Income Tax Appellate Tribunal - Indore
Narendra Narang L/H. Of Late Shri Yogesh ... vs Assessee on 17 October, 2011
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IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
AND
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No. 593/Ind/2010
A.Y. 2007-08
ACIT-4(1), Indore ... Appellant
Vs
Late Yograj Narang
Through L/H Shri Narendra Narang
Indore
PAN - ABMPM-5919R ... Respondent
CO No. 29/Ind/2010
Arising out of ITA No. 593/Ind/2010
Late Yograj Narang
Through L/H Shri Narendra Narang
Indore ... Objector
Vs
ACIT-4(1), Indore ... Respondent
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Revenue by : Shri Arun Dewan, Sr. DR
Assessee by : Shri Prakash Jain
Date of Hearing : 17.10.2011
Date of Pronouncement : 17.10.2011
O R D E R
PER JOGINDER SINGH By way of the present appeal the revenue challenges the order dated 17.6.2010 of the learned Commissioner of Income Tax (Appeals) deleting the addition of Rs. 29,14,141/- made by the Assessing Officer on account of deemed dividend income u/s 2(22)(e) of the Act whereas by way cross objection the assessee challenges the order of the learned Commissioner of Income Tax (Appeals) in treating the short term capital gains earned of Rs. 6,59,241/- on sale of shares as business income.
2. During hearing we have heard Shri Arun Dewan, learned Senior DR and Shri Prakash S. Jain, Ld. Counsel for assessee. The crux of arguments on behalf of the revenue is in support to the assessment order whereas the learned counsel for the assessee defended the impugned order.
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3. We have considered the rival submissions and perused the material available on file. Brief facts of the case are that a survey action u/s 133A was carried out at the business premises of the assessee on 15th March, 2007. An information was received by the learned Assessing Officer from another Assessing Officer that late Shri Yograj Narang was a beneficial owner of shares of "Super Galvanised Sheets Private Limited"
to the extent of 6.73% in the capacity of Yograj Narang HUF. The assessee in his individual capacity was holding 5.4% shares of the aforesaid same company. The stand of the Assessing Officer is that the assessee was beneficial owner of more than 10% shares, therefore, the provisions of section 2(22)(e) of the Act are applicable. Now the question arises whether the shares of HUF can be clubbed in the individual shares for the purpose of invoking the provisions of section 2(22)(e) of the Act ? The obvious answer is 'NO' because it is a settled position of law that the shares of HUF cannot be clubbed in the individual capacity. It is not the intention of the legislature to club the shares of individual to the HUF for the 4 purpose of invoking the provisions of section 2(22)(e) of the Act. Explanation 3(a) of section 2(22)(e) for the purposes of this clause "concern" means a Hindu Undivided Family or a firm or an association of persons or a body of individuals or a company. In section 2(22)(e) of the Act, HUF category is separately dealt with, therefore, it is not the intention of the legislature to club the holdings of individual with the HUF. The HUF shares are 6.73% whereas individual shares are 5.40% of the total issued capital. Even in JCIT v. Kunal Organics Private Limited; 164 Taxman 169 (Ahd) it was held that individual and HUF are two different entities and, therefore, their share holdings cannot be clubbed for applying provisions of section 2(22)(e) of the Act. Identical ratio was laid down in Appeal No.
4 (Mum)/2006 order dated June 25, 2008. The ratio laid down in the case of CIT vs. Raj Kumar; 300 ITR 462 (Del) clearly supports our view. We, therefore, dismiss the appeal of the revenue.
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So far as the cross objection is concerned, it was not pressed by the learned counsel for the assessee. Therefore, it is dismissed as not pressed.
In the result, the appeal of the revenue and the cross objection of the assessee are dismissed.
Sd/- sd/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 17.10.2011
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-