TaxTMI 
TaxTMI 
2012 (12) TMI 1160
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....25 lakhs made by the Assessing Officer u/s. 2(22)(e) of the Income-tax Act, 1961 [hereinafter referred to as "the Act" in short"] without appreciating that the agreement entered into by the company for the purchase of land at Q1.5 crores from the assessee (who had purchased the same land at Q 40 lakhs) was only to circumvent the provisions of section 2(22)(e) of the Act. 3. The brief facts of the case are that the assessee is an individual deriving income from salary. He is a director of M/s. McCreade Software (Asia) Pvt. Ltd., Bangalore from which he draws the salary. For the relevant assessment year, the assessee filed his return of income declaring income of Q 2,58,000. During the course of assessment proceedings of M/s. McCreade Soft....
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....was holding 21.61% of shares from 01.04.2005 till 08.03.2006, his shareholding was reduced to 1,09% of the total shares of the company after 08.03.2006. (5) On 13.03.2006, the assessee had acquired two pieces of agricultural land, each measuring 4 acres in Sy.No.113/1 (renumbered as Sy.No.174) and Sy. No.113/2 (renumbered as Sy.No.175) in Uttari Village, Uttarahalli Hobli, Bangalore South Taluk for a sum of Q 40 lakhs. (6) Within three days therefrom i.e., on 16.03.2006, the assessee had entered into an agreement of sale with the company, who agreed to purchase the same property for Q 1.5 crores, towards which the assessee had received an advance of Q 50 lakhs. (7) As per the agreement of sale, the assessee agreed....
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....observed that a sum of Q 25 lakhs has been paid by the company directly to the land owners and the assessee has only received a sum of Q 25 lakhs as advance. He therefore held that this amount of Q 25 lakhs received by the assessee is deemed dividend u/s. 2(22)(e) of the Act and he according made the addition to the returned income of the assessee. 5. Aggrieved, the assessee filed an appeal before the CIT(Appeals), who allowed the same holding that the transaction between the assessee and the company is a transaction for purchase of property and therefore cannot be treated as a loan or advance. The CIT(Appeals) also accepted the explanation of the assessee that the delay in transfer of land is due to disputes between the land owners. Aga....
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....iction is acceptable. 8. The other objection of the revenue has been that the assessee has purchased the land at Q 40 lakhs whereas within three days therefrom, the assessee has entered into an agreement with the company for sale of the same land for a sum of Q 1.5 crores which is unreasonable and is done to circumvent the provisions of section 2(22)(e) of the Act. As regards this objection, the assessee's contention has been that increase in the price of land was due to various steps to be taken by the assessee for conversion of the land from agriculture to non-agriculture use. Taking into account the procedure and the time factor involved in the conversion of agricultural land to non-agricultural land and also in view of the litigation....