Pvt Ltd reported in 2009 (313) ITR (AT)146(Mumbai)(SB), equally the Income Tax Appellate Tribunal has proceeded on the footing that the view taken in the case of Bhaumik Colour Pvt Ltd(supra) has been approved by the Division Bench of this Court in the case of Commissioner of Income Tax v/s. Universal Medicare Pvt Ltd reported in 2010(324) ITR 263 (Bom).
3. When each of these Appeals had appeared for admission on different dates, it was requested that they may not be disposed of by applying the ratio of this Court's judgment in Universal Medicare Pvt Ltd(supra) because the Revenue wants to urge that the view taken in the Universal Medicare's case requires reconsideration.
4. Since this was the request coming from the Revenue in all Appeals, we decided with the consent of the Revenue to place these matters on a single working day so that on this limited point we can hear the counsel appearing for the Revenue and equally that of the assessee. It is admitted position that if we hold that the judgment in the case of Universal Medicare(supra) does not require reconsideration, then, the individual appeals have to be decided against the Revenue by upholding the view taken by the Income Tax Appellate Tribunal.
5. It is on this footing that the matters were placed today.
6. Mr. Gupta, learned Senior Counsel appearing on behalf of the Revenue would submit that insofar as the facts in Income Tax Appeal No. 114 of 2012 are concerned, the reasoning of the Tribunal travels much beyond the section. In his submission, the Tribunal's reading of the section namely 2(22)(e) of the I. T. Act, is plainly incorrect. There is no requirement of the assessee, in this case, being a shareholder in the recipient concern within the meaning of Section 2 (22) (e) of the I. T. Act. The assessee is not required to be a shareholder therein. The lender is a company within the meaning of Clause (e). According to Mr. Gupta, shareholder of the lender company is also closely connected with the concern which is a recipient of the loan or advance. Therefore, the recipient being required to be a registered shareholder of the lender company, cannot be spelled out from the provision in question. He also then submits that the judgment in the case of Universal Medicare is distinguishable on facts. There, the assessee was not the recipient of the loan or advance in money. Thus, the Division Bench of this Court in Universal Medicare was not required to go into the second aspect of the matter. The Division Bench, yet, answered the second question framed by it and termed as a substantial question of law. Though that is based on the findings of the Tribunal, particularly, as to whether the recipient was required to be a shareholder of the recipient, all such findings and observations are in the nature of obiter dictum. They are not binding on this Court. Therefore, this Court is free to take an independent view. In any event, if this Court is not inclined to agree with the Division Bench in the case of Universal Medicare, then, the matter can be referred to a larger bench.
7. In supporting the above arguments, Mr. Gupta places heavy reliance upon a circular which has been issued and which accordin
