Assistant Commissioner of Income Tax, Circle49(1), New Delhi. Vs.. M/s C.J. International Hotels Limited, Hotel Le Meridian, 8, Windsor Place, New Delhi 110 001.
July, 11th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
`B' : NEW DELHI
DELHI BENCH `B
BEFORE SHRI H.L. KARWA, HON'BLE PRESIDENT AND
SHRI B.C. MEENA, HON'BLE ACCOUNTANT MEMBER
Nos.5204/Del/2011, 5205/Del/2011 & 5206/Del/2011
Years : 2000-
Financial Years 2001-02 & 2002-
2000-01, 2001- 2002-03
Assistant Commissioner of Vs. M/s C.J. International Hotels
Income Tax, Limited,
Circle-49(1), Hotel Le Meridian,
New Delhi. 8, Windsor Place,
New Delhi 110 001.
TAN : DELCO1385G.
Appellant by : Smt. Parwinder Kaur, Sr.DR.
Respondent by : Shri Tarandeep Singh, CA.
PER B.C. MEENA, AM :
All these appeals of the Revenue emanate from the order of
learned CIT(A)-XXX, New Delhi dated 26th September, 2011. This is a
consolidated order for FY 1999-2000, 2000-01 & 2001-02 under
Section 201(1)/201(1A) of the Income-tax Act, 1961.
2. The appellant M/s C.J. International Hotels Ltd. is running a five
star hotel in New Delhi and during the period 1999-2000 to 2001-02,
the assessee advanced amounts to M/s Pure Drinks (New Delhi) Ltd.
The Assessing Officer held that the amounts so advanced were hit by
the provisions of Section 2(22)(e) read with Section 194 of the Act and
it was held that Mrs. Harjit Kaur is holding more than 10% of the voting
power in assessee company indirectly through M/s Pure Drinks (New
Delhi) Ltd. The CIT(A) has held that this is not a case which is hit by
2 ITA-5204 to 5206/D/2011
the provisions of Section 2(22)(e) read with Section 194 of the Act.
The CIT(A) has also held that the proceedings initiated under Section
201(1)/201(1A) of the Act were barred by limitation in all the three
years by following the decision of Hon'ble Jurisdictional High Court in
the case of CIT Vs. NHK Japan Broadcasting Corporation  305
ITR 137 (Delhi) and CIT Vs. Hutchison Essar Telecome Ltd.  323
ITR 230 (Delhi). Now, the Revenue is in appeal before us by taking the
following grounds of appeal:-
"1. Holding that the relevant payments could not be
treated as deemed dividend in view of the fact that no
income on account of deemed dividend has been assessed
in the hands of the recipient company. Such finding of the
ld.CIT(A) is incorrect in law because assessment of income
in the hands of recipient is not a pre condition to determine
the liability of TDS. The liability to deduct tax, which is
only a mode of collection arises once the nature of
payments fulfills the conditions mentioned in the relevant
2. Holding that payment to M/s Pure Drinks (New Delhi)
Ltd. could not be treated as deemed dividend on the
ground that they are not shareholder of the assessee
(deductor) company ignoring the fact that payment to
above entity is very much covered in the definition of
dividend u/s 2(22)(e) of I.T. Act."
3. However, later on, the Revenue has also taken the additional
ground on the issue of limitation which reads as under:-
3 ITA-5204 to 5206/D/2011
"On the facts and in the circumstances of the case as well
as in the law, the ld.CIT(A) has erred in holding that the
proceedings u/s 201(1)/201(1A) are invalid being barred by
limitation for all three financial years."
4. Since the ground taken on the limitation of proceedings goes to
the root of the controversy and it is purely a legal ground, therefore,
after hearing both the sides, we are admitting this ground for the
5. The controversy involved in these appeals is related to the
financial year 1999-2000 to 2001-02. The order under Section
201(1)/201(1A) of the Act was made on 31.3.2011. The order was
made after a lapse of nine years from the end of FY 2001-02 and it was
after eleven years from the FY 1999-2000. When the Additional
Commissioner of Income Tax, Range-49, New Delhi initiated
proceedings, the assessee took a plea that in view of the decision of
Hon'ble Jurisdictional High Court in the case of NHK Japan Broadcasting
Corporation (supra), the proceedings have got time barred. The
learned Additional CIT took a view that since Department has gone in
SLP against the judgment of Hon'ble Delhi High Court cited supra,
therefore, to keep the matter alive, the contention of the assessee with
regard to proceedings barred by limitation was rejected. The CIT(A)
has granted the relief by relying on the decision of Hon'ble
Jurisdictional High Court (supra), wherein Hon'ble High Court observed
that the proceedings initiated under Section 201(1)/201(1A) of the
Income-tax Act, 1961 after four years from the end of the assessment
year was barred by time. According to the Hon'ble High Court, four
years was a reasonable period for passing an order u/s 201(1)/201(1A),
particularly when no limitation was prescribed for initiation of such
proceedings under the Income-tax Act, 1961. In the instant case also,
4 ITA-5204 to 5206/D/2011
the proceedings under Section 201(1)/201(1A) were initiated after a
lapse of nine years, therefore, in view of the judgment of Hon'ble
Jurisdictional High Court, the order passed by the Assessing Officer
was clearly time barred. We, therefore, agree with the view taken by
the CIT(A). Consequently, we dismiss this ground of Revenue's appeal.
6. With regard to merits of these additions, the learned DR
submitted that the CIT(A) was not justified in holding that the relevant
payments could not be treated as deemed dividend. The CIT(A) has
also erred in holding that payment to M/s Pure Drinks (New Delhi) Ltd.
could not be treated as deemed dividend on the ground that M/s Pure
Drinks (New Delhi) Ltd. is not the shareholder of the assessee
(company) ignoring the fact that payment to this entity is very much
covered by the definition of `dividend' under Section 2(22)(e) of the
7. We have heard both the sides on the issue. The CIT(A) has
granted relief to the assessee by holding as under:-
"Further even on merit also the appellant assessee has
also been able to prove that the provisions of section
2(22)(e) of the I.T. Act are not applicable in the present
case in as much as both the conditions of a shareholder
holding 10% shares in the payer company and more than
20% beneficial stakes in the payee entity do not exist in
the present case as clarified in the chart given above.
Further since the payments have been made to Statutory
authorities for meeting the liabilities of the payee company
Pure Drinks (New Delhi) Ltd., the transactions have not
resulted in any benefit to any of the shareholders of the
company. Admittedly, in the case of deemed dividend the
5 ITA-5204 to 5206/D/2011
provisions of section 194 are applicable. However, no such
proceedings had been initiated in the normal assessment
proceedings for the relevant Asstt. Years i.e. A.Y. 2000-01,
2001-02 and 2002-03 in the case of the company.
Considering all these issues severally and jointly, I hold
that it is not a case which could be said to be hit by the
provisions of Section 2(22)(e) of the Income Tax Act, much
less for operation of Section 194 of the I.T. Act."
8. We have also gone through the paper book submitted by the
assessee. The Revenue has failed to controvert the findings of CIT(A)
on this issue. In view of the factual matrix narrated by the CIT(A) in his
order, we find no infirmity in his order. The same is sustained.
9. In the result, all the appeals of the Revenue stand dismissed.
Decision pronounced in the open Court on 3rd July, 2014.
(H.L. KARWA) MEENA)
PRESIDENT ACCOUNTANT MEMBER
Dated : 03.07.2014
Copy forwarded to: -
1. Appellant : Assistant Commissioner of Income Tax,
Circle-49(1), New Delhi.
2. Respondent : M/s C.J. International Hotels Limited,
Hotel Le Meridian, 8, Windsor Place,
New Delhi 110 001.
5. DR, ITAT