TaxTMI 
TaxTMI 
TaxTMI 
2016 (5) TMI 457
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....llagers and after taking over possession of the land so purchased, it was handed over to M/s Country Wide Promoters Pvt. Ltd. for development and promotion of a proposed township in pursuance of a collaboration agreement. It was the AO's contention that in consideration of the transfer of land to M/s Country Wide Promoters Pvt. Ltd., the assessee company has charged a fee of Rs. 35,000 per acre. The Assessing Officer has noted in his order that during the year under consideration, the assessee company did not carry any other business other than that of acquiring land from the villages through registered sale deeds and transferring the land so acquired to M/s Country Wide Promoters (Pvt.) Ltd. The Assessing Officer noted that a sum of Rs. 67,18,002/- was paid in cash towards the purchase of land to different parties, and as, according to him, the land purchased constituted stock-in-trade of the assessee, he disallowed a sum equal to 20% of the amount paid in cash (being Rs. 13,43,600/-) u/s 40A(3) of the Act. The Assessing Officer also added a sum of Rs. 796,743/- u/s 2(22)(e) of the Act as deemed dividend on account of loans and advances received from associated concerns. The Asses....
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....tional payments have been added to the cost of the land and no stamp duty has been paid on the said additional payment which means that the assessee company has claimed in its books all the payments which have been made over and above the sale consideration as described in the sale deed and on which no stamp duty has been paid to the Government. As per Indian Stamps Act, prosecution proceedings can be initiated for this violation. Hence, these additional payments cannot be allowed as expenditure to the assessee company. Hence this expense of additional payment is not allowable as deduction. 6. Regarding the issue of deemed dividend u/s 2(22)(e), Ld. DR submitted that the assessee had received Rs. 9,00,000/- from Super Belts (P) Ltd. and Rs. 10,78,000/- from Green Valley Housing & Land Development (P) Ltd. in the course of business transactions but at the time of assessment proceedings itself, in order to buy peace of mind and to avoid any litigation with the department, it had offered the same to be taxed as deemed dividend and thus, the Ld. CIT(A) has wrongly deleted the addition. He submitted that the order of the Assessing Officer should be restored on both the counts. 7. The ....
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.... submissions and carefully perused the relevant material placed on record. As far as the issue of deemed dividend in the Department's appeal is concerned, it is an undisputed fact that the assessee company is not a registered shareholder of the payer companies who have advanced loans to the assessee company. The Hon'ble Jurisdictional High Court has held in the case of CIT vs Ankitech (P) Ltd. (supra) as under:- "Further, it is an admitted case that under normal circumstances, such a loan or advance given to the shareholders or to a concern, would not qualify as dividend. It has been made so by legal fiction created under section 2(22) (e) of the Act. We have to keep in mind that this legal provision relates to 'dividend'. Thus by a deeming provision, it is the definition of dividend which is enlarged. Legal fiction does not extend to 'shareholder'. When we keep in mind this aspect, the conclusion would be obvious, viz, loan or advance given under the conditions specified under section 2(22) (e) of the Act would also be treated as dividend. The fiction has to stop here and is not to be extended further for broadening the concept of shareholders by form of dividend to its shar....
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....disallowance does not arise. Accordingly, we hold that the disallowance of Rs. 875,000/- on account of additional payments was wrongly made by the Assessing Officer. Moreover, the partial sustenance of this addition by the Ld. CIT (A) is also incorrect and is liable to be deleted for the reason afore said. Hence, this ground of appeal of the Department is also rejected. 15. Accordingly, the appeal of the Department is dismissed. 16. As far as the assessee's appeal i.e. I.T.A. No. 1761/Del/2013 is concerned, after going through all the relevant records and after giving a careful consideration to the rival submissions, it is seen that the fact remains unassailed on record that the expenditure disallowed by the AO, which has been upheld by the Ld. CIT (A), was never claimed as an expense by the assessee. Section 40A starts with the non-obstante clause setting out that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provisions of the Act relating to the computation of income under the head 'profits and gains of business or profession'. Sub-section (3) of section 40A is an exception to the deductibility of expenditure un....