Page 26 - DTPA Journal Aug 18

DTPA - J | 2017-18 | Volume 3 | August 2018

second category of payments referred to in Sec. Cases referred to :
2(22)(e) of the Act, namely, the recipient of the amount (i) PCIT vs M/s. Ennore Cargo Container Terminal P.
being a concern in which the shareholder has a Ltd., T.C (A) Nos. 105 and 106 of 2017 dated
substantial interest. For the said reason, the A.O. 27.03.2017
treated the receipt of Rs.90 crores from Portescap as
(ii) CIT vs Universal Medicare (P.) Ltd., 324 ITR 263
deemed dividend u/s 2(22)(e) of the Act.
(Bom.)
FINDINGS : Sec. 2(22)(e) covers within its sweep three
categories of payments. Firstly, the payment by way of (iii) CIT vs Impact Containers, 367 ITR 346 (Bom.)
loan or advance to a shareholder; Secondly, payment to (iv) CIT vs NSN Jewellers (P) Ltd., [ITA no. 2312 of
any concern in which such shareholder is a member or 2011] (Bombay HC)
a partner; and, thirdly, any payment made on behalf of 10) DCIT, Circle- 2(1), Hyd vs. Inventaa Industries
or for the individual benefit of any such shareholder. (P) Ltd.
Ostensibly, assessee-recipient is not a shareholder in [2018] 95 taxmann.com 162 (Hyderabad -
the payer company, i.e. Portescap and, therefore, it is Trib.) ( Spl Bench)
not covered by the first category of payment. In fact, it is
the second category which is sought to be invoked by IT APPEAL NOS. 1015 TO 1018(HYD.) OF 2015
the A.O. There is a common shareholder, both in the Order Dated : 9.07.2018
assessee-company and Portescap, and even if we RATIO : Sec 10(1) - Just because mushrooms are
were to assume that the amount received by the grown in controlled conditions, it does not negate
assessee-company is for the benefit of the stated the claim of the assessee that the income arising
aforesaid common shareholder, yet, it could only be from the sale of such mushrooms is agricultural
assessed in the hands of such registered shareholder income.
and not in the hands of the assessee-company.
FACTS : The assessee was treating the income from
In the result, this case is in favour of the assessee. growing mushrooms (Edible white button mushroom)
IMP. NOTE: The Tribunal in the instant case has as "income from agriculture" and hence exempt u/s.
distinguished the Apex court decision in the case of 10(1) of the Income Tax Act, 1961. A survey operation
Gopal & Sons (HUF) 77 taxmann.com 71 in the u/s. 133A was conducted at the mushroom growing unit
following words : of the assessee-company. During the course of survey,
“So far as the reliance placed by the Revenue on the statements were recorded from two Vice Presidents of
the company.
judgment of the Hon'ble Supreme Court in the case of
Gopal and Sons (HUF) (supra) is concerned, the same, FINDINGS : Basic operations are performed by
in our view, is quite inapplicable to the facts of the expenditure of human skill and labour on land by the
present case. Firstly, the assessee before the Hon'ble assessee, which results in the raising of the 'product'
Supreme Court was a HUF and the issue was as to called "Edible white button mushroom" on the land and
whether the loans and advances received by the HUF as this product has utility for consumption, trade and
could be treated as 'deemed dividend' within the commerce, the income arising from the sale of this
meaning of Sec. 2(22)(e) of the Act. Notably, in the case product is agricultural income and hence exempt u/s.
before the Hon'ble Supreme Court, the payment was 10(1) of the Act.
made by the company to the HUF and the shares in the With the advancement of modern technology, most of
company were held by the karta of the HUF. It is in this the crops, fruits, vegetables and flowers are being
context that the Hon'ble Supreme Court upheld the grown in controlled conditions, in green houses and in
addition in the hands of the HUF as factually the HUF pots. In these advanced scientific agricultural
was the beneficial shareholder. The fact-situation in the techniques, soil is removed from the land and is placed
case before us stands on an entirely different footing in different containers such as pots, trays and stands
inasmuch as the assessee-recipient of money is neither etc. and agricultural operations are performed on them
the registered nor the beneficial shareholder of the to yield the desired results of production of products
payer company, i.e. Portescap. Ostensibly, the which have some utility.
common registered as well as beneficial shareholder of
Just because mushrooms are grown in controlled
assessee-company and Portescap is Kollmorgen and
conditions it does not negate the claim of the assessee
not the assessee-company. Therefore, the decision of
that the income arising from the sale of such
the Hon'ble Supreme Court in the case of Gopal and mushrooms is agricultural income.
Sons (HUF) (supra) is inapplicable to the facts of the
present case.” ITAT upheld the order of the Ld. CIT(A) on this issue in

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