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TMI Blog2018 (1) TMI 1046X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that:- The amounts under the disputed heads were being received by the Assessee from its Subsidiary Company only as part of regular business transactions, which was being accounted properly. The change in circumstance, as to the distribution of dailies/publications in the Gulf, causing the same to be transported through the Agent directly from Trivandrum to the Gulf, [instead of forwarding the same to Bombay, where the registered office of the Subsidiary Company is situated and then to have it transported from Mumbai to the Gulf, for distribution in the Gulf ] was resulted because of the starting of direct flights from Trivandrum to Gulf, as pointed out by the Assessee. Advance deposits were also effected by the Subsidiary Company and payments were being effected directly by the Assessee to the clearing and forwarding agent of the Subsidiary Company at Trivandrum, as per their instructions, which were being properly accounted - payments effected by the Subsidiary Company and received by the Assessee, were as part of the regular business transactions and applying the law laid down in the judicial precedents cited above, it could not have been treated as 'loan' or 'advances', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re taken up and heard together. 2. The respondent Assessee is the same in all the cases, who is engaged in printing and publishing of the Malayala Manorama daily , Manorama Weekly , the publication by name THE WEEK and also the Manorama Year Book. The Assessee Company has 100% shares in a Subsidiary Company, viz., Commercial Broadcasts Ltd. ( CBL in short), who is engaged in distributing the Assessee's publications in the Gulf region. An agreement has been executed between the Assessee Company and the Subsidiary Company in this regard and the printing and publication of the materials as aforesaid by the Assessee Company and distribution of the same in the Gulf Region by the Subsidiary Company is being carried out in terms of the said agreement. 3. Incidentally, it is to be noted that the Head Office of the Subsidiary Company was at Mumbai and since sufficient number of direct flights were not available from Kerala to the Gulf Region, the publications were being sent by the Assessee Company to the Subsidiary Company at Mumbai, from where it was being taken to the Gulf Region and distributed there, resulting in delay by one day. By the passage of time, sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the printing of books. Such a course of showing higher profit in respect of the printing of books was stated as shown by the Assessee to claim maximum deduction under Section 80Q and accordingly, the Assessing Officer was of the opinion, in view of the inconsistencies and incongruities in arriving at the profits in the new Units, that a reasonable method had to be adopted, to allocate the profits on the basis of the total receipts in the respective units. It was accordingly, that the entire Turnover in respect of the 'Daily' published from different divisions were taken together, also reckoning the turn over in respect of the Year Book published in different languages and the total profit was worked out fixing the same as 2.91%. 6. Coming to the second issue as to the deemed dividend under Section 2(22)(e) of the Act, it was contended by the Assessee that the disputed figures were the balances in the accounts, resulted in the course of ordinary commercial transactions and hence they would not come within the purview of loan or advance as to be categorised under section 2(22)(e) of the Act. The said contention was repelled by the Assessing Authority, placing relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 20.01.1988 holding that all overhead expenses connected with the publication had already been debited in the Books of Accounts. It was held that the Assessee's computation of Income under Section 80Q should have been accepted by the Assessing Officer and that there was no justification for re-computing the deduction allowable. It was accordingly that appropriate directions were given to the Assessing Officer in this regard. 8. With regard to the contention of the Assessee that the Assessing Officer was not correct in treating the Trade Discount amounting to ₹ 3423600/- and the Agents' Deposit of ₹ 60 lakhs as deemed dividend under Section 2(22)(e) of the Income Tax Act, it was observed that, under the said provision, 'loans and advances' given to a share holder will be treated as deemed dividend ; what was received by the Assessee was not coming within the purview of loans and advances and hence the Assessing Officer was not correct in treating the said amount as deemed dividend . During the accounting period, it was observed that, the Assessee had not accepted any loan or advance from the Assessee's Subsidiary Company (CBL, Bombay). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom time to time be agreed to cover the price ao publications to be supplied. Such deposits shall be returned without interest to CBL upon expiry or termination of agreement. In pursuance of the agreement, the Assessee Company has received a deposit of ₹ 60 lakhs towards the purchase cost of News Paper and magazines supplied. This is not the sole instant of taking deposits from agents. , but, the Assessee was uniformly collecting deposits from all the agents. The total of such deposits received as on 31.03.1995 was ₹ 11,11,58,000/- Therefore, deposit towards cost of publication will not come under Loan or Advance as given u's.2(22)(e)and hence the Assessing Officer is not correct in treating this sum as deemed dividend. 10. The necessity to draw a distinction between loan and deposit was highlighted; also seeking to draw a distinction with regard to the law laid down by the Mumbai High Court in 188 ITR 318. In fact, the Assessing Officer had included a sum of ₹ 8356287 as deemed dividend under Section 2(22)(e) of the Income Tax Act, to the income of the Assessee, which included the alleged loan of ₹ 2356287/- and the deposit of ₹ 6000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the airfreight charges as and when demanded by the Clearing and Forwarding Agent, to be reimbursed by the CBL as and when remittances were received from its Gulf Distributor. It was in view of this understanding that the Assessee Company started making payments to the Clearing and Forwarding Agent in a separate ledger account. It was accordingly that the Assessee Company used to pay the Clearing and Forwarding Agent M/s. Airfreight Ltd and in turn, the Assessee used to get payment periodically from the Subsidiary Company/CBL. This clearly revealed the instances of day-to-day commercial transactions and there was clear credit and credit balance in the accounts, by virtue of which, the Appellate Authority held that the Assessing Officer was not correct in concluding that the closing credit balance was a 'loan' to the Assessee from a Company in which it was having substantial holdings. It was reiterated by the Appellate Authority, that it was only a commercial transaction and there was no lending or advancing within the meaning of section 2 (22)(e). It was also observed that the other account, relating to the 'product cost' related to sale of newspaper and other publ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the entire matter and passed Annexure C verdict repelling the contentions taken by the Revenue and upholding the verdict passed by the Appellate Authority. The question regarding deduction under section 80Q of the Act has been discussed in paragraph 7 ; which is reproduced below: We have heard rival submissions and considered the facts and materials on record including the contents of the paper book submitted by the learned representative of the Assessee and the case laws cited by the parties. We find that the question of deduction under Section 80Q was subject matter of appeal before this Tribunal and the Tribunal in its order dated 13.07.1978 in ITA No.1053/Coch/76-77 for the assessment year 1975-76 whereby the Assessee's computation was accepted. Further the learned representative of the Assessee placed on record copies of the computation of taxable income and Annexures thereto for the assessment year 1992-93, 1993-94 and 1994-95 and submitted that similar claim of the Assessee for these years was accepted by the department. We find that the Assessee has been consistently following this method of computation and it was being allowed except for certain years and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held therefore that the deposit towards the cost of publication will not come under Loan or Advance as given under section 2(22)(e) of the Act and hence the Assessing Officer was not correct in treating this sum as deemed dividend . 16. There is a case for the Revenue that the observation made by the Tribunal and the basis for drawing inference in favour of the Assessee [that in respect of the earlier assessment years, the proceedings finalised in favour of the Assessee were not subjected to challenge by the Revenue], it is stated that no principle of 'res judicata' will be applicable in respect of Income Tax matters. The said contention is sought to be answered by the learned counsel appearing for the Assessee by placing reliance on the decision rendered by the Apex Court in M/s. Radhasoami Satsang, Saomi Bagh, Agra vs. Commissioner of Income Tax [ ( 1992)1 SCC 659] , whereby it has been held that, though the principles of 'res judicata' strictly do not apply to Income Tax proceedings, each assessment year being a Unit and the decision rendered in respect of one year may not apply in respect of the next year, where a fundamental aspect permeating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one assessment year to the same opinion in a subsequent year is not because of any principle of res judicata but because of the theory of precedent or the precedential value of the earlier pronouncement. Where facts and law in a subsequent assessment year are the same, no authority whether quasi judicial or judicial can generally be permitted to take a different view. This mandate is subject only to the usual gateways of distinguishing the earlier decision or where the earlier decision is per incuriam. However, these are fetters only on a coordinate bench which, failing the possibility of availing of either of these gateways, may yet differ with the view expressed and refer the matter to a bench of superior strength or in some cases to a bench of superior jurisdiction. In the above circumstance, the submission made by the learned Government Pleader for the Revenue, placing rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence is made to the judgment rendered by a Division Bench of the Delhi High Court in Commissioner of Income - Tax vs. Raj Kumar [(2009) 318 ITR 462 Delhi] . The Delhi High Court held that, to attract Section 2(22)(e) of the Income Tax Act, thereby making a payment to have the attributes of a 'dividend' within the meaning of the provision, it has to satisfy: ( i) The Company making the payment is one in which public are not substantially interested. ( ii) Money should be paid by the Company to a shareholder holding not less than ten percent (10%) of the voting power of the said Company. It would make no difference if the payment was out of the assets of the Company or otherwise. ( iii) The money should be paid either by way of an advance or loan or it may be any payment which the Company may make on behalf of or for the individual benefit of any shareholder or also to any concern in which such shareholder is a member or a partner and in which he is substantially interested. (iv) And lastly, the limiting factor being that these payments must be, to the extent of accumulated profits, possessed by such a Company. It was held by the Bench that the wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rofits; but dividend does not include- ( i) a distribution made in accordance with sub-clause(c) or sub-clause (d) in respect of any share issued for full cash consideration, where the holder of the share is not entitled in the event of liquidation to participate in the surplus assets: ( ia) a distribution made in accordance with sub-clause or sub-clause (d) in so far as such distribution is attributable to the capitalised profits of the Company representing bonus shares allotted to its equity shareholders after the 31st day of March, 1964, and before the 1st day of April, 1965; ( ii) any advance or loan made to a shareholder or the said concern by a Company in the ordinary course of its business, where the lending of money is a substantial part of the business of the Company; ( iii) any dividend paid by a Company which is set off by the Company against the whole or any part of any sum previously paid by it and treated as a dividend within the meaning of sub-clause(e) to the extent to which it is so set off. ( iv) any payment made by a Company on purchase of its own shares from a shareholder in accordance with the provisions of section 77A of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as 'advances or loans', and the appeals were allowed. The Delhi High Court observed that the view taken by the Tribunal did not suffer from any error of law. Since the Assessee was involved in the booking Resorts for the customers of the two Companies (mentioned therein)with whom they had regular/normal business transactions as a part of its day-to-day business activities, such financial transactions could not be in any circumstances be treated as 'loans' or 'advances' received by the Assessee from the two Companies, to be brought within the purview of Section 2(22)(e) of the Act. It was accordingly, that interference was declined, dismissing the Revision Petitions, holding that there was no substantial question of law. 24. In Commissioner of Income Tax vs. Excel Industries Limited [(2014) 13 SCC 459 ], the Apex Court considered the scope of deviation from previous assessments and as to when it was impermissible. It was a case where Section 28(iv)- Export income was involved under the Income Tax Act, 1961. It was held by the Bench, that the income tax cannot be levied on hypothetical income. According to the Apex Court, if income does not result at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out by the Assessee. It was in this regard, that advance deposits were also effected by the Subsidiary Company and payments were being effected directly by the Assessee to the clearing and forwarding agent of the Subsidiary Company at Trivandrum, as per their instructions, which were being properly accounted. The payments effected by the Subsidiary Company and received by the Assessee, were as part of the regular business transactions and applying the law laid down in the judicial precedents cited above, it could not have been treated as 'loan' or 'advances', so as to make the disputed amounts as deemed dividend , as defined under Section 2(22)(e) of the Act. We are of the view that there is absolutely no basis for the challenge raised by the Revenue, with reference to the deduction under Section 80Q of the Act and the assessment, taking it as a deemed dividend under Section 2(22)(e) of the Act. The common question involved in the above cases is answered accordingly. 26. In ITA.1686 of 2009 ( cited supra), there is no challenge with reference to Section 80Q of the Act, but for the common contention with reference to Section 2(22)(e) of the Act, which sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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