TaxTMI 
TaxTMI 
2012 (9) TMI 825
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....o circumvent the provisions of section 2(22)(e). 3. The CIT(A) also failed to appreciate the applicability of the decision of Hon'ble Calcutta High Court in the case of M D Jindal Vs. CIT (1987) 164 ITR 28, to the facts of the present case in support of the stand taken by the AO that the so called agreement was not genuine and was an ostensible device to circumvent the provisions of section 2(22)(e) of the l.T.Act, 1961. 4. For these and other grounds that may be urged at the time of hearing, it is prayed that the order of the CIT(A) in so far as it relates to the above grounds may be reversed and that of the Assessing Officer may be restored. 5. The appellant craves leave to add, alter, amend and/or delete any of the grounds mentioned above." 3. From the above grounds, it would be clear that the only grievance of the department relates to the deletion of addition of Rs. 1 crore made by the AO u/s. 2(22)(e) of the Income-tax Act, 1961 [hereinafter referred to as "the Act" in short"]. 4. The facts of the case in brief are that the assessee derived income from salary, house property and other sources. She filed her return of income on 31.07.2007 declaring an income of Rs. 1,21,....
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.... made by the assessee are reproduced by the ld. CIT(A) in paras 4.1 to 4.9 of the impugned order and read as under:- "4.1 As per the agreement dated 06.01.2007 the property intended to be purchased by the company from the appellant is a residential property located at No.795, 12th B Cross, 23rd Main, J.P. Nagar 2nd Phase, Bangalore measuring 134.20 sq. mtrs. The built up area is 1700 sq. ft. The Assessing Officer has stated that the market value of the property is Rs.50,25,00,000/-. There is no basis for this estimation made by the Assessing Officer. The property measures 134.20 sq. mtrs only. The built up area is 1700 sq. ft and the property is residential in nature. In view of this the agreed price of Rs. 1,20,00,000/- is reasonable. The conclusion of the Assessing Officer, that the agreement is a device to advance funds on the basis of an estimated market value of Rs.50,25,00,000/- is factually not correct. 4.2 The Assessing Officer states that the agreement is not on stamp paper. The Assessing Officer also brings out the fact that the sale is not yet registered. It is a fact that the agreement is not on stamp paper. The agreement is also not registered and the sale is not ....
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....) of the act are attracted if all the conditions set out in the provision are satisfied at the time of making the advance. This decision is relevant in a case where an advance is made and as on the last day of the accounting year such advance may not be outstanding. The decision squarely applies to cases where loan or advance is made without the assessee requiring to transfer any asset or render services in return. The case is not applicable to the appellant, since the appellant is required to transfer the immovable property in lieu of the advance received. Under the above circumstances the decisions relied upon by the Assessing Officer are not applicable to the appellant. 4.4 The appellant submits that the provisions of section 2(22)(e) of the Act has brought in only a legal fiction. It is a decided position of law that in construing the fiction it is not to be extended beyond the purpose for which it was created. Reliance is placed on the following decisions i) Mancheri Puthusseri Ahmed Vs. Kuthiravattam Estate Receiver, AIR 1997 SC 208, 214 ii) CIT Vs. Shakuntala (1961) 43 ITR 352, 357 (SC) iii) CIT Vs. Moon Mills Ltd (1966) 59 ITR 574, 579 (SC) The concept of deemed divi....
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.... without interest. This view in regard to the definition of loans or advance has been expressed in the decision of Madras high court in the case of G.R.Govindarajulu Naidu Vs. CIT (1973) 90 ITR 13 (Mad). Even in the decision of Supreme Court in the case of Bombay Steam Navigation Company (1953) Pvt Ltd Vs. CIT (1965) 56 ITR 52 (SC) the same view has been upheld. In the case of the appellant what is agreed upon is transfer of immovable property and the advance is a part payment of the proceeds. The advance received is not intended to be repaid. Under the circumstances the advance made for purchase of property cannot be considered as dividend within the meaning of section 2(22)(e) of the Act. 4.7 The appellant relies on the decision of Delhi ITAT in the case of Sunil Sethi Vs DCIT in lTA No.2131/Delhi/2007. In the said decision it has been held that where there is documentary evidence on record to substantiate the fact that advances were made during the course of business activity of the assessee the same cannot be considered as dividends. In the case of the appellant the company has advanced to the share holder for purchase of property and therefore cannot be held as dividends. 4....
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....ransferred to the company due to certain formalities which were to be fulfilled, so there was no question of invoking the provisions of section 2(22)(e) of the Act and making the addition by considering the advance amount as deemed dividend, therefore the ld. CIT(A) was fully justified in deleting the addition made by the AO. 11. We have considered the submissions of both the parties and carefully gone through the material available on record. In the present case, it is not in dispute that the assessee held 97.83% shares in the company from which advance of Rs. 1 crore was received by the assessee against the sale of property belonging to her. The assessee furnished a copy of the agreement to sell before the AO, who did not accept that agreement as genuine for the reason that it was not registered and was also not on the stamp paper, however, nothing was brought on record to substantiate that there was not an agreement between the assessee and the company M/s. Mc Creade Software (Asia) Pvt. Ltd. for the sale of property belonging to the assessee. When there was an agreement between the assessee and the company for sale of property belonging to the assessee, it cannot be said that ....