TaxTMI 
TaxTMI 
2018 (10) TMI 586
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Assessee S.No. Assessee ITA.No. Development Rights Disallowance of Expenses Deemed Dividend 1. Saamag Developmers Pvt. Ltd., 2053/D/2017 62,59,639 2,30,88,128 47,08,000 2. Saamag Construction Ltd. 2054/D/2017 3,04,89,086 3,84,61,268 91,67,650 3. Saamag Infrasctucture Ltd., 2055/D/2017 4,68,48,831 2,14,49,458 --- 4. Saga Developers Pvt. Ltd., 2056/D/2017 --- 2,25,66,035 --- 5. Pyramid Realtors Pvt. Ltd., 2057/D/2017 --- 2,26,62,796 5,00,000 2.1. For the purpose of disposal of appeals, we decide ITA.No.2053/Del./2017 as under. ITA.No.2053/Del./2017 - M/s. Saamag Developers Pvt. Ltd., : 3. The brief facts of the case as culled from the assessment order is that the assessee-company is engaged in the business of real estate development i.e. acquisition of land, development thereof, construction of residential apartments, commercial complexes etc. The assessee filed its return of income on 26.03.2012 declaring an income of Rs. 1,45,27,554/- which was processed under section 143(1) of the IT Act, 1961. The case of the assessee was taken up for scrutiny and assessee filed necessary details, information and documents as called for by the assessing off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aamag Construction Ltd., b) Saamag Infrastructure Ltd., c) Saga Developers Pvt. Ltd., d) Pyramid Realtors Pvt. Ltd., 6.1. All these entities including the assessee-company ventured into the business of Real Estate Development since inception. More particularly during the A.Y. 2008-2009, the Saamag Group embarked upon development of a residential project in Village-Bamhetta, District-Ghaziabad, U.P. The details of the same were filed to show that joint venture entity had to develop a residential project in about 75.09 acres of land. During Assessment Year 2008-09, 46.67 acres of land was acquired and was in the possession of the Saamag Group. The development rights in respect of such lands of 46.67 acres were transferred and appropriate consideration was received. Since there was still further land to be acquired, the process of acquisition of land by the Saamag Group of companies continued in the subsequent years also. During the assessment year, the assessee-company had transferred development rights of land measuring 1.314 acres. Accordingly, a Development Agreement dated 25th March 2010 was entered into by the assessee-company and M/s. Sare Saamag Reality Pvt. Ltd. for tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... within the meaning of Section 5 of the Income Tax Act. The assessee relied upon decision of Hon'ble Supreme Court in the case of CIT vs. A. Gajapathy Naidu, 53 ITR 114 (SC) in which the Hon'ble Supreme Court held that "When the ITO proceeds to include a particular income in the assessment, he should ask himself inter alia, two questions namely (i) What is the system of accounting adopted by the assessee and (ii) if it is mercantile system of accounting, subject to the deemed provision, when has the right to receive accrued. If comes to the conclusion that such a right accrued or arise to the assessee in a particular accounting year, he shall include the said amount in the assessment of the succeeding assessment year". It was further held that "It would not be proper to extend the meaning of the word "accrue or arise" in Section 4 of the I.T. Act to take any amount received by the assessee in a later year though the receipt was not on the basis of right accrued in earlier year". 6.2. The assessee-company, therefore, contended that this principle in Gajapathy Naidu's case reiterates assessee's submissions that the assessee's rights to development rights, income will accrue and will....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee-company relied upon the Order of the ITAT, Delhi Bench in the case of ITO vs. M/s Finian Estates Developers Pvt. Ltd., in which it was held that "unless the necessary approval for development is received from the regulatory authority, the consideration arising from transfer of development rights attached to the land will not accrue to the assessee. It is a contingent right only and will become a legal right to receive and enjoy the income only when the necessary approval is received". As per shareholders agreement dated 18.05.2007 that the assessee-company and the other Companies of the Saamag Group have a heavy legal burden and responsibility of delivering to the Consortium the agreed FSI and the agreed area of land. As per the same agreement there are heavy financial burden on the assessee-company when it is unable to deliver duly approved (by GDA) specified FSI of 34,94,371 sq. ft. 6.3. The Ld. CIT(A) considering the findings of the A.O, submissions of the assessee-company and material on record and all the agreements in question of the consortium, noted that during the year under consideration there is an increase of Rs. 3.52 crores under the head 'Advance received ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... when approval is granted by GDA. It is offered for taxation in A.Y. 2010-2011 in a sum of Rs. 3,89,29,660/-(PB-182), Rs. 3,78,11,266/- in A.Y. 2013-2014 (PB-189) and Rs. 1,61,44,227 in A.Y. 2014-2015 (PB-207). PB-134 is the details of land acquired through the same agreement in 1314 acres. PB-130 is Development Rights Agreement Dated 25.03.2010 between the assessee-company and M/s. Saamag Realtors Private Limited which relate to land acquired by assessee-company. It is also an un-registered agreement. The Tribunal has considered the identical issue in A.Y. 2008-2009. Therefore, no addition could be made against the assessee and the amounts in question is not taxable during the assessment year under appeal. 8. On the other hand, Ld. D.R. though relied upon the Orders of the authorities below, but stated that issue may be covered by the Order of the Tribunal as above. 9. We have considered the submissions of the parties and gone through the material on record. The Ld. CIT(A) following the Order for A.Y. 2008-2009 confirmed similar addition against the assessee-company. In A.Ys. 2008-2009 and 2012-2013 the group appeals of the assessee-company and others have been decided by the Tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h May 2007. 10.5 Under the shareholders agreement, one of the group companies, M/s Saamag Realtors Pvt. Ltd., was a confirming party to the shareholders agreement, which also holds 10.39 acres of land and made SPV for the purpose. As per agreement, after signing the same the name of SPV would have to be changed to 'SARE SAAMAG REALTY PVT. LTD'. The other parties of the Saamag group hold 36.2246 acres of land on the date of the agreement. 10.6 The salient features of the relevant clauses of the shareholders' agreement are reproduced as under:- Clause 2.5 The loan facility of Rs. 25 crores granted by Punjab National Bank and Indian Overseas Bank, on mortgage of land, be transferred in favour of SPV and also performance guarantee of Rs. 4,75,00,000/- provided by GDA. 2.6 In case Saamag fails to obtain permission to transfer the loan facility in favour of SPV, then Saamag shall repay the whole amount and obtain a No Dues Certificate at its own cost and then SARE shall infuse the withheld amount as per clause 2.7. 3.1 The authorized capital of SPV shall be Rs. 240 crores. 3.1.2 It is agreed that the development right together with the land in respect of 36.2246 acres of la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....V. M/s Saamag shall be liable to compensate SPV and SARE. 4.2.2 The capital contribution of the Saamag towards the capital of SPV shall remain in lock in period till the Saamag has undertaken all the statutory and other compliances and obtained all the necessary approvals, sanctions, permissions etc. from the appropriate Government authorities required by the SPV to undertake the development and construction of the project and final sale of units. Clause 8.2 - Responsibilities and Obligations of Saamag: 8.2.1 Saamag agrees and undertakes that the execution of the project by SPV is the responsibility and obligation of Saamag and such responsibility and obligation includes but is not limited to those stated in this agreement and Saamag shall be exclusively responsible for the project from the beginning till its completion. 8.2.2 Saamag shall issue separate and individual irrevocable power of attorneys pertaining to their respective share in the project area, in favour of the SPV in order to facilitate and develop, construct, transfer or create charge of the project area by the SPV. 8.2.3 Saamag shall undertake all statutory compliances and shall further apply, obtain seek a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment, (b) as a result of any act of omission or commission or negligence in contravention of this agreement by SCL, and/or on the part of its officers, directors, employees and agents, (c) as a consequence of the third party claims against or legal dues or any nature on SCL in connection with the subject matter of this agreement, or (d) infringement of intellectual property of SPV caused by SCL. 10.7 The aforesaid shareholders agreement was the main agreement and after that, further agreements were also made between the parties as and when the appellants acquired the land and such agreements in the year under consideration were dated 29th September 2007 and 19th October 2007. Whatever the sale considerations had been fixed under the shareholders agreement, the appellants had credited the same to the advance account in its books because they were of the view that keeping into consideration the overall terms of the contract, the agreement was in respect of the transfer of development rights together with land and because on the date of agreement, the stipulated land was not approved by GDA for development purposes in terms of UP Urban Planning & Development Act, 1973, no developmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing them into harmony with the other clauses of the contract and not with reference to only of few terms or with just one of the rights flowing therefrom as held by the Supreme Court in the case of State of Orissa vs. Titagarh Paper Mills Co. Ltd. in [1985] 60 STC 213. Mr. Rastogi stated that the Hon'ble Supreme Court in the case of Titagarh Paper Mills (supra) observed that a chameleon may change it colour according to its surrounding, but a document is not a chameleon to change its meaning according to purpose of the statute with reference to which it falls to be interpreted. 10.10.1 Ld. Counsel of the assesee further stated that in the instant case, the AO has not considered the very shareholders agreement as a whole but only considered clause No. 3.1.2 of the agreement and ignored the other clauses of the agreement containing the various obligations, liabilities of the assessees flowing from the other clauses of the contract as well as also ignored the various prohibitive and penal clauses flowing from the contract which have to be faced by the appellants on account of any breach of the terms of the contract. The AO also fails to take into cognizance the clause 4.2.2 containi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation of the documents contemplated u/s 53A of the Transfer of Property Act and held that after the commencement of Amendment Act, 2001, in the absence of registration of such documents with the Registration Authorities, these documents cannot be considered to be a document of the nature referred to in section 53A of the Transfer of Property Act and in such situation the allowing of any possession to the transferee is immaterial. 10.10.5 Ld. Counsel of the assessee pointed out that the provision of section 2(47)(v) of the IT Act has been brought to the Statute Book by the Finance Act, 1987 with effect from 1st April 1988 and prior to that it has been consistently held by various High Court and the Supreme Court including the Jurisdictional High Court that the taxability in respect of transaction relating to immovable property accrued or arisen in the year in which the sale deed has been registered irrespective of allowing of the possession of the property at an earlier date. Such law was held in the following cases: Alapati Venkata Ramaya vs. CIT 57 ITR 185 (SC) CIT vs. Meatles Ltd. 84 ITR 37 (SC) CIT vs. Hindustan Cold Storage & Refrigeration Pvt. Ltd. 103 ITR 455 (Del) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tax in the Assessment Year 2008-09 wherein the shareholders agreement has been made. 10.13 However, in rejoinder Ld. Counsel of the Assessee stated that as far as the surrender alleged to have been made during the course of search, it was made under pressure and under some ignorance and misconception of law and that is why later on the assessee had retracted from the same looking into the legal positions, which came to his notice about the year of accruality of income on transfer of development rights and land. Ld. Counsel of the assessee also stated that even the AO has not proceeded based on the surrender so made but he proceeded independently and at this moment the Revenue cannot justify its case based on the alleged surrender. 10.14 Ld. Counsel of the assessee further stated that as far as the registration with GDA is concerned, the same cannot amount to registration as contemplated u/s 17(1A) of the Registration Act, 1908, meant for compulsory registration of transfer of immovable property governed by the Transfer of Property Act with the Registration Authorities. The registration with GDA of the consortium parties has no relevance for the purpose of determination of the y....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e purpose of the said section 53A of the Transfer of Property Act. The Hon'ble Supreme Court, after considering the provision of section 2(47)(v) of the IT Act read with section 53A of the Transfer of Property Act and section 17(1A) of the Registration Act at pages 548-549 observed as under: "20. The effect of the aforesaid amendment is that, on and after the commencement of the Amendment Act of 2001, if an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a "transfer" of a capital asset under Section 2(47)(v) of the Act, there must be a "contract" which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the express....
X X X X Extracts X X X X
X X X X Extracts X X X X
....own by the Hon'ble Supreme Court, the provisions of section 2(47)(v) of the IT Act are not applicable to the transactions embodied in the shareholders agreement dated 18th May 2007 as well other agreements dated 29th September 2007 and 19th October 2007 because all agreements are unregistered agreements and accordingly no liability of tax can be fastened on the appellant merely on the basis that the possession of the land has been handed over by the appellant. Under the law, the appellant continues to be the owner of the land and has at no stage purported to transfer the rights taken to ownership to the SPV. 11.3 In the case of Balbir Singh Maini (supra), the Hon'ble Supreme Court, even after declaring that in the absence of registration of the joint development agreement u/s 17(1A) of the Registration Act, the provision of section 2(47)(v) of the IT Act is not applicable even if the possession has been handed over, has also examined the issue with reference to sections 4 and 5 of the IT Act on the point of accruality of income. The Hon'ble Supreme Court at pages 550-552 of the Report observed as under: "24. The matter can also be viewed from a slightly different angle. Shri Vo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cumstances, have been made in the books of account." The above passage was cited with approval in Morvi Industries Ltd. v. CIT [Morvi Industries Ltd. v. CIT, (1972) 4 SCC 451 : 1974 SCC (Tax) 140 : (1971) 82 ITR 835] in which this Court also considered the dictionary meaning of the word "accrue" and held that income can be said to accrue when it becomes due. It was then observed that: (page 340) ". ... the date of payment ... does not affect the accrual of income. The moment the income accrues, the assessee gets vested with the right to claim that amount even though it may not be immediately." This Court further held, and in our opinion more importantly, that income accrues when there "arises a corresponding liability of the other party from whom the income becomes due to pay that amount". 11.4 It follows from these decisions that income accrues when it becomes due but it must also be accompanied by a corresponding liability of the other party to pay the amount. Only then can it be said that for the purposes of taxability that the income is not hypothetical and it has really accrued to the assessee. 11.5 As far as the present case is concerned, even if it is assumed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the case as explained above, the ground raised by the assessees relating to taxation of profits on transfer of development rights together with land is allowed." 9.1. The assessee-company filed all the agreements in question on record which were the basis for making the addition against the assessee-company in A.Y. 2008-2009. The assessee-company rightly contended that income from transfer of development rights would accrue as per I.T. Act when assessee-company would receive approval for construction for specified FAR area from GDA. Unless and until it does not receive the approval from GDA, income would not accrue to the assessee-company. The assessee-company also rightly contended that as per the above agreements, transfer of development rights is only a transfer in vacuum because the Town Planning Scheme may be required for construction of roads and other public facilities for public at large and in that situation, assessee-company may not be able to complete the development work in property in question. Therefore, it was a conditional agreement depending upon the approval taken from various authorities for completion of the agreement. The agreements also contain the penalt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee-company is entitled for consideration of Rs. 3,89,29,660/- @ Rs. 595/- per sq. feet from M/s. Saamag Realtors Private Limited. Since the sanction was received for this FSI, the assessee-company in its revised return of income had offered the income relatable to this sanctioned FSI as per computation placed on record. In a nutshell, for the sanctioned FSI of 65,428 sq. feet, net income of Rs. 1,58,41,532/- has been offered to tax. The A.O. while dealing with this issue, had disallowed the development and other relatable expenses attributable to said FSI aggregating to Rs. 2,30,88,128/-. It was submitted that even the gross revenue of Rs. 3,89,29,660/- referable to sanctioned FSI does not accrue in the captioned assessment year. This is because, even after sanction of such FSI, before construction by the assessee-company, the Government of Uttar Pradesh can acquire the impugned land when it is required for public purpose and this would be evident from this Supplementary Agreement Dated 15.10.2009. It was submitted that expenses incurred by assessee-company are allowable deduction. In A.Y. 2008-2009, assessee-company had transferred development rights referable to 46.67 acres of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xpenses claimed for A.Y. 2006-2007 to A.Y. 2014-2015. Learned Counsel for the Assessee submitted that assessee-company has been capitalizing expenses in the books of account and following its methodology regarding offering of income from sanctioned FSI. Whenever FSI is sanctioned, assessee-company offered the income for taxation and claimed proportionate development expenses. He has submitted that the Hon'ble Supreme Court in the case of Calcutta Co. Ltd. 37 ITR 1 it was held that "the expression profit or gains in Income Tax Act has to be understood in its commercial sense and there can be no computation of such profits and gains until the expenditure which is necessary for the purpose of earning the receipt is deducted therefrom". Learned Counsel for the Assessee further submitted that when the assessee has offered income from sanctioned FSI in A.Y. 2013-2014, the A.O. vide Order dated 30.03.2016 under section 143(3) (PB-202, accepted such expenses which were proportionately claimed in A.Y. 2013-2014, details of the same, are filed at page-281 of the paper book). In A.Y. 2014-2015 such proportionate expenses have been allowed under section 143(1) of the I.T. Act. PB-191 is P & L ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and claimed expenses on the same sanctioned FSI. Therefore, there was no reason to disallow the expenditure claimed by assessee-company which is also accepted by the A.O. in subsequent years. The assessee-company maintained books of account on the same accounting pattern as have been maintained in earlier years and the offering of the income as per sanctioned FSI have been accepted by the Tribunal in A.Y. 2008-2009. When the assessee-company followed the same accounting system in subsequent year and accepted by the A.O, there is no reason for the A.O. to deviate from the same. The Ld. CIT(A) has not given any independent finding with regard to claim of the expenditure made by assessee-company as against proportionate income offered for taxation. No fault have been found in the accounting system followed by assessee-company. No material have been produced by the Revenue to rebut the contention of the assessee-company. In this view of this matter, we are of the view that there is no justification to disallow the expenses of Rs. 2,30,88,128/- claimed by the assessee-company being cost of the land and development expenses incurred by the assessee-company. We, accordingly, set aside th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch constituent and assessee-company has been assigned the work of arranging finance and look-after implementation of the project, if awarded. The development of the Integrated Township envisaged acquisition of substantial area of land. These companies have received the advances from other group companies for the acquisition of the lands and other business purposes. The assessee-company filed chart showing utilization of funds received from (1) Hamshir Exim Pvt. Ltd., and (2) Max Buildtech Pvt. Ltd., It was submitted that money have been utilised and applied towards business of real estate development in respect of Bamhetta project and Rudrapur Project. Not a penny of monies so received has reached the shareholders. Nothing has enured to the benefit of shareholders i.e., Members of Pandey family who are having substantial shareholders in all Saamag group of companies. All monies have been applied for business purposes. Therefore, Section 2(22)(e) will not apply. The assessee-company relied upon the decision of Hon'ble Delhi High Court in the case of Creative Dyeing and Printing Pvt. Ltd., 318 ITR 476 (Del.) in which it was held that "the amounts advanced for business transaction ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eholding pattern and profit are not disputed. It is not proved that it was a commercial transaction. It is a loan or advance. Therefore, the addition is rightly made. The Ld. D.R. relied upon decision in the case of Smt. P. Sharada vs. CIT 229 ITR 444. 23. We have heard the rival submissions and perused the material available on record. It is not in dispute that Samag group of companies consisted of various entities engaged jointly in the business of real estate development in the State of Uttar Pradesh. Consortium Agreement and other Agreements were executed between all the group concerns. Different responsibilities have been attached to each member of consortium. The assessee-company and other group companies have been taking money from others group company and utilized same for the purpose of development in respect of Bamhetta Project and Rudrapur Project. No amount have gone to shareholder. The above contention of assessee-company have not been disputed by the authorities below. It is, therefore, clear that amounts have been received by assessee-company for business consideration and business transactions only carried out by the group companies. An identical issue have been c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l the assessee falls within the ambit of charging section by clear words, he cannot be taxed by implications. Hence the charging section has to be construed strictly and for this purpose the appellant relied on the CWT vs. Eliss Bridge Gymkhana in 229 ITR 1. The appellant states that the addition as made by the CIT (Appeals) is not only against the very purpose of provision of section 2(22)(e) of the IT Act but is also not covered by the provision of section 2(22)(e) of the IT Act. (iii) The provision of section 2(22)(e) of the IT Act is a deeming provision. Hence the deeming provision should be construed strictly and be confined and limited to the purpose for which they are created and should not be extended beyond their legitimate field as held by the Supreme Court in the case of CIT vs. Vadilal Lalubhai in 86 ITR 2 and 181 ITR 1 (Kerala), CIT vs. P.V. John. (iv) In the case of CIT vs. Sarathy Mudaliar in 83 ITR 170, the Hon'ble Supreme Court 14.3.1 In the case of CIT vs. Sarathi Mudaliar in 83 ITR 170, the Hon'ble Supreme Court, while considering the provision of Section 2(6A)(e) of the Indian Income-tax Act, 1922 (which is parimateria to Section 2(22)(e) of the IT Act), obs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained in the impugned section. The object of keeping accumulated profits without distributing them obviously is to take the benefit of the lower rate of super-tax prescribed for companies. This object was defeated by section 23A which provides that in the case of undistributed profits, tax would be levied on the shareholders on the basis that the accumulated profits will be deemed to have been distributed against them. Similarly, section 12(1B) provides that if a controlled company adopts the device of making a loan or advance to one of its shareholders, such shareholders will be deemed to have received the said amount of the accumulated profits and would be liable to pay tax on the basis that he has received the said loan by way of dividend. It is clear that when such a device is adopted by a controlled company, the controlling group consisting of shareholders have deliberately decided to adopt the device of making a loan or advance. Such an arrangement is intended to evade the application of section 23A. The loan may carry interest and the said interest may be received by the company; but the main object underlying the loan is to avoid payment of tax." 14.3.3 It has been cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....regarded as a lender. 14.3.8 In the case of CIT, Lucknow vs. Bazpur Co-operative Sugar Factory Ltd. in 177 ITR 469, the Hon'ble Supreme Court further stated that for the purpose of loan there must be relationship of borrower and lender in the given transaction and if there is no relationship of borrower or lender then the amount received cannot be considered as loan. 14.3.9 In the case of Durga Prasad Mandelia's vs. Registrar of Companies (1987) 61 Companies Case 479, the Bombay High Court held as under: "There can be no controversy that in a transaction of a deposit of money or a loan, a relationship of a debtor and credit must come into existence., The terms "deposit" and "loan" may not be mutually exclusive, but nonetheless in each case what must be considered is the intention of the parties and the circumstances. In the present case, barring the assertion of the respondent that the moneys advanced by the company to the Associated Cement Companies Ltd. constitute a loan and offend section 370 of the Companies Act, there is nothing else to show that these moneys have been advanced as a "loan". In the context of the statutory provisions, the word "loan" may be used in the se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eceived on debentures and Government Securities are not liable to tax under Interest Tax Act though they carry the interests thereon. To support his view, he relied upon following cases laws:- * 259 ITR 312 (Bom), CIT vs. United Western Bank Ltd. * 259 ITR 295 (Bom), Discount & Finance House of India Ltd. vs. S.K. Bhardwaj * 87 ITD 11 (Del) PN Bank vs. DCIT * 115 ITD 218 (Ahd) (SB) Gujarat Gas Finance Service Ltd. v. Assistant Commissioner of Income Tax. * [2006]5 SOT 918 (Delhi)(SB) Housing & Urban Development Corporation Ltd. vs. JCIT 14.3.12 In the case of Creative Dyeing & Printing Pvt. Ltd. in ITA No. 3036/ Del/2005, the Delhi Bench, ITAT vide order dated 9.5.2008 has held that if the amount received by the recipient company as investment from the payer company, then such amount will not be a loan and advance as contemplated u/s 2(22)(e) of the IT Act. The order of the Delhi Bench of the ITAT in case of Creative Dyeing & Printing Pvt. Ltd. has also been upheld by the Delhi High Court in CIT vs. Creative Dyeing & Printing Pvt. Ltd. in 318 ITR 476. 14.3.13 Section 2(22)(e) of the IT Act only considers those amounts which are having the characteristic of loans and a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s can be made as deemed dividend u/s 2(22)(e) of the IT Act. Similar propositions have also been made by the Punjab & Haryana High Court in the case of CIT vs. Suraj Dev Dada in 367 ITR 78 as well as the Mumbai Bench of the Tribunal in the case of Bombay Oil Industries Ltd. vs. DCIT reported in 28 SOT 383 and Ravindra R. Fotedar vs. ACIT in 167 ITD 100. 14.5.2 Keeping into consideration such position of law, we hold that the additions as made by the CIT (Appeals) in terms of section 2(22)(e) of the IT Act are not correct because such amounts received cannot be considered as loans and advances. Even otherwise also, the payer companies had already made their investment in capital field more than the accumulated profits and in that situation it cannot be considered that those companies were having physical possession of accumulated profits capable of being disbursed. Therefore, the additions in dispute stand deleted". 23.1. In view of the above, it is clear that the identical issue have been decided by the Tribunal in the case of assessee and other group concerns. Following the same, we are of the view that the amount in question could not be treated as deemed dividend under sect....