Tribunal rules in favor of companies, deems transactions as normal course of business.

The Tribunal allowed the appeal, ruling that Section 2(22)(e) was incorrectly applied. The transactions for land purchase and development rights assignment were deemed to be in the normal course of business, benefiting both companies. The addition of deemed dividend income was set aside as the Assessing Officer and CIT(A) erred in their application of the section.

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Issues:
1. Validity of the order passed by the CIT(Appeal)
2. Addition of deemed dividend income under section 2(22)(e) of the Income Tax Act, 1961
3. Application of Section 2(22)(e) in the case

Issue 1: Validity of the order passed by the CIT(Appeal)
The appellant challenged the order of the Commissioner of Income Tax [Appeals]-XXXIII, New Delhi, alleging it to be bad on facts and in law, void ab-initio, and violating rules of natural justice. The appellant sought to amend or vary the grounds of appeal. The appeal was filed against the order dated 17.07.2014 under section 143(3) of the Income Tax Act, 1961 for Assessment Year 2011-12.

Issue 2: Addition of deemed dividend income under section 2(22)(e) of the Income Tax Act, 1961
The Assessing Officer made an addition of Rs. 7,00,000 as deemed dividend income u/s 2(22)(e) of the Income Tax Act, 1961. This addition was based on the substantial interest of the assessee in the payer and recipient companies, namely BPTP Ltd. and Visual Builders Pvt. Ltd. The appellant objected to this addition, stating that the amount was an advance for the purchase of suitable land, shown as a current liability in the Balance Sheet. The CIT(A) confirmed the addition, leading to the appeal.

Issue 3: Application of Section 2(22)(e) in the case
During the proceedings, it was revealed that the amount received by Visual from BPTP Ltd. was for making a payment to Mr. Rishipal Sharma against the purchase of land. The payment was used in the ordinary course of business for the land purchase and assignment of development rights. The appellant provided documents supporting these transactions. The Tribunal found that Section 2(22)(e) was not applicable as the transactions were in the normal course of business, benefiting both companies. The Assessing Officer and the CIT(A) erred in applying Section 2(22)(e) in this case. The appeal was allowed, and the addition of deemed dividend income was set aside.

In conclusion, the Tribunal allowed the appeal of the assessee, finding that the application of Section 2(22)(e) was incorrect in this case. The judgment emphasized the normal course of business transactions for land purchase and development rights assignment, leading to the dismissal of the addition of deemed dividend income.

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